Obamacare - Solution or Dumpster Fire?

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Information on Affordable Care Act (ACA)

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Obamacare - Solution or Dumpster Fire?

  1. 1. Obamacare-Solution or Dumpster Fire? Dennis L. Thompson CPA,CFE www.dlthompsoncpa.com 206-390-9432 dennislt@dlthompsoncpa.com
  2. 2. Agenda • • • • • • • Brief History of Healthcare Obamacare (ACA) Essentials Impact on Individuals Impact on Business Impact on Taxes Alternatives to ACA Conclusion & Observations
  3. 3. Brief History • Prior to 1920 – Little Knowledge About Diseases • During 1930’s –People Started Using Hospitals – Baylor Hospital in Dallas created Blue Cross – FDR Wanted National Health Insurance-Focused on Social Security first • WWII- Employer’s Added Health Insurance – Union negotiations encourage Health Insurance as a benefit – Wages & Price Controls
  4. 4. Medicare • 1965 –Medicare Established to Protect Elderly Poor • Medicare – Part A – covered hospital services – Part B - covered doctors’ services • Now – Original Medicare – Government – Medicare Advantage- Private insurance
  5. 5. Clinton Care • Bill Clinton Campaigned on Healthcare 1992 • Hilary Clinton Formed Task Force – Controversial • Employers to be Required to Provide Insurance Through HMOs – Opposed by Health Insurance Industry
  6. 6. Obamacare Essentials • • • • • • • • • Insurance Pools – Spread Risk No Pre-Existing Conditions No Lifetime Caps Young Adults on Parent’s Plan until Age 26 Individual Mandate Insurance Exchange (Marketplace) Enrollment Periods Essential Health Benefits Medicaid Available to Low Income Under 65
  7. 7. • • • • • • • • • • Essential Health Benefits Ambulatory Services Emergency Services Hospitalization Maternity & Newborn Care Mental Health & Substance Abuse Prescription Drugs Rehabilitative Services Laboratory Services Pediatric Services Preventative & Wellness Services
  8. 8. Insurance Plans • Percent Coverage of Essential Services – Bronze – Silver – Gold – Platinum 60% 70% 80% 90%
  9. 9. Example of Insurance Plans tanding Obamacare: POLITICO’s Guide to the Affordable Care Act
  10. 10. Individuals • Insurance that Qualifies: – Provided by Employer – Medicare – Medicaid – Purchased on your own • Affects about 15% of Population – Not covered
  11. 11. Exemptions From Coverage ource: Gladys Nichols IRS Tax Analyst
  12. 12. I’m Already Covered – No Worries, Right? Wrong!! • You Might Get Dehired. • Employer Might Kick Spouse Off Plan • Employer’s Plan Might Get More Expensive
  13. 13. Hey My Insurance Went UpWhat the #@!!! • Affects Prior Individual Plans – Prior plans don’t offer 10 Essentials – New plans more expensive, feature rich • Individuals Might Qualify for Subsidy • Some Individuals Worse Off
  14. 14. Insurance Exchanges • Websites Where You Purchase Insurance – States have option of setting up own Exchanges – Federal Exchange if State does not have Exchange – Open Oct 1, 2013 (in theory) – State of Washington – www.wahealthplanfinder.org – Required to purchase insurance by 3/31/14 – Tax Credit Subsidy – Must buy through Exchange
  15. 15. Insurance Exchanges • S Source: Gladys Nichols IRS Tax Analyst
  16. 16. Insurance Exchanges
  17. 17. I Can’t Afford Insurance – Now What? • Might Qualify for Medicaid – If State Offers It – Right now more people are signing up for Medicaid • Might Qualify for Premium Tax Credit – Must go through Exchange to be Eligible – Phase out between 100% - 400% Federal Poverty Level – Individual must calculate –Online calculators – Credit can be sent to insurance company directly – If mistake made in calculation –might have to pay back part of credit
  18. 18. Premium Tax Credit ource: Gladys Nichols IRS Tax Analyst
