Tax Burden

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Individual Mandate Excise Tax
Section 1501 (Page 324) • Effective January 2014

Starting in 2014, anyone not buying “qualifying” health insurance must pay an individual income surtax according to the higher of the following (page 71 of manager’s amendment updates Reid bill):

Exemptions exist for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS).

Employer Mandate Tax
Section 1513 (Page 348) • Effective January 2014)
Estimated Revenue Effect: $39 billion from 2010-2019

If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $750 for all full-time employees.  Applies to all employers with 50 or more employees.

If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

Excise or “Cadillac” Tax on Comprehensive Health Insurance Plans
Section 9001 (Page 1979) • Effective January 2013
Estimated Revenue Effect: $149.1 billion

Starting in 2013, a new 40 percent excise tax on “Cadillac” health insurance plans will be levied against these plans ($8,500 single/$23,000 family).  Higher threshold ($9850 single/$26,000 family) for early retirees and high-risk professions.  CPI +1 percentage point indexed.  Longshoremen have been exempted (page 362 of the manager’s amendment). From 2013-2015, the 17 highest-cost states are 120% of this level.

Hike in Medicare Payroll Tax
Section 9015 (Page 2040) • Effective Date: January 2013
Estimated Revenue Effect: $86.8 billion

Current law and changes:

The 0.9% new rate addition is not deductible for the self-employment tax adjustment.  Updated by page 372 of manager’s amendment.

Medicine Cabinet Tax
Section 9003 (Page 1997) • Effective Date: January 2011
Estimated Revenue Effect: $5 billion

Americans would no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

HSA Withdrawal Tax Hike
Section 9004 (Page 1998) • Effective Date: January 2011
Estimated Revenue Effect: $1.3 billion

Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Flexible Spending Account Cap – aka "Special Needs Kids Tax"
Section 9005 (Page 1999) • Effective Date: January 2011
Estimated Revenue Effect: $14 billion

Imposes cap on FSAs of $2,500 (currently unlimited).  This cap is indexed to inflation after 2011.  This change was added on page 363 of the Manager’s Amendment. 

There is one group of FSA-owners who will be especially impacted by this new cap: parents of special-needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.

Tax on Medical Device Manufacturers
Section 9009 (Page 2020) • Effective Date: January 2010
Estimated Revenue Effect: $19.2 billion

Medical device manufacturers employ 360,000 people in 6000 plants across the country. This bill would impose a new $2 billion annual tax on the industry imposed relative to shares of sales made that year.  Exempts items retailing for less than $100.  Rises to $3 billion annually in 2017 (updated by page 364 of manager’s amendment).

Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI
Section 9013 (Page 2034) • Effective Date: January 2013
Estimated Revenue Effect: $15.2 billion

Currently, those facing high medical expenses are allowed a deduction if the total cost of the expenses reduces the filer’s income by 7.5%. The new provision would impose a threshold of 10%. Waived for 65+ taxpayers in 2013-2016 only.

Tax on Indoor Tanning Services
Page 373 of Manager’s Amendment • Effective Date: July 1, 2010
Estimated Revenue Effect: $2.7 billion

New 10% excise tax on Americans using indoor tanning salons.

Blue Cross/Blue Shield Tax Hike
Section 9016 (Page 2044) Effective Date: January 2010
Estimated Revenue Effect: $400 million

The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues is spent on clinical services.

Excise Tax on Charitable Hospitals
Section 9007 (Page 2001) • Effective Date: Immediate

$50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by HHS (updated on page 364 of manager’s amendment).

Tax on Innovator Drug Companies
Section 9008 • Effective Date: January 2010
Estimated Revenue Effect: $22.2 billion

$2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Health Insurers
Section 9010 • Effective Date: January 2011
Estimated Revenue Effect: $59.6 billion

$10 billion annual tax on the industry imposed relative to health insurance premiums collected that year.  Phases in gradually until 2017.  Fully-imposed on firms with $50 million in profits (updated on page 365 of manager’s amendment).

Elimination of tax deduction for employer-provided retirement Prescription Drug Coverage in Coordination with Medicare Part D
Section 9012 • Effective Date: January 2011
Estimated Revenue Effect: $5.4 Billion

Salary Limit of $500,000 for Executives of Health Insurance Companies
Section 9014 (Page 2035) • Effective Date: January 2013
Estimated Revenue Effect: $600 million

Employer Reporting of Insurance on W-2 (Preamble to taxing individuals on their health benefits)
Section 9002 (Page 1996) • Effective Date: January 2011