With the High Court upholding ObamaCare, the scramble is on to figure it out

With the High Court upholding ObamaCare, the scramble is on to figure it out

Lets pass it, and then read whats in it, then Speaker Pelosi said of The Affordable Health Care Act (ACA) when it successfully passed Congress in 2009 to become President Obamas signature accomplishment. And with the United States Supreme Court yesterday upholding ACAs constitutionality the dust is settling, perhaps, but the fallout on the new laws meaning, breath, and implementation looms large, complicated in no small part with election season posturing by Democrats and Republicans vying for the presidency and control of Congress in 2013.

Right out of the box it appears that employers will need to take actions ahead of the ACAs January 1, 2014 implementation date.

Come January 1, 2013, for instance, the Medicare payroll tax is poised to increase by 0.9% on high-income earners; and a 3.8% tax on net investment income of the same high-income earners is going to go into effect. These measures will be known as the Medicare Contribution Tax, coming about as a direct result of ACAs implementation.

Right now, the Medicare tax on salary and/or self-employment (SE) income is 2.9%. If you’re an employee, 1.45% is withheld from your paycheck, and the other 1.45% is paid by your employer. If you’re self-employed, you pay the whole 2.9% yourself.

Starting in 2013, an extra 0.9% Medicare tax will be charged on: (1) salary and/or SE income above $200,000 for an unmarried individual, (2) combined salary and/or SE income above $250,000 for a married joint-filing couple, and (3) salary and/or SE income above $125,000 for those who use married filing separate status. For self-employed individuals, the additional 0.9% Medicare tax hit will come in the form of a higher SE bill.

Starting in 2013, the maximum rate on long-term gains is scheduled to go from 15% to 20% and the maximum rate on dividends is scheduled to increase to 39.6% as the so-called Bush tax cuts expire.

With the aforementioned Medicare Contribution Tax, planned for high income taxpayers, their maximum federal rate on long-term gains for 2013 and beyond will actually be 23.8% (versus the current 15%) and the maximum rate on dividends will be 43.4% (versus the current 15%).

The additional 3.8% Medicare tax will not apply unless adjusted gross income (AGI) exceeds: (1) $200,000 for singles, (2) $250,000 for married joint-filers, or (3) $125,000 for married filing separate status.

There will be a new limit on flexible spending accounts, with employees limited to $2,500 each, and the medical expense deduction floor increases to 10% from 7.5%.

Features of the ACA that are beginning to be discussed and analyzed by the news media and others are as follows:

The employer mandate and individual mandate

Employer and insurer reporting requirements

New health insurance market reforms

Establishment of state health insurance Exchanges for individuals

Premium tax credits and cost-sharing subsidies for certain individuals in Exchange insurance products

Medicaid expansion to new populations (100% federal match to states for newly-eligible populations through 2016)

Annual fees on health insurers

Independent Payment Advisory Board (IPAB) reports to Congress if Medicare spending exceeds the growth target.

Political fallout in the wake of the Supreme Courts ACA ruling includes the announcement by House Majority Leader Eric Cantor (R-VA) that the House will vote on legislation to repeal the ACA in its entirety as early as July 11. That vote will be largely symbolic, however, as it is unlikely to advance in the Democratic-controlled Senate. Indeed, efforts to repeal all or part of the law will be difficult unless Republicans maintain control of the House, win the presidency, and gain a majority in the Senate in the November 2012 elections.

Commenting on the Supreme Court ruling, NADA Chairman Bill Underriner said it will have a negative impact on U.S. dealers. “The resources that dealers must put toward meeting these new health care mandates prevent them from growing their businesses and in many cases will hinder their ability to offer quality health care plans to their employees,” he said. The average new car dealership employs 53 people and earned pre-tax income of $785,000 last year, NADA says.