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Prediction: Health Care Reform Will Become a Tax Matter

08.01.2012

On June 28, 2012, the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA). Health care reform is real. The decision was a split vote 5-4 in favor of keeping the PPACA in place.

Health Care Reform

Our non-legal position published in January 2012 through multiple outlets, including St. Louis Medical News, had this

prediction: the individual mandate is written into the IRS tax code and has been interpreted as a tax. The Anti-Injunction Act prohibits federal courts from hearing cases against federal taxes until they have been implemented.

Since the individual insurance mandate was struck down today through the Commerce Clause, but upheld through the Tax and Spending Clause, the fight on this is not over. When the mandate goes into effect in 2014, the tax impact will have been realized. Once implemented, suits will be filed saying that “harm has been done” with the tax law and once again (prediction) put health care reform before the Supreme Court.

The court’s decision means that several business and tax provisions that were part of the Act will remain in place. These include the codification of the economic substance doctrine, an annual assessment on pharmaceutical manufacturers as well as the new Medicare Hospital Insurance tax and net investment income on higher income taxpayers, which will take effect in 2013. The PPACA also imposes a $500,000 deduction limit on executive compensation paid by health insurance providers.

Beginning in 2014, there will also be new penalties imposed on employers with 50 or more full-time employees for those employees enrolled in subsidized coverage in the new health insurance exchanges created under the Act.

Your insurance costs will be affected – positively or negatively. The first question from an insurance perspective is how will PPACA affect you? The second issue will be how you solve the problems. Whatever the effects on your business, you will need to develop a strategy now that health care reform is here. While you have until 2014 before most of the insurance impact will take effect, your strategy should be in place long before then.

The Supreme Court also had a limited ruling regarding Medicaid provisions in the PPACA. Part of the provisions greatly expand Medicaid (insurance typically for lower income individuals and families) coverage throughout the country. Medicaid is typically a shared expense between the federal government and the individual state governments. The states were contesting this increased coverage as a financial burden they could not sustain. The PPACA proposed taking away federal funding from states that refused to take part in the new Medicaid regulations. However, the Supreme Court ruled that the federal government cannot take away Medicaid funding from states that refuse to participate.

For more information, or to schedule a Health Care Reform Strategic Review, please contact Ron Present at 314.983.1358 or rpresent@bswllc.com.

To learn more about health care reform and request a timeline for employers compliance with PPACA, click here.

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