Patient Protection and Affordable Care Act Changes Affect Employers in 2013

The United States Supreme Court ruled that the Patient Protection and Affordable Care Act was constitutional. What does that mean to small business in 2013? It means continued change in Health care from the employer’s prospective.

A recent study of health insurance companies indicates most employers will be paying higher amounts for insurance as health insurance companies will be raising premium rates. One of the provisions of the PPACA requires rebates to employers if the health insurance provider spends less than 80 percent of premiums on medical care, so there is a projection that the rate of increase in premiums will be lower than in earlier years.

In an effort for consumers to review policies from different insurance companies, a “Summary of Benefits and Coverage” is required under the law. The summary is a simple description of items covered and not covered under the plan. So, by reviewing the summary of multiple plans, you should be able to compare them to determine which option is best for you. Make sure your human resource department is aware of this, and have them contact the insurance companies, who will provide the “Summary of Benefits and Coverage” to you.

If your company has a flexible spending account, the amount that can be placed into the account for years beginning in 2013 is capped at $2,500. In prior years, that amount was set by each employer. Flexible savings accounts allow you to have qualified out-of-pocket medical expenses such as physician co-payments, or eyeglasses, prescription drugs or other medical expenses paid or reimbursed on a pre-tax basis. Any amount of your fund not used up in a year is currently lost (use it or lose it) so if you have one, carefully choose the annual dollar amount.

One of the benefits of the PPACA is that the law allows adult children up to the age of 26 to remain on their parent’s health insurance policy. Not every plan allows parents to do so, as some plans were exempted from this provision. Review your personal situation to determine if your plan allows it if you have a child who may qualify.

For those insured that suffer from chronic or very costly conditions, annual amounts that insurers will pay generally increase from $1.25Million to $2 Million in 2013.

Other scheduled changes for 2013 for most taxpayers include the medical expense deduction floor increasing from 7.5 percent to 10.0 percent (the new floor is waived during 2013-2016 for individuals who turn 65 before the end of these years).

Beginning in 2013, if you file your tax return as Single, and you make more than $200,000 or if you file jointly, and combined you make more than $250,000 you will pay an extra 0.9 percent Medicare tax.

Beginning in 2013, if you are single and your modified adjusted gross income is more than $200,000 or if you file jointly, and combined you make more than $250,000 you will pay an extra 3.8 percent Medicare tax on unearned income.

As I mentioned in an earlier article, the tax rates are scheduled to increase in 2013. So, almost all taxpayers are scheduled to see a tax increase unless Congress acts to modify or change the law.

Be aware of the changes taking effect in 2013. Make sure the affect is consistent with your business plan and your desire to provide health insurance and medical benefits to your employees. Be prepared for the changes.

Gerard J. Kassouf, CPA is a director of the Birmingham, Alabama firm of L. Paul Kassouf & Co., P. C., Certified Public Accountants and Business Advisors. He can be reached at gkassouf@kassouf.com.