Health insurance expert Patrick Casale got my attention while I was driving to a business meeting in Las Vegas. On his radio broadcast he asked: “Do you know what Obamacare is all about?” I was all ears.
Mr. Casale’s answer: taxation.
Yes, an insolvent nation, living off borrowed or newly printed money, is seeking new tax revenues outside of politically-charged income tax increases.
Already the federal government derives revenue outside income taxes in a quid pro quo relationship with overseas oil companies that charge more for petroleum and then in exchange agree to buy U.S. Treasury bills to fund U.S. overspending.
But now the federal government is eyeing another source of tax revenues – untaxed health benefits provided by employers. The (un)Affordable Care Act (ACA) now requires large employers to submit pro-forma W-2 forms on the cost of health coverage received by employees. This is now done under the guise of “helping employees better understand their employer-provided benefits and true cost to obtain health coverage.” Some think by 2018 it is believed the Federal government will begin taxing these benefits.
There are many more taxes invoked in the ACA. A list of some (and probably not all) the taxes being invoked or planned under the ACA are as follows (Source: Thomson Reuters news service):
Employers must begin withholding the additional 0.9% Medicare tax in the pay period in which wages are in excess of $200,000, and continue to withhold it until the end of the calendar year.
A surtax will be applied on unearned income of higher-income individuals. For tax years beginning after December 31, 2012, an unearned income Medicare contribution tax is imposed on individuals, estates, and trusts. For an individual, the ‘‘net investment income tax’’ (surtax) is 3.8% of the lesser of either (1) net investment income or (2) the excess of modified adjusted gross income over the threshold amount ($250,000 for a joint return or surviving spouse, $125,000 for a married individual filing a separate return, and $200,000 for all others).
There will be a higher threshold for deducting medical expenses. For tax years beginning after December 31, 2012, unreimbursed medical expenses are deductible by taxpayers under age 65 only to the extent they exceed 10% (rather than 7.5%) of adjusted gross income (AGI) for the tax year.
A financial gain on a sale of a home that isn’t covered by the Code Sec. 121 home-sale exclusion ($500,000 for joint filers)—such as the gain on the sale of a second home—is subject to a tax.
The Patient-Centered Outcomes Research Institute, which is a part of the ACA that determines whether medical treatments are cost effective, will be funded in part by fees paid by issuers of health insurance policies and sponsors of self-insured health plans. For each policy year ending after September 30, 2012, each specified health insurance policy and each applicable self-insured health plan will have to pay a fee equal to the product of $2 ($1 for policy years ending during 2013) multiplied by the average number of lives covered under the policy.
There is an additional tax imposed on medical devices. For sales after December 31, 2012, a 2.3% excise tax applies to sales of taxable medical devices intended for humans. The excise tax is paid by the manufacturer, producer, or importer of the device. (The tax doesn’t apply to eyeglasses, contact lenses, hearing aids, and any other medical device determined by IRS to be of a type that is generally purchased by the general public at retail for individual use.)
Individuals not carrying health insurance face a penalty (aka “individual mandate”). For tax years beginning after December 31, 2013, nonexempt U.S. citizens and legal residents must pay a penalty if they do not maintain minimum essential coverage,
which includes government sponsored programs such as Medicare and Medicaid. The penalty will likely be extracted by the IRS when tax filers are owed a refund rather than raiding your bank account. A Kaiser Health Plan website explains the financial penalties that will be imposed beginning in 2014 which increase from in 2015 and 2016.
There will be an excise tax on health insurance providers. The aggregate annual flat fee for the industry (e.g., $8 billion for 2014) will be allocated based on a health provider’s market share of net premiums written for a U.S. health risk for calendar years beginning after December 31, 2012. Small insurers are exempt.
An excise tax applies to high-cost employer-provided health insurance coverage. For tax years beginning after December 31, 2017, a 40% nondeductible excise tax will be levied on insurance companies and plan administrators for employer-sponsored health coverage to the extent that annual premiums exceed $10,200 for single coverage and $27,500 for family coverage. An additional threshold amount of $1,650 for single coverage and $3,450 for family coverage will apply for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions. This so-called Cadillac tax is said to be needed to get health insurers to offer and employers less costly health plans. W-2 forms will reveal who has Cadillac health plans and the 40% surtax on that amount will apply beginning in 2018.
