With President Barack Obama’s historic health reform legislation, the Health Care and Education Reconciliation Act of 2010, H.R. 4872, signed into law March 23, advisors as well as the financial services community at large now have the task of digesting the law’s details and deciphering how it will affect their businesses–and the lives of their clients–going forward.
While the healthcare reform law will be phased in over the next decade, it will continue to impact the economy for many years to come. The Congressional Budget Office (CBO) has weighed in with its assessment of how much healthcare reform will cost (see Numerology), with CBO Director Douglas Elmendorf stating in April that over a 10-year period, ending in 2019, the law’s new insurance provisions would reduce the deficit by $143 billion and cover 32 million people who didn’t have insurance.
For advisors, healthcare reform affects a myriad of issues–namely taxes, investing, annuities, health savings accounts (HSAs), flexible spending accounts, as well as implications for small businesses–that will keep them on their toes for some time. Most of these topics are discussed in the pages that follow.
For instance, come 2011, the healthcare law conforms the definition of qualified medical expenses for health savings, health flexible spending accounts, and health reimbursement arrangements to the definition used for the itemized deduction. Also in 2011, the healthcare reform law increases the penalty for distributions from health savings accounts prior to age 65 not used for qualified medical expenses from 10% to 20%.
In 2013, the law increases the Medicare payroll tax from 1.45% to 2.35% for individuals with wages of more than $200,000 and $250,000 for joint filers. The law also imposes a new 3.8% tax on investment income referred to as “unearned income” for individuals with wages of more than $200,000 and $250,000 for joint filers.