Health Care Reform: Tax Hikes on the Way

Here are 13 changes in the massive overhaul that could impact your tax bill, for better or worse.

The new health care reform law is chock-full of new taxes and tax increases that will affect many individuals and businesses, but it will be years before most of these hikes take a bite out of your -- or your company’s -- wallet. The law also has tax breaks to help both individuals and small businesses pay for insurance.

1. A new 10% excise tax on indoor tanning services on services provided after June 30, 2010.

2. The new law gives small firms tax credits as incentives to provide coverage, starting this tax year. Employers with 10 or fewer workers and average annual wages of less than $25,000 can receive a credit of up to 35% of their health premium costs each year through 2013. The credit is phased out for firms larger than that and disappears completely if a company has more than 25 employees or average annual wages of $50,000 or more. Beginning in 2014, small firms that sign up with one of the health exchanges to be created can receive a credit of up to 50% of their costs.

3. A requirement that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with W-2s for 2011.

4. Elimination of a deduction employers now take for providing Medicare Part D prescription drug coverage to their retirees to the extent that the federal government subsidizes the coverage. This will not take effect until 2013.

5. Doubling the penalty for nonqualified distributions from health savings accounts, to 20%, beginning in 2011.

6. A limit on the amount that employees can contribute to health care flexible spending accounts to $2,500 a year, but the cap won't take effect until 2013.

7. A ban on using funds from flexible spending accounts, health reimbursement arrangements or health savings accounts for the cost of over-the-counter medications, starting in 2011.

8. Imposing a 0.9% Medicare surtax on wages of single taxpayers earning more than $200,000 a year and couples earning over $250,000, starting in 2013, as well as a 3.8% Medicare tax on their unearned income. The new law defines unearned income as interest, dividends, capital gains, annuities, royalties, and rents. Tax-exampt interest won’t be included, nor will income from retirement accounts.

9. A hike in the 7.5% floor on itemized deductions for medical expenses to 10%, beginning in 2013. But taxpayers age 65 and over are exempt from the cutback through 2016.

10. A new 40% excise tax, beginning in 2018, on high-cost health plans, levied on the portion that exceeds $10,200 for individuals and $27,500 for families.

11. A new tax on individuals who don't obtain adequate health coverage by 2014. The tax is be phased in over three years, starting at the greater of $95, or 1% of income, in 2014, and rising to the greater of $695, or 2.5% of income, in 2016.

12. Providing a refundable tax credit, once the individual mandate takes effect in 2014, to help low-income folks purchase coverage. To be eligible, a person's household income must be between 100% and 400% of the federal poverty level, generally around $11,000 to $44,000 for singles and $22,000 to $88,000 for families.

13. A nondeductible fee charged to businesses with 50 or more employees if the firms fail to offer adequate coverage. The fee will equal $2,000 times the number of employees, though it won’t count the first 30 workers in that calculation.

Copyrighted, Kiplinger Washington Editors, Inc.



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Protect Your Heart at Every Age

You're never too young—or too old—to start lowering your heart disease risk. Of course, exercising, eating healthy and reducing stress are key throughout life, but due to physiological changes that happen as we age, certain risk factors do become more of a threat.

In Your 20s

Stub Out a Social Smoking Habit
Smoking is enemy number one when it comes to heart disease, and even just a few cigarettes can do damage: New research from McGill University in Montreal found that smoking just one cigarette a day stiffens your arteries by a whopping 25 percent. Plus, smoking erases the hormonal advantage you have from estrogen, which can leave you vulnerable to a heart attack before menopause, explains Dr. Bonow.

Don't Ignore the Birth Control Factor
Remember that hormonal contraceptives slightly increase the risk of blood clots, so if you've ever had one, make sure to discuss it with your doctor before going on birth control. And if you're currently a smoker, don't take oral contraceptives, because the combo can be especially dangerous, says Sharonne N. Hayes, MD, director of the Women's Heart Clinic at Mayo Clinic in Rochester, Minnesota.

