Benefits Chalk Talk: Individual Tax Penalties Starting in 2014

By now you’ve heard all about the “individual tax penalties” that apply to most Americans if they’re not carrying health insurance by January 1st, 2014. Back in June of 2012, the Supreme Court of the United States upheld the “individual mandate” based on the congressional power to regulate tax.

What does this mean? It means that nearly every American will need to be insured by 2014, or face a yearly tax penalty.

In this blog post, we’re going to briefly explain the basic structure of this individual tax penalty, and how it will be “phased in.” Keep in mind that we’re emphasizing individual tax penalties only in this blog post. There are different mandates for employers with +50 employees, but we’re not discussing those tax penalties here.

As mentioned above, we used the phrase “phased in.” The bulk of the tax penalties will not hit right away in 2014; this will allow people to familiarize themselves with the new system. Here is how it will work, starting in 2014 if you decide not to purchase health insurance:

Uninsured Individual Tax Penalty in 2014:

• 1% of yearly income or $95/year (whichever is higher)

Uninsured Individual Tax Penalty in 2015:

• 2% of yearly income or $325/year (whichever is higher)

Uninsured Individual Tax Penalty in 2016:

• 2.5% of yearly income or $695/year (whichever is higher)

Uninsured Individual Tax Penalties after 2016:

• Increased annually by the Cost of Living Adjustment (COLA)

The penalty amounts are capped at the family level. The most that a family can pay in tax penalties is 3x the yearly individual amount listed above. In other words, if a family has five uninsured family members, only three of them will be subject to the yearly penalty.

You’ll want to discuss with your broker/insurance professional where you can find affordable health insurance by 2014, or face a new tax penalty. Again, as mentioned in this article, the tax penalties will increase over time. Our advice is to be proactive about it, and have a plan that makes the most sense for you and your personal situation. Your decisions will be most likely based on the Federal Poverty Level (or FPL). Contact us any time with questions. You can find an infographic on our Pinterest page here: PAIS Individual Tax Penalty Info

Thanks for stopping by, we hope you found our information to be valuable. Check back at our blog to get further information about funding healthcare. Also, please share with your friends, clients, colleagues, and family. Here are a few of our other information outlets:

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Your Health Benefits Toolbox

Today’s blog post is a general overview about all of the “tools” that are available to people to fund their healthcare. We’re also going to talk about the sources of these tools. Our biggest goal is to help you understand what types of programs are available, and where the funding/accessibility to these programs comes from.

Keeping it simple, there are three major sources that fund benefits programs:

1. Your employer.
2. Your contributions (You).
3. The government.

Below are summaries of the programs that are available to people through the above listed benefits sources. Keep in mind that only healthcare, disability, and life benefits are discussed (retirement benefits are not included):

Government Programs:

• OASDI (Social Security): Old Age, Survivors, and Disability Insurance. This is a government program that provides benefits for the elderly, survivors/dependents of deceased family members, and the disabled. 
• Medicare: This is a government program that provides health benefits for the elderly.
• Medicaid: This is a government program that provides health benefits for the poor.
• State Disability Income: Five states have state disability programs (California, New York, New Jersey, Hawaii, Rhode Island). Puerto Rico also has a disability program. These programs help the citizens of these states with income protection in the event of disability.
• State Health Insurance Exchanges (set to begin January 1st, 2014): The new “Health Insurance Marketplaces” of healthcare reform (ACA 2010) will provide a place where people with incomes between 100% and 400% of the Federal Poverty Level (FPL) may receive subsides to purchase individual health insurance policies.
• Guaranteed Issue Mandate: A provision of ACA 2010 (healthcare reform) that will require insurance companies to accept all applicants who apply for health insurance.

Employer Programs: 

• Group Health Insurance Plan: Some employers may offer their employees an opportunity to enroll in a group health insurance plan. The employer may pay all (or a portion) of premiums. 
• Group Dental Insurance Plan: Some employers may offer a group dental plan that is similar in concept to a group health insurance plan.
• Employer-Paid Vision, Supplemental Health Insurance, and Life: Employers may decide to add additional benefits that are paid for.
• Health Reimbursement Arrangements (HRAs): These are arrangements that are set up by an employer to reimburse employees tax-free for “qualified medical expenses.”
• Employer Self Funding: This is an arrangement where an employer pays for the medical expenses of their employees through the general revenue of the company. Typically there is a third party administrator and stop-loss coverage involved.

