Health Insurance

Health care reform passed in 2010 has brought a number of changes to the health insurance landscape and further changes are probable. Since 2014, all uninsured U.S. citizens and legal residents are required to obtain health care coverage or pay a penalty. Qualifying coverage can be provided through employers or purchased through an insurance exchange. Federal coverage such as Medicare or Medicaid also qualifies. Also subsidies are provided on a sliding scale to individuals with lower to mid-level incomes. The subsidies are provided in the form of tax credits contingent upon one's household income and the number of people in the household. Starting in 2019, with passing of the Tax Cuts and Jobs Act in December 2017, the individual mandate that requires all Americans under 65 to have health insurance or pay a penalty is repeated. Americans without health coverage in 2019 will not be subject to a tax penalty.

To assist those who cannot afford the full cost of premiums, the Medicaid program will be expanded to enroll uninsured individuals with incomes up to 133% of the Federal poverty level (FPL). Subsidies will be provided on a sliding scale to individuals with lower to mid-level incomes who do not qualify for Medicaid. Families and individuals with incomes up to 400% of the FPL may be eligible for a premium assistance tax credit to help them purchase basic coverage through an exchange.

To help raise revenue to cover the cost of subsidies, the new law will broaden the Medicare tax base for higher-income taxpayers. This includes an additional Hospital Insurance tax rate of 0.9% on earned income in excess of $200,000 for individuals and $250,000 for married couples filing jointly, as well as a 3.8% unearned income Medicare contributions tax on the lesser of net investment income or the excess of modified adjusted gross income (MAGI) over the same threshold amounts. Some trusts and estates will also be liable for this 3.8% tax.

Starting for tax years beginning after December 31, 2019, a 40% nondeductible excise tax will be imposed on health insurance providers or plan administrators for any "Cadillac" health insurance plan with annual premiums in excess of $10,200 for individual and $27,500 for family coverage, with both amounts adjusted for inflation and higher thresholds for employees in certain high-risk professions and non-Medicare retirees age 55 and older. Insurance providers and plan administrators are permitted to pass along the excise tax to consumers through higher premiums.