Mr. Casale revealed to me another hidden tax incentive for the States. In the ACA scheme, there will also be a drive to enroll more Americans in Medicaid, which is precisely what happened in the opening days of the Healthcare.gov online insurance exchange. Up to 80% of ACA enrollees in some states are poverty-stricken Medicaid enrollees. The States are promoting Medicaid enrollment because they will receive funds, which is not used to provide healthcare, can be used for any purpose the States choose. It’s another way to help bailout States that are in economic trouble. It’s a carrot that lures States to support the ACA. Anywhere they can find money.
One way to confuse the public over the details of health reform is to overwhelm them with pages and pages of new regulations – 20,000 pages in all. Just like the complicated IRS tax regulations, virtually everyone requires a guide to navigate the now complicated ACA.
Photo: WhiteHouse.gov
Want to get a view of modern-day American fascists? Go no further than this picture provided by WhiteHouse.gov which shows the President in discussion with health insurance executives. If you can’t get a small portion (~15%) of the uninsured American population to buy health insurance on the open market via advertising and modern marketing methods in a free market, even though they have sufficient income to buy it, rely upon top-down federal government coercion to do the job – backed by a Supreme Court decision no less, just what every modern fascist dreams of. The Federal government now does the advertising for insurers and even answers the telephone for them and qualifies “sales leads” at its Healthcare.gov website. Where did free enterprise go?
How the (un)Affordable Care Act robs Americans blind
The online insurance exchange for the Affordable Care Act offers plans that provide ten “essential benefits.” These are: ambulatory patient services (outpatient care you get without being admitted to a hospital), emergency services, hospitalization (such as surgery), maternity and newborn care (care before and after your baby is born), mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy), prescription drugs, rehabilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills), laboratory services, preventive and wellness services and chronic disease management and pediatric services. Most of these services are covered in normal health plans, but Mr. Casale says by mandating them, there is no room to tailor a plan to save money.
Selling plans that must provide these ten services represents overselling. For example, everyone has to buy a plan with maternity benefits or pediatric services which may not apply to them, says Mr. Casale. This is a bonanza for the insurers.
Mr. Casale says a person can buy outside the offered plans on the Healthcare.gov website, save thousands of dollars, pay the penalty for buying outside the plan, and still obtain considerable savings.
For some of his clients he also suggests they buy a plan with a high deductible, like $7000 to drive premiums even lower, then open a Health Savings Account and place $7000 in it which is tax deductible. A person or family in the 25% or 40% tax brackets will then save $1750 and $2800 in taxes and have set aside the deductible in the event of significant out-of-pocket health care expenses.
Another sell-out to industry is revealed in a Bloomberg news story which says Big Pharma may lose hundreds of billions of dollars of anticipated new revenues from drug sales because of delays in signups at the Healthcare.gov website. Instead of reducing health care costs, Big Pharma had an expansion in drug spending planned.
Most disturbing is Mr. Casale’s assertion that senior Americans are going to pay heavily for this contrived healthcare reform. Working under the guise of lowering healthcare costs, but covertly burdening Americans with rising health insurance premiums they cannot possibly afford with stagnant incomes over the past four decades, Medicare recipients are going to find themselves locked in onerous Medicare supplement plans where their only option is to enter HMO plans that are not nearly as good, he says. It’s like a box of crackers that is the same size on the outside, but when you open it up, the crackers are smaller and fill only a portion of the box.
Mr. Casale says what is really happening is Medicare is slowly being gutted. What senior Americans don’t know is that $70 billion per year is going to be cut out of Medicare over the next ten years with across the board cuts and possibly even rationing, he says.
However, says Casale, by the government’s own admission they spend over $70 billion in insurance fraud annually. Mr. Casale asks: “Why not plug the hole than have to resort to cutting services?”
Pay cuts coming in the form of reduced hours
Mr. Casale says: “At a time when we are experiencing 20-year lows for incomes. The new definition of full-time employment is 30 hours/week to make employees eligible for mandated employer-provided health benefits. This 30-hour work requirement may induce employers to drop workers to less than 30 hours of work a week, which could result in a 25% cut in gross pay. The impact of the less-than-30-hour work week would be to thrust more workers to the Healthcare.gov website to obtain required health insurance coverage from the government exchange on their own.
Cadillac employer plans will be almost unaffordable
Beginning in 2018 potentially 40% tax will be applied to so-called Cadillac employer-provided health plans. A Cadillac health plan is based upon premiums not upon benefits. If your premium exceeds $10,250 a year, the employer could be subject to a 40% tax.
Employers not only cannot afford the new rates, if an employer doesn’t offer insurance, there is a fine.
For example, if the employer has 100 employees, for the first 30 workers there is no fine. The next 70 are subject to a $2000 fine per worker, or $140,000 fine total (non-tax deductible expense). So the employer has no incentive to provide insurance any longer because these is no tax write off.
