The Senate and the House Unveil Health Reform Bills

Fundamentally Altering the System

On November 7th, 2009 the House of Representatives passed the Affordable Health Care for America Act (H.R. 3962) and the Senate Democratic Leadership unveiled its health reform bill, the Patient Protection and Affordable Care Act (H.R. 3590) on November 18th, 2009.  Massive changes to the health insurance delivery system and employer provided healthcare coverage would be made. Requirements would include obtaining health coverage or paying a penalty, surtaxes applied to high earners, and information reporting changes – with revenue from compliance and foreign-tax rules funding such reform.

The parameters of both bills will impact many of Feeley and Driscoll’s clients and friends. It can be difficult to follow all of the legislation on health reform (either proposed or passed).  The Kaiser Family Foundation has created Health Reform Comparison Tools to better compare and summarize the tax-related provisions in the Senate Leadership and the House-passed health reform bills. If you have specific questions, please contact an accountant or consultant at Feeley & Driscoll via Email or call us at 1 (888) 875-9770.

Brief Highlights

(please see the Reform Comparison for details)

From the House of Representatives

Related to H.R.3962, the Affordable Health Care for America Act the following are highlights are changes in employer responsibilities, individual responsibilities, and tax provisions:

• Employer provided health insurance
• Tax credits for businesses with ten or fewer employees
• Requirement of health insurance for individuals or payment of an additional tax
• New information reporting requirements for insurance providers
• Changes in nontaxable reimbursements from health flexible spending accounts and arrangements
• Salary reduction contributions to health flexible spending accounts and arrangements
• Penalties on distributions from health flexible spending accounts and arrangements
• Deductions for expenses allocable to Medicare Part D subsidy elimination
• No pre-tax coverage available for purchased through the insurance exchange
• Establishment of a temporary reinsurance program
• Extension of the general exclusion for employer-provided coverage to eligible beneficiaries
• Self-employed individual deductions to meet certain criteria

From the Senate

Related to H.R. 3590, the Patient Protection and Affordable Care Act the following key revenue raisers include:

• Additional 0.5% Hospital Insurance (HI)
• 40% nondeductible excise tax to health coverage in excess of $8,000
• Employers to report value of health benefits on W-2 forms
• Health insurance issuers to pay a fee for each policy
• For employer provided flexible spending accounts and arrangements, non-prescribed over the counter medicines are not reimbursable on a tax-free basis
• Penalty of nonqualified HAS distributions would increase
• Capped contributions to health FSAs
• Hospitals would be subject to new requirements, policies, assessments, reporting, and disclosure rules
• Modification of general information reporting requirement
• Increase in floor beneath itemized medical expense deductions
• 5% excise tax applied to cosmetic surgeries
• A $500,000 deduction limit applied to remuneration of employees of service providers of covered health insurance
• Provide a safe harbor from the nondiscrimination requirements for cafeteria plans for eligible small employers
• Temporary tax credit to encourage investments in new therapies
• Annual fee levied on manufacturers and importers of branded drugs and certain medical devices

For further detail you may also like to reference the following sources:

Ways and Means Committee: http://waysandmeans.house.gov
Energy and Commerce Committee: http://energycommerce.house.gov
Education and Labor Committee: http://edlabor.house.gov/
Senate Leadership: http://www.democrats.senate.gov/

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