Watch Your Alcohol Intake
Moderate amounts of alcohol can have a beneficial effect on your heart. (By "moderate," we mean one drink a day or about 5 ounces—but many restaurants serve far more than that.) Overdoing it can raise triglycerides, increase blood pressure and lead to weight gain, thanks to all those empty calories.

In Your 30s


Get a Grip on Stress
When you're juggling career and family, it's crucial to find stress management techniques that work. "Untamed stress has a direct negative impact on heart health," says Dr. Stevens. "The constant bombardment of adrenaline raises blood pressure and destabilizes plaque in your arteries, making it likely to cause a clot or heart attack."

Lose the Baby Weight
No, you don't have to fit into your skinny jeans by the time the baby's 6 months old, but do aim to get back to your pre-pregnancy weight within one to two years. "Carrying around extra pounds can lead to high cholesterol, high blood pressure and other heart disease risk factors," Dr. Bonow says. Also remember that it's easier to lose weight in your 30s than in your 40s, when your metabolism slows down.

Stay Social
It's important to stay connected to friends and family for the sake of your mood and heart. Research at the University of Pittsburgh School of Medicine found that high levels of loneliness increase a woman's risk of heart disease by 76 percent. On the flip side, having strong social support can help lower your blood pressure and improve other cardiovascular functions. Set aside time once or twice a week to call friends, or make a monthly dinner date.

In Your 40s

Make Sleep a Priority
Thanks to peri-menopause, fluctuating hormone levels can interfere with a good night's sleep. But not getting at least seven hours of shut-eye regularly can lead to increased blood pressure, low-grade inflammation and higher levels of the stress hormone cortisol, all of which are harmful for your blood vessels and heart, explains Jennifer H. Mieres, MD, a cardiologist at New York University School of Medicine and coauthor of Heart Smart for Black Women and Latinas. Lack of sleep has also been linked to weight gain. So establish good habits: Turn in (and wake up) at the same time every day—even on weekends—and do your best to relax before going to bed, whether it's watching a favorite funny TV show or reading.

Reassess Your Risk Factors
You may discover that your cholesterol, blood pressure and blood sugar levels have changed in this decade, even if you aren't doing anything differently, says Dr. Hayes. In fact, 22 percent of 40-something women have high blood pressure and 50 percent have high cholesterol (a jump from 38 percent of women in their 30s), according to the National Heart, Lung, and Blood Institute. Also, be sure to get your thyroid checked around 45; hypothyroidism (an underactive thyroid gland), which becomes more common as women get older, can negatively affect your cholesterol levels as well as your heart.

Step Up Strength Training
You start to lose muscle mass more rapidly in your 40s, which causes your metabolism to slow down since muscle burns more calories than fat. Unfortunately, this makes it harder to stave off those extra pounds. To help maintain muscle and keep your metabolism going, aim for two 15-minute sessions weekly of lifting weights, using a resistance band or doing other toning exercises.

Carve out Personal Time
"Between the demands of work and family, it becomes even more challenging to find time for yourself in your 40s," says Dr. Mieres. But it's crucial to do so—not only to help ease stress but also to guard against depression, which commonly crops up in this decade and can raise your risk of heart disease. "Find at least 10 minutes of ‘me' time every day to do something—even if it's just chatting on the phone with a friend—that helps you destress and regroup," says Dr. Mieres.

In Your 50s

Move More
Around menopause, you tend to gain extra weight around your belly, which can lead to insulin resistance, inflammation and heart strain. Cardiovascular fitness also starts to decline, particularly if you're not that physically active to begin with. "Unfortunately, at this point, women have to burn more calories to stay at the same weight," Dr. Stevens says. Start taking the stairs instead of the elevator whenever you can, walk faster around the mall, or jog to the mailbox to send letters instead of sticking your hand out the car window as you drive by. Small changes really do add up.

Have an ECG
Silent heart abnormalities become more common in your 50s, and an electrocardiogram (ECG) to check your heart's electrical activity can pick them up, says Dr. Goldberg. Also ask your doctor if you should have a stress test; this is especially important if you're just starting to exercise.