Prior to the Affordable Care Act, if this hypothetical company insured these 100 employees @$500 premium per month/$6000 per year, then the employer would have to pay $600,000 to provide health insurance for these employees and save approximately $200,000 in corporate taxes (30% corporate tax rate).
Now under the ACA the government is going to capture $200,000 more in income taxes from the employer plus $140,000 in fines. So the government is happy, and the employer no longer incurs the cost of providing health insurance and is relieved of that duty, leaving the workers as the big losers, to fend for themselves with fewer dollars to buy health insurance.
80% payout for delivered care is a ruse
Mr. Casale says the exorbitant profits of modern healthcare conglomerates are hidden from view. Today insurance carriers own the clinics. The doctors there are paid employees on salary. During the course of a 12-month period the patients pay, let’s say, $1.5 million for copays and deductibles and pay $10 million in premiums.
The insurance company in required to pay out 80% under the ACA, but in this scenario, essentially they are billing and paying themselves, less costs for labor, overhead and administration. Today’s healthcare conglomerates are “taking it all” and the idea they have to deliver 80% minimum for delivered care is a ruse. Medicare would do better placing doctors on salary rather than allowing insurance companies to take all the profits.
It also appears insurers are playing footsy with the White House and offering the insured $100 rebate checks if insurers did not spend 80% on delivered care, but this appears to be a charade to make the White House look good.
Mr. Casale is angered at the reformed health insurance system. He says the current scenario runs counter to the principles of insurance. “If you are safe driver, you pay less for auto insurance. If you are healthier and practice good health habits, you get super preferred ratings for life insurance. But when it comes to health insurance, there is no incentive to be healthy and only incentive to run up the bill.”
There are many low-income Americans who faithfully believed the Affordable Care Act would help them find low-cost health insurance plans. But instead, the entire program appears to be a covert sell out to big business.
All Americans affected
According to Mr. Casale, what is going to happen is the entire U.S. population is going to join the same team on this issue. “Liberal or conservative, educated or uneducated, young or old, Americans are going to vote with their pocketbook and choose not to buy because they can’t afford to buy. They simply don’t have the money. The product is not affordable. And the product is inferior.” So public backlash on members of Congress will be felt at all levels, he predicts.
Mr. Casale took me through a scenario where the health plan my household now buys @$18,000 a year can be duplicated using a plan that excludes unnecessary services (maternity) and has a high-deductible combined with a Health Savings Account which would reduce my overall net premiums to under $6,000 a year.
It’s obvious that health insurance can be more affordable when purchased outside the Healthcare.gov exchange which purports to save Americans money. However, Mr. Casale, says this same plan next year under the ACA is going to cost me $12,000-13,000!
As a report published at the Wall Street Journal says: “Millions will be losing their individual insurance policies that they were promised they could keep. They will be expected to buy more expensive ObamaCare-approved policies than they want or need, and to do so from ObamaCare exchanges that aren’t working.” That sums it up nicely.
Mr. Patrick Casale can be reached at www.patrickcasale.com or by email.
HEALTH INSURANCE PLANNER
Identifier (family name)
Individual ✓
Family ✓
Health status
Name
Good✓
Fair✓
Poor✓
Smoker✓
Member #1
Member #2
Member #3
Member #4
Member #5
Needs maternity benefits ✓
Family or individual income
$
WorkerHours/week Hours/week
Retiree ✓
Employer provides ins ✓
Current health plan Uninsured ✓ PPO ✓ (choice of doctors) HMO ✓ (listed doctors)
Deductible
$
Co-pay
$
Premium Monthly Annually
$ $
% of income/ health expenses
Federal Tax Bracket (circle)
Filing Status
Taxable Income
Rate
Single
$0 to $8,925*:
10%
$8,925* to $36,250:
15%
$36,250 to $87,850:
25%
$87,850 to $183,250:
28%
$183,250 to $398,350:
33%
$398,350 to $400,000:
35%
$400,000+:
39.6%
Joint
$0 to $17,850*:
10%
$17,850* to $72,500:
15%
$72,500 to $146,400:
25%
$146,400 to $223,050:
28%
$223,050 to $398,350:
33%
$398,350 to $450,000:
35%
$450,000+:
39.6%
Head of Household
$0 to $12,750*:
10%
$12,750* to $48,600:
15%
$48,600 to $125,450:
25%
$125,450 to $203,150:
28%
$203,150 to $398,350:
33%
$398,350 to $425,000:
35%
$425,000+:
39.6%