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Tuesday, July 31, 2012


There are several emails going around stating how much "0bamacare" is going to increase Part B premiums. One email says the premium will be $247 per month by 2014.

Rest easy ▬ this email is incorrect.

Medicare Part B premiums are not directly affected by the Affordable Care Act. The premiums are set by two regulations that have been in effect for decades.

The Official Formula

The official formula states that Medicare premiums are to be based on the previous years' Medicare Part B healthcare costs. The federal government (i.e. your taxes) pays 75% of the premium and you pay 25% of the premium. After you pay the premium you are then responsible for an additional 20% of YOUR Part B costs. 

So the 2014 costs, which will be announced in late 2013, will be based on Medicare costs of 2012. This won't be known until 1. we get done with 2012 and 2. the government has time to crunch the figures.

An Even Older Law

Now, another regulation that went into effect prior to the premium formula states that the premium is also tied to the Cost of Living Adjustment (COLA). This regulation affected the premiums in 2010 and 2011 and prohibits a premium increase in any year that there is no Social Security COLA. This held most people's premiums at the 2009 level of $96.40.

However, those who did not have their Part B premium withheld by Social Security and those brand new to Medicare did not benefit from the regulation. In fact, they were hurt because of the fact that most people did not see an increase but healthcare costs did increase. The premium was for 2010 and 2011 was $110.50 and $115.40 respectively. We had a COLA adjustment for 2012 and everyone's premium leveled out to $99.90 (with the exception of those who are high income and pay a surcharged premium).

When will we know?

Medicare generally makes the next year premium announcement in late September or early October so we should know the new amounts soon.

How does the Affordable Care Act affect premiums?

As I said, indirectly. The Act is supposed to lower health care costs. If it does, then Part B premiums will decrease. If not...maybe it won't go up as fast.

Tuesday, July 10, 2012

HealthCare Reform and the New Taxes

With the recent Supreme Court ruling we now have a new tax. The penalty for not having any insurance coverage starting in 2014 is now called a tax, and therefore is ruled Consitutional. However, this post will give you information on all of the other taxes that were already in the Act.

Taxes on Individuals:

►The first tax is, of course, the mandate. Currently the tax is supposed to be $95 in 2014, $325 in 2015 and $695 in 2016. After 2016, the penalty will be adjusted for inflation. However, this will likely be increased prior to 2014 so don't hold your breath.

►The second tax is an additional 0.9 percent Medicare tax on earned income in excess of $200,000 ($250,000 for families).

►The third tax is wealthier Seniors are paying a higher Part D premium. This is not a tax per se but I'm including it because it is revenue going directly to the government.

►The fourth tax is the tax deduction for Part D retiree drug subsidy employers receive will be eliminated beginning in 2013.

►The fifth tax is if you have an adjusted gross income (AGI) over $200,000 ($250,000 for joint filers) you will also pay a 3.8 percent Medicare tax on unearned income, such as interest, dividends, rents, royalties and certain capital gains. Retirement plan distributions aren’t subject to this tax.

►The sixth tax is the threshold for deducting unreimbursed medical expenses, which will be increased from 7.5 percent of AGI to 10 percent of AGI in 2013. Most places do not list this as a tax, but if you can't deduct medical expenses from your taxes it is in effect a tax.

Taxes on Employers:

Some people do not consider taxes on an employer to have any affect on them. However, if the employer is paying a tax they are not paying you a higher salary.

►Employers with 50 or more full-time workers that don’t offer coverage will be charged $2,000 per full-time employee. However, the employer’s first 30 employees will be excluded from this assessment.

►Employers who do offer coverage could be subject to penalties, if any of their workers receives a premium tax credit. In this case, employers will be charged either $3,000 for each employee receiving the tax credit or $2,000 for each full-time employee, whichever is less. Again, the first 30 full-time employees will be excluded from this assessment. This means your employer will be penalized if you don't get on their insurance. What this will do to a couple who both work and both have coverage from their employer will remain to be seen.

►Employers with fewer than 50 full-time employees aren’t subject to these penalties.

Taxes on Business:

All taxes on a business is passed along to the consumer, so this will have an affect on you every time you buy from these business.

►10 percent tax on indoor UV tanning services went into effect in 2010.

►Manufacturers and importers of brand-name drugs began paying an annual fee in 2012, starting at $2.8 billion. This, along with the Part D subsidy, has resulted in an increase in medications.

►2.3 percent excise tax on medical devices goes into effect in 2013. This will increase health care costs.

►Health insurance companies will start paying an annual fee in 2014, starting at $8 billion. This will increase health insurance premiums.

►Insurers that offer high-premium plans will be subject to a 40 percent nonrefundable excise tax. This will result in fewer businesses offering the best plan available.

Tax Credits:

Since we are talking about taxes we must be fair and list the tax credits.

In 2014, people with income between 133 percent and 400 percent of the federal poverty level will become eligible for tax credits or cost-sharing subsidies to help cover the cost of insurance. The amount of these credits will vary, depending on income. You can see how your income stacks up here. People with income 133% or less will automatically be placed on Medicaid.

►Businesses are eligible for a tax credit worth up to 35 percent of their share of their employees’ health premiums if they meet the following conditions:
→ They employ fewer than 25 full-time equivalent workers;
→ Their annual average wage is less than $50,000; and
→ They cover at least 50 percent of the cost of health insurance for an employee with single coverage.
This tax credit is only temporary and is due to be eliminated after 2 years.