Health Care Reform

By Jescia Sigh
February 8, 2011
To be discussed…
Background

Changes to employer’s tax reporting requirements

Obligations for dependent coverage

Changes to Flexible Spending Arrangements

How the law applies to employees

How this law affects small businesses

Background…
1965: Medicare and Medicaid is introduced to the US
(President Lyndon Johnson)
1985: Consolidated Omnibus Budget Reconciliation Act
of 1985 (COBRA) amended the Employee Retirement
Income Security Act of 1974 (ERISA)
1997: State Children’s Health Insurance Program was
established
2010: Patient Protection and Affordable Care Act (23
Mar 2010) and Health Care and Education Reconciliation
Act of 2010 (30 Mar 2010)
How the HRC affects employers…
Changes to tax reporting requirements on health plans:
 Report the value of health insurance coverage they provide

Obligations to cover dependents:

 Employers with cafeteria plans can permit employees to
begin making pre-tax contributions

Changes to Flexible Spending Arrangements:

 Over-the-counter drugs or medicines cannot be reimbursed
How the HRC affects employees…
More documentation is required

Health coverage for children 26 and under is tax-free

FSA’s will not reimburse over-the-counter medicines or

drugs
How the HRC affects small
businesses…
Small Business Tax Credit:
 Encourage small business owners to offer health insurance
 Helps organizations to afford health coverage for employees

Eligibility
 Employer must cover at least 50% of costs
 Size of the organization matters
 Amount of average annual wage
 Taxable and tax-exempt firm

Amount of Credit
 Up to 35% for taxable
 Up to 25% for tax-exempt
HRC Example…
Auto Repair Shop with 10 Employees Gets $24,500
Credit for 2010

Main Street Mechanic:

• Employees: 10

• Wages: $250,000 total, or $25,000 per worker

• Employee Health Care Costs: $70,000

2010 Tax Credit: $24,500 (35% credit)

2014 Tax Credit: $35,000 (50% credit)

Questions…