Health Care Reform - Timeline for Small Businesses

The new healthcare reform law will be implemented over much of the next decade. From 2010 to 2013, changes largely involve new taxes, fees and mandates on individuals and small business. Most healthcare system changes begin in 2014 and later years.

This article presents a timeline of some major provisions. 

Please note:  The timeline goes well into 2018, due to space limitations we didn't list the entire timeline in this post. Please contact your HBUS Inc representative for a copy of the entire timeline.

 

2010

• Small business tax credit: A temporary small business tax credit is available for some firms who provide qualified health coverage. However, the credit puts small business owners through a series of complicated tests to determine the actual amount of the credit. (1) Very few small firms will receive the full credit (only firms with 10 employees or less). For firms with 11-25 employees, the credit is reduced per employee. Firms with more than 25 employees get NO credit. (2) Only firms who pay their workers an average of $25,000 or less are eligible for the full credit. The credit is reduced as the average wage goes up, stopping when it reaches $50,000. (3) Only firms covering 50% or more of insurance costs will be eligible. (4) The credit is only available for a maximum of six years. There are additional provisions for start-up firms beginning business after the enactment of this law.
• Age 26: Children may stay on their parents’ policies until age 26.
• Tanning salon tax: A 10% excise tax on indoor tanning services begins July 1.
• Economic substance doctrine: The bill alters long-standing judicial doctrine in ways that could reduce tax-planning options and increase litigation.

2011

• W-2 reporting: Employers will be required to report employees’ health benefits on W-2s.
• Brand-name drug tax: Manufacturers and importers of brand-name drugs will pay a tax of $2.5 billion in 2011, $3.0 billion per year for 2012 through 2016, $3.5 billion for 2017, $4.2 billion for 2018, and $2.8 billion for 2019 and thereafter.
• HSA & FSA limits: Consumers are prohibited from using HSA and FSA funds to purchase non-prescribed items, including over-the-counter medication (except insulin).
• HSA penalty: The penalty for using HSAs for non-qualified purchases increases to 20%.
• Federally subsidized long-term care: Employers may voluntarily participate in the CLASS long-term care program. Participating firms’ employees will be automatically enrolled and subject to payroll deductions unless they choose to opt out. This program will almost certainly cost the federal government far more than what the payroll deductions will cover. So this entitlement is yet another unfunded liability to add to federal deficits for decades to come.
• Cafeteria plan safe harbor rules added: Employers will have to meet minimum contribution requirements to receive protection from nondiscrimination requirements under cafeteria plans.

2012

• 1099 reporting: Businesses will have to send Form 1099s for every business-to-business transaction of $600 or more – a tremendous new paperwork burden for small business.

2013

• Medical device tax: Manufacturers and importers of certain medical devices will face a 2.3% excise tax.
• Fewer deductible medical expenses: New limits are placed on the deductibility of medical expenses on individual income tax returns. This provision raises the 7.5% AGI floor on medical expenses deductions to 10%. The AGI floor for those 65 and older (and their spouses) remains at 7.5% through 2016.
• “Medicare” payroll taxes: The Medicare payroll tax on wages and self-employment income in excess of $200,000 ($250,000 joint) will increase to 2.35% and is not indexed to inflation. This tax marks the first time that funds designated for Medicare will be diverted elsewhere – specifically to pay for the insurance policies of people under the Medicare age. This establishes a precedent for treating this payroll tax as a revenue raiser for other purposes.
• “Medicare” investment tax: In addition to the payroll tax, there will be a 3.8% tax on investment incomes for higher-income taxpayers (“higher-income” is based on wage and self-employment income plus other factors). Like the payroll tax, these funds are officially designated for Medicare but will be spent elsewhere.
• FSA limits: Cafeteria plan FSAs will be limited to a maximum of $2,500 (inflation-adjusted after 2013).