Affordable Care Act’s Growing List of Tax Implications
The problem with introducing health care reform through changes in tax law is that it sets the ball rolling on the impact of the changes.
As the Affordable Care Act’s roll-out and implementation moves towards the second year, the tax implications of whatever was done in the first year are only now being felt.
Because the government handed a huge new group of customers to the heath care industry, they’re expected to pay some $8 billion worth of taxes which are due on Sept 30.
This is the first time this tax is being collected, and there’s an unintended consequence – the federal government is taxing itself and forcing state governments to pony up their share to cover the cost of the new tax imposed on the health care industry.
That’s because some private insurers have passed on the cost of the higher taxes to policy holders, and reimbursements for Medicare health plans have been hiked because of the increase in cost to plan enrollees.
States have to pick up part of the increased tab. For example, California’s cost has increased by $88 million, with the federal government paying $48 million and the State chipping in $40 million. In Florida, the cost is $100 million, with a 60-40 split.
Another issue that’s just popped up on the radar is that people who enrolled into a health plan through a federal or state marketplace may possibly face delays in filing their tax returns and getting refunds.
That’s because the HHS and state agencies have to send out Form 1095-A to help those who got their insurance from the marketplace and were eligible for tax credits made available under the ACA. That’s about seven million people.
The HHS has to send out these forms to people from 36 states who signed up through the federal marketplace. The remaining states which established their own marketplace will have to send out the form on their own to those who enrolled using the state’s marketplace and are eligible for tax credits.
Some people will also get too much in subsidies if their financial condition and income improves in the interim. This means the IRS will then be required to grab some of their refund to adjust for the extra health care tax credit granted.
Oh, and this isn’t just about ordinary people. A new “CEO tax” that’s one of the tax code changes introduced in the ACA has already collected tens of millions of dollars.
That’s because the deduction cap for compensation provided to a health care company’s top executives was brought down from $1 million to $500,000, and the new cap includes all forms of compensation including performance bonuses.
According to the Institute for Policy Studies, this new change in the tax law has by itself managed to raise $72 million in additional taxes last year from the 10 largest insurers.