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2013 PPACA Surcharges, Taxes and Penalties

Who:  All employers and all individuals who purchase health insurance.  There are costs that may impact employer group health insurance plans and premiums under the Patient Protection and Affordable Care Act (PPACA).  Individuals may have added increased costs related to healthcare expenditures and personal taxes.

When: Starting with plan years after September 30, 2012 and calendar year 2013.

What: Costs associated with health insurance plans that will affect fully insured premiums and self-insured plan costs.

  1. Insurance Surcharge: A fee of $2 per covered life for all health plans (insured and self-insured) for plan years ending after September 30, 2012 ($1 in the case of plan years ending during fiscal year 2013).

  2. Medical Device Excise Tax: A 2.3 percent excise tax on medical devices costing more than $100.

    In addition, there are new costs related to health and healthcare that may affect individuals.

  3. Health Savings Account (HSA) Withdrawal Penalty:  An increase from 10 percent to 20 percent in the HSA penalty for non-medical withdrawals

  4. Limited Medical Deduction:  The threshold for including itemized medical expenses as income tax deductions will go up to 10 percent (from 7.5 percent) of adjusted gross income.

  5. Medicare Surtax:  An additional 0.9 percent Medicare surtax for those making $200,000 or more ($250,000 joint).

  6. Non-earned Income Surtax:  A 3.8 percent surtax on non-earned income from dividends, interest, rent, capital gains, annuities, house sales, partnerships, and other sourceswhen your adjusted gross income is more than $200,000 ($250,000 for joint-filers).

Executive Summary:  Several new costs will be implemented during 2013.  These costs may be built into fully insured premiums or experienced as claims occur under self-insured plans.   In some cases, employees will need to be better educated to make informed decisions on withdrawals of HSAs and the calculation of the personal income tax itemized deduction for medical expenses. 

Cost Issue

Start Date

 Insurance Surcharge

9/30/2012

 Device Excise Tax

1/1/2013

 HSA Withdrawal Penalty

1/1/2013

 Limited Medical Deduction

1/1/2013

 Medicare Surtax

1/1/2013

 Non-earned Income Surtax

1/1/2013


Actions:  If applicable, employers will need to calculate the insurance surtax and make appropriate payments to the federal government.  Employers will need to adjust the Medicare tax withholding from employee paychecks.  Employers should check with their insurance brokers, agents, consultants, payroll system vendors, and insurers in preparation for the changes to be implemented in 2013. 

 

The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions and a contributor for the Client Community newsletter. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult your legal advisors to determine the laws and regulations impacting your business. Any opinions expressed within this document are solely the opinion of the individual author and may not reflect the opinions of EBix or its personnel.