Patient Protection and Affordable Care Act

On March 23, 2010, President Obama signed into law H.R. 3590, the Patient Protection and Affordable Care Act (PPAC).  Many of the important provisions and all the tax increases do not take effect until 2013, however, here is a summary of the changes most likely effect ACA members going forward:

• Large and mid-size employers (i.e., employers with 50 or more employees) that fail to offer qualifying medical insurance to a full-time employee who has enrolled in a subsidized plan using the premium assistance tax credit or cost-sharing reductions will be subject to a tax of $2,000 per employee.  Additional penalties may apply beginning after 2013.
• Certain small employers with less than 25 employees and an average wage of less than $50,000 will be eligible for a tax credit for nonelective contributions to purchase of health insurance for their employees, including self-employed individuals, beginning after 2010.
• Certain small businesses can provide a new employee benefit cafeteria plan (SIMPLE Cafeteria Plan) that provides tax-free benefits to employees, including self-employed individuals, beginning after 2010.
• Employer-sponsored health insurance coverage must be reported on the employees’ W-2 beginning after 2011.
• Qualified small businesses will be able to buy insurance through state-based Web portals to be known as Small Business Health Options Programs (SHOP) after 2013.
• A 40% nonrefundable excise tax will be imposed on group insurers if annual premium payments exceed an inflation adjusted $10,200 for individual coverage and $27,500 for family coverage (so-called “Cadillac plans”), beginning in 2018.
• The deduction for the subsidy for employers who maintain prescription drug plans for their medicare Part D-eligible retirees will be eliminated after 2012.
• If essential coverage requirements are not met, a new $500,000 deduction limit on executive compensation applies to payments to insurance providers after 2012.

G. Ross Dietrich, CPA, CIT
Senior Audit Manager
(602) 776-6344 Direct
rdietrich@pkcpa.com