
Government Relations Issue Updates U.S. HEALTHCARE LEGISLATION On Sunday, March 21, 2010, the House passed the Senate-approved health care bill by a vote of 219-212. The only bipartisanship support for the bill was in its opposition, as 34 Democrats voted along with all 178 Republicans voting NO. The 34 Democrats who stood up against their party’s leadership and with the majority of Americans were: John Adler, Jason Altmire, Michael Arcuri, John Barrow Marion Berry (AR), Dan Boren (OK), Rick Boucher, Bobby Bright, Ben Chandler, Travis Childers, Artur Davis, Lincoln Davis, Chet Edwards (TX), Stephanie Herseth Sandlin, Tim Holden, Larry Kissell, Frank Kratovil, Daniel Lipinski, Stephen Lynch, Jim Marshall, Jim Matheson, Mike McIntyre, Mike McMahon, Charlie Melancon (LA), Walt Minnick, Glenn Nye, Collin Peterson, Mike Ross (AR), Heath Shuler, Ike Skelton, Zack Space, John Tanner, Gene Taylor and Harry Teague (NM). The House then approved a bill of changes or “fix” to the Senate bill that now goes back to the Senate for their consideration under reconciliation (requiring only 51 votes). The Senators will begin tangling over the “fixer” or “reconciliation” bill. If the Senate makes any changes at all to the reconciliation package, it will have to go back to the House for yet another vote before going to the President for his signature. There are many concerns regarding the reconciliation bill, but below are some of the more troubling provisions for employers. Please call your Senators today and encourage them to oppose these and other detrimental provisions in the House’s reconciliation bill under consideration this week (3.22.10) in the Senate. 1. Employer mandate: The penalty for the "free rider" increased from $750 per employee to $2000 per employee if you don’t offer insurance for more than 50 employees. If you do offer insurance, but the employee share of premiums is "unaffordable" (greater than 9.5% of income), and that employee goes into the exchange and receives a tax credit, your fine is $3000 per employee!!
2. For the first time, it uses part-time employees when calculating how many full time employees for that determination of "over 50 employees". The senate bill was silent on part-time workers.
3. A new 3.8% “Medicare” tax on non-wage income would be placed on high earners, income from interest, dividends, capital gains, and some profits from investments in partnerships and S-corporations. The revenues from the tax on unearned income would be credited to the Supplemental Medical Insurance trust fund. If the unearned income tax–and other proposed tax hikes on high-income individuals included in the President’s FY 2011 budget—become law, a high-income taxpayer could have an effective tax rate on capital gains and qualified dividends of 23.8 percent. Significantly, however, the effective tax rate on nonqualified dividends would be 43.4 percent.
4. The Cadillac tax on “high value” health plans is delayed from 2013 to 2018 - but it will now be only indexed to CPI inflation (Senate bill was CPI+1%). Since medical inflation is so much higher than CPI, this will, without a doubt, become the next Alternative Minimum Tax (AMT) and catch more and more plans every year.
5. While stating they have removed the “Cornhusker Kickback”, the reconciliation bill instead provides an expansion of the federal government’s reach into Medicaid, and obligates the federal government to pick up 90% of the cost of Medicaid expansion – forever.
6. The reconciliation bill also leaves in place special deals for Louisiana, Connecticut, the frontier states, and others, while adding in new special deals for states like Tennessee. From our early research, we have found employers with under 50 employees are not impacted too much, although there are some tax credit options for employers who choose to offer insurance. The Congressional Budget Office said the initial cost of the program will be $1 trillion over the next decade. The following information is from The Wall Street Journal (3.22.10) WHAT’S IN THE BILL The $940 billion health-care overhaul will take nearly a decade to roll out in full. A look at the key parts of the bill and when they go into effect. 2010
2011
Taxes and fees
2013
2014
Cost control
2016
2017
2018
—Sources: House bill; Kaiser Family Foundation For additional information visit the U.S. Chamber's Health Care Toolkit. USA Today timeline "Health care: What you could see." Another excellent article written by the Maryland Association CPAs entitled, Health care reform: What will change?
Health Care Reform and Small Biz What does the new health care law mean for small businesses? Congress passed and President Obama signed comprehensive health care legislation containing a requirement for individual health care coverage and a de facto requirement for most businesses to provide health insurance. Key provisions for small business include: Requirements for Small Businesses Small Business Health Options Programs (SHOP) Tax Credits Begin This Year Companies with 25 or fewer employees and average wages of less than $50,000 could receive tax credits for contributions to employee coverage. The tax credit phases out as company size and average wage increases. Individual Mandate Rules for Insurance Companies Detailed information on the health care reform law can be found at: For more information on what it means for small business: Voice of Business Weekly Legislative Updates
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