Individual Programs (programs you pay for individually):

• Individual Health Insurance Plans: These are insurance plans that people participate in outside of an employer. Starting on January 1st, 2014 all applicants who apply for individual health insurance must be accepted.
• Voluntary Benefits: These are benefits that are typically offered to the employees of a group at a “group rate” that is usually discounted. Employees typically pay for these benefits through payroll deduction, and premiums can also be paid for tax-free through section 125. Examples of voluntary benefits include supplemental health insurance, vision & dental plans, disability insurance, life insurance, etc.
• Individual Life, Dental, Vision: There are many individual life insurance, dental, and vision programs available outside of group plans.
• Health Savings Accounts (HSAs): Health Savings Accounts allow people to save money for medical expenses, and then pay for them tax free.
• Union, Association, MEWA, etc: Individuals may have accessibility to benefits through these types of organizations. Benefits may be paid for out of pocket, and could be offered at a reduced rate.

The above listed gives you the general overview of the benefits that are available through the government, employers, and individual purchases. This does not include all benefits (as it is a general overview)… but it should give you a broad-based idea about the tools that are available, and where they come from.

Thanks for stopping by, we hope you found our information to be valuable. Check back at our blog to get further information about funding healthcare. Also, please share with your friends, clients, colleagues, and family. Here are a few of our other information outlets:

Home Page: http://www.policyadvantage.com

Twitter: http://www.twitter.com/policyadvantage

Facebook: http://www.facebook.com/policyadvantage

YouTube: http://www.youtube.com/policyadvantage

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Benefits Chalk Talk: What are the differences between a Health Savings Account (HSA) and a Health Reimbursement Arrangement (HRA)?

Welcome back to another post in our series called “Benefits Chalk Talk.” This series is designed to help people and employers better understand all of the tools that are available when funding their healthcare. Our biggest goal is to help our clients and potential clients put the things in place that make the most sense.

This post will help you make comparisons between two very important concepts: Health Savings Accounts (HSAs), and Health Reimbursement Arrangements (HRAs). The reason these two are so important is because they are “money smart” concepts that can help you retain funds. When utilized correctly and with the proper guidance, they can help you save premium dollars that would normally go to the insurance companies. 

Here are some important comparisons between an HSA and HRA. We’ll show them as questions, so they’re easier to understand:

Can I get a general overview of both an HSA and HRA? What exactly are they?

• Health Savings Account: HSAs are accounts that are created at financial institutions (usually banks). It is established in an employee’s or individual’s name. An HSA helps someone save and pay for medical expenses tax-free. The account is owned by the individual. Participation in an HSA requires enrollment in a high deductible health plan (HDHP). 
• Health Reimbursement Arrangement: HRAs are the funding option that gives the employer the most control. The employer determines what services are covered, the amount they want to give each employee, and retains control over unused funds.

Who can make contributions to an HSA and HRA? 

• Health Savings Account: An employer can contribute to an HSA. The employee/individual can also directly contribute to an HSA. Further, an employee can re-direct salary to an HSA account. 
• Health Reimbursement Arrangement: The employer is the only one that can contribute to an HRA. An employee may not contribute to an HRA in any way.

Who owns an HSA and HRA account? 

• Health Savings Account: The individual/employee owns the account.
• Health Reimbursement Arrangement: The employer owns the arrangement/account.

Who has responsibilities during claims when they pertain to HSAs and HRAs?

• Health Savings Account: Only the employee is responsible for maintaining supporting claims records. The employer does not need to be involved. 
• Health Reimbursement Arrangement: This is an ERISA plan. The employer (or HRA administrator) must substantiate claim expenses.

How involved do I have to be as an employer?

• Health Savings Account: There is no employer involvement required in administration or compliance. Although, the employer may contribute and allow for payroll deferral (either after-tax, or through Section 125).
• Health Reimbursement Arrangement: This is an ERISA plan, where compliance is required (proper reporting documents and administration).

Do my funds rollover year-after-year? 

• Health Savings Account: Yes. Funds in a Health Savings Account will rollover year-after-year. There is a maximum yearly contribution that is adjusted at times. The account goes with the individual/employee if they leave or change jobs. 
• Health Reimbursement Arrangement: Employers generally allow some rollover for future years’ use. However, money does not go with the employee, if the employee changes jobs.

The above questions should give you a basic understanding about the differences between an HSA and HRA. There are additional details about planning strategies when using HSAs and HRAs. Each business and individual is unique, so please contact us anytime to get further information about what types of insurance plans may fit your situation best when working with a Health Savings Account or Health Reimbursement Arrangement. These are both very valuable tools. 

Thanks for stopping by. Check back at our blog to get further information about funding healthcare. Also, please share with your friends, clients, colleagues, and family. Here are a few of our other information outlets:

Home Page: http://www.policyadvantage.com

Twitter: http://www.twitter.com/policyadvantage

Facebook: http://www.facebook.com/policyadvantage

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