Understanding Insurance Reform
PART ONE
Dave Villar , President Pacific Coast Benefits LLC ,
Dave Villar is the President of Pacific Coast Benefits LLC , He was a founder and partner of PDI Insurance Services . Dave is an active Member of the National Association of Health Underwriters and a member of the Anthem Blue Cross Agent Advisory Council . He has specialized in Employee Benefit Planning for businesses since 1987 . To find out more about Pacific Coast Benefits and upcoming Healthcare Reform Seminars , visit www . pacbenins . com or call ( 408 ) 847-1000
Sometimes change can be frightening , especially when the parameters around it are unknown and confusing . The new health care reform law is one of those changes . The Patient Protection and Affordable Care Act ( PPACA ) will extend insurance coverage to 32 million uninsured Americans by 2019 , and it will certainly affect us all — the question is how ?
No matter which side of the debate you were on , the reality is that health care reform is now law . Anyone claiming to know what will ultimately come from this reform is either guessing or looking into a crystal ball . What we do know is that several things will change in the way coverage is delivered to us and our employees and the financial impact it will have on everyone .
The new law will place strict guidelines on health care companies . For example , health plans will stop offering policies with lifetime limits on coverage , canceling policies when people get sick , and denying coverage to people with preexisting conditions ( the last taking place in 2014 ). Another change will allow children and young adults to remain covered on their parents ’ health plan until the age of 26 . This provision is scheduled to take place prior to September 23rd of this year . Most Americans will be required to buy health insurance by 2014 or pay a penalty . According to IRS published reports , the penalty will start at $ 95 or 1 % of income in 2014 , whichever is higher , rising to $ 695 or 2.5 % of income in 2016 . However families would not pay more than $ 2,085 . Some would be exempt from the requirement due to financial hardship , religious or cultural beliefs .
There will be some benefits that come from this reform for small business owners . One of the first benefits to arrive from the PPACA is the assistance it provides small businesses in providing coverage for their employees in the form of tax credits . The tax credits are available beginning with the 2010 tax year and can reimburse small employers as much as 35 percent of their contribution to worker health insurance premiums for eligible employers .
The IRS has recently issued guidelines concerning the small business health care tax credit . The process for determining if a company qualifies for the tax credit and if so , for how much of one requires some careful calculations ( these are IRS guidelines after all ). But those calculations are fairly straightforward . Consult with your tax advisor before taking any action .
The full tax credit ( 35 percent ) is available to qualified employers with 10 or fewer workers ( excluding owners ) whose workers earn , on average , less than $ 25,000 annually . Qualified employers with up to 25 full time employees and providing average wages of up to $ 50,000 are also eligible for a smaller tax credit on health insurance premiums they pay . The formula for determining the dollar amount of their tax credit can be found on the IRS website under IRS FAQ , or you can contact our office for a copy .
One interesting twist : the premium paid by the small businesses against which the tax credit is calculated is capped by the average premiums paid by small business in the state . The IRS will be publishing a list of those averages later this month . So as noted before , there are some careful calculations required to determine eligibility and the credit amount . Still , a subsidy is a subsidy is a subsidy . And for small business owners this is a welcome one .
The legislation passed by both houses and signed into law by President Obama is simply the framework of what will shape healthcare reform over the next decade . Today we are simply peeling the first layer of the onion . As this process evolves a clearer picture will come into view of what healthcare in America will look and feel like . In the meantime , as a consumer or business owner it is imperative that you remain informed of the changes and how they will affect you and your business . Pacific Coast Benefits is here to help you navigate through Health Care Reform . Please feel free to contact me with any questions .
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