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Health Care Reform and Preventative Care and Wellness Benefits

Health Care Reform Law contains a number of provisions that entitle you to new preventative care services and wellness provisions. These can help you stay healthy and catch any possible problems early as well as help you to save money.
For those with insurance:

  • All new health plans, with the exception of grandfathered plans, must cover many important preventative care and wellness benefits. These include immunizations and screenings for cancer and diabetes, with no charges to the member. It applies to individual and group plans.
  • For covered preventive services for Adults, women and children contact a SHN representative.

For those with Medicare:

  • Medicare will cover an annual wellness visit and a personalized prevention plan that may include:
    • An assessment of health risks
    • Updated medical history
    • List of current healthcare providers
    • List of current prescription drugs
    • Height, weight, and blood pressure measurements
    • A screening schedule personalized for the appropriate preventative services
    • A list of health risk factors and possible treatment option
  • Medicare will still cover the “Welcome to Medicare” exam for new enrollees. The new health care law does not require Medicare Advantage Plans to cover the same preventative services with no deductible or co-payment so each member should check with their individual plan.

Health Care Reform and Tax Implications

The majority of tax changes affect those families whose incomes are $200,000. Changes began in 2011 and will continue to be implemented throughout the next few years.

W-2 Forms:
Reporting the cost of health care coverage to employees is now a necessary part of the W-2 forms issued by employers. This will be mandatory beginning in 2012. It will not affect the taxes an individual pays. The cost of the health care benefits reported should not be included in the individual’s income. You are not required to pay any FICA taxes on this amount.

Medicare Taxes:
There will be no change to Medicare taxes for individual with an income under $200,000 or families with an income under $250,000. If your income exceeds these amounts, you will see an increase in the amount you pay for Medicare Part A taxes. The increase will begin in 2013 and will be increased from 1.45% to 2.35%. The increased 2.35% will only be on any income above and beyond the $200,000 for individuals or $250,000 for families.

Flexible Spending Accounts (FSAs):
Beginning in 2013, the maximum contribution that can be made into these accounts, without being taxed, is $2,500. The limit will increase each year to adjust for the cost of living increases. Starting in 2011, over the counter medications are no longer eligible to be purchased using FSA funds unless they are prescribed by a doctor.

Medical Expense Deductions:
Currently, taxpayers are able to deduct a portion of their medical expenses that exceed 7.5% of their adjusted gross annual income. Starting in 2013, this deduction can only include medical expenses that exceed 10% of taxable income. The deduction percentage will not change until 2016 for those 65 and older.

Example: If your gross income in 2010 is $100,000 and your medical expenses were $11,000, you are currently able to deduct $3,500: $11,000-($100,000 x 7.5% = $7,500) = $3,500. Beginning in 2013, you will only be able to deduct $1,000: $11,000-($100,000 x 10% = $10,000) = $1,000.

New Tax on “Cadillac” Health Plans
Beginning in 2018, if your health benefits are valued at more than $10,200 for individual plans and $27,500 for family plans, your insurers will pay a new 40% tax on the amount the benefits exceed the threshold. For some retirees who are older than 55 and not eligible for Medicare, or who are in high-risk job positions, the levels increase to $11,850 and $30,950. The threshold will also be adjusted for companies that pay a higher premium based on the age and gender of their employees. Threshold levels will be adjusted for cost-of-living starting after 2018.

The “Cadillac” tax will not be paid by the employee directly but rather is taxed on the insurer, whether it is an insurance company, employer or third party responsible for employee benefits. The insurer will be the one to decide if the tax will be passed on to the employee.

Taxes on Investment Income
Tax payers earning less than $200,000 for individuals and $250,000 for couples will not see an increase in their taxes on investment income. Beginning in 2013 if you earn more than $200,000 for individuals or $250,000 for couples you will pay a 3.8% tax on your net investment income. Net investment income for tax purposes includes: interest, dividends, annuities, royalties, rents, and capital gains. It does not come from Social Security, pensions, or IRA distributions or IRA annuities.

Not all investment income is taxable. To calculate the amount of the tax, subtract $200,000 for individuals or $250,000 for couples from taxable income. Compare the results with the amount from investment income and multiply the lesser amount by 3.8% to get the amount of tax.

Example: A married couple, filing as such, has a combined modified adjusted gross income of $275,000 and a net investment income of $10,000. To figure out the amount they pay in taxes: compare the amount of the net investment income ($10,000) with $275,000-$250,000 = $25,000. Since $25,000 is greater than $10,000, the tax would be on the net investment income amount, $10,000, because it is less than the difference. The tax is $380: $10,000 x 3.8% = $380.

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