The U.S. Supreme Court
decided in a 5-4 vote to uphold the Patient Protection and Affordable Care Act P.L. 111-148 (the Act). The Court determined in its ruling for National Federation of Independent Business v. Sebelius
, that requiring U.S. citizens and legal residents to maintain minimum essential health coverage is a permissible exercise of Congress’s constitutional authority to tax.
However, the Court decided the severability clause of the Act is unconstitutional. This clause would cut all Medicaid funds a state receives unless they expand coverage to a much larger number of recipients. The Act will stand without the penalty of states’ losing all Medicaid funds.
The Court decision allows a number of key provisions of the Act to continue as they have already gone into effect, including:
- Individuals with preexisting health conditions are eligible for a temporary high-risk pool
- Lifetime dollar limits for essential benefits in insurance policies are prohibited
- Dependents must be allowed to stay on a parent’s health coverage plan until they turn 26
- Insurers are prohibited from excluding preexisting health conditions for children under age 19
Among the new healthcare provisions that will go into effect in 2014 are:
- Insurers will be prohibited from discriminating against any individual based on a preexisting medical condition
- States will be required to establish health insurance exchanges with Insurance premiums of individuals in households with income up to 400% of the poverty line will be subsidized.
- The cost for coverage for people in the same age group will be the same regardless of health status, and
- Companies with more than 50 full-time-equivalent employees will be required to offer affordable health insurance
Finally, the Act adds a number of new taxes provisions to help fund healthcare reform, all of which were upheld by the Supreme Court decision. Among them are:
- Small business tax credit (Sec. 45R) gives a credit of up to 50 percent of a company’s nonelective contributions for insurance premiums for businesses with 25 or fewer employees and average annual wages of $50,000 or less.
- Reporting requirements (Sec. 6055) requires insurers and employers who self-insure to report certain insurance coverage information to both the IRS and the individual
- Fees on health plans (Sec. 4375) imposed of each health insurance policy
- Tax on high-cost employer plans (Sec. 4980I) will be effective 2018 on coverage providers when the aggregate value of employer-sponsored health insurance coverage exceeds a required threshold.
The information contained in this blog is not intended to be tax advice, is of a general nature, and is based on authorities that are subject to change. Application to your specific situation should be determined in consultation with your tax advisor. IRS Circular 230 Disclosure: Any tax advice in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any matters addressed herein.