AMERICAN TRUCKING ASSOCIATIONS

 
Q. What are the 2010 tax issues in health care reform?

A. Beginning in 2010, The small business health tax credit, worth 50% of an employer's contribution toward employees' health insurance premiums, will be given to firms with 10 employees or less. For firms with 11-25 employees, the size of the credit is based on the number of employees and average wage of workers. Only firms that pay their employees $25,000 or less are eligible for the credit. The credit is reduced as the wages go up and are capped at $50,000. Those firms with more than 25 employees do not receive the credit. The credit is only available for a maximum of five years and only two years once the state exchanges¹ are up and running in 2014.

 
Q. What important health care-related changes are in store from 2011 - 2013?

A.     2011

• Beginning January 1, 2011, employers will now be required to report the value of employees' health benefits on W-2s.
• Consumers will no longer be able to use Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) to purchase over-the-counter medications unless prescribed by a physician.
• Manufacturers and importers of brand-name drugs(drugs that are not generic) will be assessed an annual fee. For 2011 the amount is set at $2.5 billion and increases significantly each year thereafter.
• The beginning of voluntary payroll deductions into the federally-subsidized long-term care program. After a five year vesting period, contributors are allowed access to the program (if they have a qualifying need) which will pay out $75/day for long term care benefit.

         2012

• Medicare payments are frozen for 2011. In 2012 a new system of benchmarks will be phased in.   

         2013

• The existing employer tax deduction for the Medicare Part D subsidy is eliminated.
• New limits will be placed on the deductibility of medical expenses on individual income tax returns. This provision raises the current 7.5% Adjusted Gross Income (AGI) "floor" on medical expenses deductions to 10% of AGI. The 7.5% floor for those 65 years or older remains at the 7.5% through 2016.
• The Medicare payroll tax on wages and self-employment income in excess of $200,000 ($250,000 joint) will increase by 0.9% which also will apply to net investment income. Earners of more than $200,000 ($250,000 joint) will be assessed an additional 3.8% Medicare tax on investment income. This tax will be used specifically to pay for the insurance policies of people under the Medicare age.
• FSA contributions will be limited to $2500/year (adjusted for inflation after 2013). Regulations will clarify if this amount applies to families as well as to individuals.
• Manufacturers and importers of certain medical devices will be assessed a 2.3% excise tax.

Q. Why is 2014 an important year for the employer community?

A. This is the year that the greatest portion of the law, with several important provisions, will go in to effect. Most of the insurance insurance market reforms will be implemented.


Q. What are health care exchanges?

A. Beginning in 2014, States must establish an "American Health Benefit Exchange" through which individuals can purchase "qualified health plans." Individuals will have the option to obtain health insurance through the State insurance exchange. The State must create Small Business Health Options Programs exchanges (SHOP exchanges) that would allow small employers to pool together to purchase insurance. Here, small businesses are defined as those with 100 or fewer employees.


Q. What is the difference between an "individual mandate" and an "employer mandate?"

A. The new law, beginning in 2014, will require that all U.S. citizens and legal residents have qualifying health insurance coverage. If an individual doesn't buy insurance, he/she will be penalized the greater of $695 or 2.5% of income.

An employer mandate requires some firms to provide insurance, pay penalties or both. The penalties are based on: the number of full-time employees; whether or not the company offers health insurance coverage; and, whether or not one or more employees qualify for government subsidies toward the purchases of health insurance through the State exchange.


Q. What are the federal health insurance "subsidies" and what impact will they have on employees and employers?

A. An employee will qualify for a federal subsidy to purchase health care insurance if his or her household income is below 400% of the federal poverty line (i.e., $88,000 for a family of four). Subsidies will be paid directly to the insurer and not to the individual.

The subsidy also acts as an excise tax (penalty) on employers that offer health insurance coverage but have employee(s) who also receive the subsidy. For example:

• An employer with more than 50 full-time employees that offers health insurance and that has no employees receiving the subsidy will not be assessed a penalty.
• An employer with more than 50 full-time employees that does not offer health care insurance and has one or more of its employees receiving the subsidy would have pay a penalty of $2,000 per fulltime employee. The first 30 workers would be subtracted from the calculation (of the penalty).
• An employer with 50 or more employees that does offer qualified health insurance and has an employee(s) receiving the subsidy will be penalized $3000 per subsidized fulltime employee.

Q. What are some of the other provisions that will become effective in 2014?

A. The following provisions of the health care law go into effect in 2014:

• Federal government will define the "essential benefits package." All qualified health plans must offer this minimum package.
• The income level for Medicaid eligibility will rise which will allow millions of new people into the Medicaid system.
• Prohibition on pre-existing conditions exclusions for all plan participants, not just for those 19 years old and under.
• Wellness program incentives become effective. All employers will be permitted to vary their health insurance premiums for employees up to 30% - based on whether or not employees participate in wellness programs and meet certain health standards. This could be increase to 50% by the Secretary of HHS which would allow employers to create powerful incentives for employee participation in wellness programs.
• Prohibition on waiting periods² that exceed 90 days

Q. What is this so-called "Cadillac tax" and when is it effective?

A. The "Cadillac tax" will be effective in 2018. Essentially, it is 40% excise tax on the employer whose health plans cost in excess of $10,200 annually for an individual or $27,500 annually per family. Thresholds are increased for certain high-risk professions and retirees over the age of 55: $11,850/individual and $30,950/family.


On April 16, 2010 ATA sponsored a Health Care Reform webinar. This webinar is available to members seeking additional information on this page under Health Care Documents in the right hand column.  

ATA Contact: Christie Cullinan, Director of Workplace & Fleet Safety, ccullinan@trucking.org