The ACA, or the Affordable Care Act, is a health insurance law that has played a major role in the way healthcare is administrated across the United States. While the Affordable Care Act has allowed millions of people to gain health insurance for the first time, there has been plenty of push back from those who found their premiums rising. Others were unhappy with how they had to switch doctors due to the ACA. Employers also found it challenging to provide healthcare for their employees through the ACA. But what role does taxation play in the ACA and how the country benefits or suffers because of the act? We take a look. How the ACA and Taxes Work
When the ACA was enacted, some changes were also made to the Medicare tax. For instance, from January 2013, an added 0.9 percent Medicare tax is added to a person’s wages. Married couples who earn more than $250,000 a year are subjected to the tax, while individuals who are married but file separately have a threshold of $125,000. For everyone else, the threshold sits at $200,000 income per year. In most cases, employers are the ones who must deduct the tax from the wages or compensation they provide to an employee on a weekly, bi-weekly or monthly basis.
The adoption credit that is applied to a person’s tax filings also increased due to the Affordable Care Act. Meanwhile, an employee who receives health coverage through their employer can provide coverage to their children under 27 years old – tax free. The tax-free coverage for under-27 children applies to insurance plans at the work place or for retirees. It also changes how employees can make pre-tax contributions to the expanded benefits they can receive from cafeteria plans.
The ACA certainly changed the way individuals and families received health insurance. With the pre-existing condition provision, many who were sick or suffered from a long-term condition were now able to apply for and receive health insurance. Meanwhile, children could remain on their parents’ insurance plan for much longer than before.
However, the biggest changes brought about by the ACA were felt by employees. The Affordable Care Act made it mandatory for large-scale employers to provide health coverage for any full-time employees. If they failed to provide such coverage, they would find themselves charged a shared responsibility fee.
While larger businesses may not have too much of an issue insuring their employees, as most larger companies already provided health insurance in some form, small businesses did not feel the same way.
Small Businesses and the ACA
Profit margins are always tight at small businesses, which is the reason they do not employ many people. And the suggestion to provide health insurance for these employees certainly posed some challenges for small businesses. It is the reason why the Small Business Health Care Tax Credit was created, to help these businesses with the costs of covering their employees. The tax credit applies to businesses of a specific size, or those businesses where most workers are low to moderate income. The tax credit only applies if a business contributes to at least half of the cost of single coverage for an employee.
There is a special Small Business Health Options Program, or SHOP, Marketplace, where small businesses are required to purchase health insurance coverage for their employees. And despite reports suggesting otherwise, small businesses who have less than 50 full-time employees are not legally required to provide health insurance coverage.
Under the group coverage laws of the ACA, it is stated that if an employer decides to provide health insurance to even one full-time employee, they must provide health insurance to all their employees. And since owners are generally classified as employees for these purposes, if the owner and/or upper management of a small business are provided health insurance through the company, other employees must receive the same benefit. Similarly, if coverage is offered to one part-time employee, all part-time employees must receive the same coverage.
Given the fact that the pre-existing conditions clause is a part of the ACA, it means that employees who have certain illnesses or long-term conditions must be provided with insurance as well. No previous medical problem is cause for an employer to deny an employee health coverage. The dependents of employees are also given coverage when the group plan is enacted, which includes spouses, children and/or unmarried domestic partners. And within these group plans, if an employer decides to contribute 50 percent or more of the money for the employees’ insurance plans, they will receive the Small Business Health Care Tax Credit from the IRS.