  19. 19. Premium Tax Credit Source: Gladys Nichols IRS Tax Analyst
  20. 20. Obamacare Cliff Source: The Obamacare Cliff Blog by CapCat
  21. 21. Obamacare Cliff ource: The Obamacare Cliff Blog by CapCat
  22. 22. Penalty For Individuals • 2014 - Greater of $95 or 1% of Household Income • 2016 – Greater of $695 or 2.5% of Household Income • Calculated on Tax Return – First reported on 2014 tax return in 2015
  23. 23. How is ACA Reported? Source: Gladys Nichols IRS Tax Analyst
  24. 24. Graph of Penalties
  25. 25. Psst. Don’t Tell Anyone. IRS Can’t Enforce Penalty • Cannot Use Liens or Levies to Collect Payment • IRS Can Only Take Penalty out of Refund • No Criminal Penalties for Not Paying Penalty • Tax Strategy – Reduce withholding so you don’t get a refund
  26. 26. Obamacare & Businesses • Employers – Magic number is 50 employees – Less than 50 –small employer/group – 50 or more- large employer/group • Employee Cost for Insurance Can’t Exceed 9.5% of W-2 wages – This Can Trigger Fines • These Rules Have Been Postponed Until 2015
  27. 27. Impact of ACA on Business Source: Gladys Nichols IRS Tax Analyst
  28. 28. Large Employer • 50 or More Employees – Employee – Person who works more than 30 hours a week – Caution – Includes combination of full & part-time • Example – 2 employees who work 25 hours a week & 1 employee who works 30 hours = 2 fulltime employees
  29. 29. Example of Calculation Source: Gladys Nichols IRS Tax Analyst
  30. 30. Health Insurance –Large Employer • If Not Offered: – $2,000 fine per employee for number over 30 – Example: Company of 100 employees: • 100 – 30 = 70 x $2,000 =$140,000 penalty plus • $63 per employee • If Offered: – Employee qualifies for Subsidy - $3,000 per employee
  31. 31. Small Employer Less Than 50 • No Requirement to Offer Insurance – Caution- Watch FTE number • Need to Notify Employees Not Offering Insurance – So They Can Use Exchanges
  32. 32. Example of W-2 Information Source: Bruce McFarland, L&R Tax Preparation
  33. 33. Employer Decision Tree ource: Bruce McFarland, L&R Tax Preparation
  34. 34. Impact on Personal TaxesEarned • If You are High Income, Medicare Increased by .9% (1.45% to 2.35%) • High Income – $250,000 Joint – $200,000 Single • This is a Tax on Earned Income
  35. 35. Impact on Personal TaxesUnearned • 3.8% Medicare Tax on Net Investment Income – Interest, Dividends, Passive Activity Income • Very Complicated – Don’t Try to Do This Yourself
  36. 36. Alternatives To ACA • Democratic – Single Payer-Government Pays, not Private Insurers – Canada- Contracts with Private Organizations – United Kingdom- Govt controls resources & personnel – Think Medicare
  37. 37. Alternatives To ACA • Republican – Fixed sum, refundable tax credit for purchase of private health insurance. Would help buy core insurance. – Additional insurance – use after-tax dollars – Increased standard deductions for those who buy qualifying insurance – Expansion of Health Savings Accounts – Medical Malpractice Liability Reform
  38. 38. Misc Observations • Obamacare Relies Heavily on Internet • Figuring Your Subsidy Credit Requires Math • Obamacare Needs Young, Healthy People in Exchanges – Can Young People Afford It? • Employers Not required to Provide Affordable Coverage Insurance to Spouses and Children • Be Very Careful That You Are Signing Up at the Correct Website – Would Not Want
  39. 39. Resources • Politico – Understanding Obamacare – http://www.politico.com/obamacare-guide/ • Kaiser Permanente – http://healthreform.kaiserpermanente.org/ • Washington State Marketplace – https://www.wahealthplanfinder.org • Collection of Articles on ACA – https://drive.google.com/folderview? id=0BxrfhMfSpqleElOTU1XYU91bms&usp=sharing

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