Add Fiber
Besides being good for your cholesterol and blood sugar, pumping up your fiber intake (think whole grains like oatmeal, brown rice and flaxseeds, as well as beans, fruits and veggies) can help prevent constipation, which becomes more of a problem as you get older and your digestive system starts to slow down.

In Your 60s

Get Even More Vigilant About Screenings
After you go through menopause and get older, your blood pressure and cholesterol tend to go up, and blood vessels get stiffer. "Have your blood sugar, blood pressure and cholesterol measured yearly," advises Dr. Goldberg.

Consider Medication
If you have hypertension or high cholesterol, the way you've been managing it before may not be enough. "As you get older, you may need more aggressive therapy," Dr. Bonow says. "High blood pressure that was controlled with one medication may now require three to control it." Talk to your doctor about whether you need to add to or adjust your medications to control your risk factors.

Be Alert to Symptoms
Now is when the first noticeable symptoms of heart disease may appear, so it's important to know what's normal for your body and be on the lookout for worrisome signs like chest discomfort, shortness of breath or changes in exercise tolerance—meaning you suddenly feel winded going up a flight of stairs or feel unusually tired for no apparent reason, says Dr. Mieres. If these appear, see your doctor pronto!

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New health proposal is industry's favorite so far

WASHINGTON – The latest health overhaul plan circulating on Capitol Hill gives health insurers, drug makers and large employers reasons to heave sighs of relief, sparing them the higher costs and more burdensome rules included in other Democratic-written alternatives.

Industry players that have already struck bargains with President Barack Obama's administration and leading Democrats to help pay for revamping the health system saw most of those deals left intact — and in some cases sweetened — in the $856 billion proposal unveiled Wednesday by Sen. Max Baucus, D-Mont., the Finance Committee chairman.

You won't hear any of them cheering publicly about what they would get out of the measure, because many are still hoping for a better deal before Congress takes final action on revamping the health care system. But don't expect to hear them coming out in opposition, since they know Baucus' plan is the lesser of many evils being considered.

Take the health insurance industry.

It would score a new, taxpayer-subsidized customer base of millions who don't currently have insurance, thanks to a mandate that everyone purchase coverage — backed up by steep penalties on people who don't. And it wouldn't have to compete with the government to cover people, unlike in the four other health overhaul plans approved this year by Democratic-dominated congressional committees.

Nor would the nonprofit so-called "co-ops" designed to provide consumers with an alternative to private health insurance pose any real threat to their business, according to a nonpartisan analysis released Wednesday. The Congressional Budget Office said those plans "seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments."

Insurers would also take a smaller hit to the payments they get for offering private plans under Medicare — some $110 to $120 billion, estimated one industry source, compared with the $175 billion that Obama initially proposed this year.

AP – Senate Finance Committee Chairman Sen. Max Baucus, D- Mont. leaves his health care news conference on …

In exchange, insurers had already agreed to stop denying coverage to people with serious health conditions and help cover the cost of the transition to the new system. They're still fighting hard against two other aspects of the measure that would slice into their potential profits: a new 35 percent excise tax on high-cost plans and $60 billion in fees, both of which insurers warn would be passed on to consumers.

"We have some significant concerns, particularly the new taxes that are going to make health insurance less affordable," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans. He rejected the notion put forth by many liberal and labor groups that the measure amounts to a gift to private insurers, arguing that the companies are covering more than one-quarter of its pricetag, a level disproportionate with the industry's share of health care costs.

But health insurance stocks jumped Wednesday at the news of Baucus' public option-free measure. And privately, industry lobbyists acknowledged that the plan is far more to their liking than any of the other measures currently under discussion, and expressed confidence that it would improve further as senators and Obama's team continued to haggle over its details as it approaches a Senate vote.

Meanwhile progressives called the measure an industry giveaway — "like a dream come true" for insurers, said Justin Ruben of MoveOn.org — and labor leaders said Baucus had compromised too much and produced a bill that would force people to buy health coverage they couldn't afford.

"We think the plan the way it is structured incentivizes employers to offer bare-bones plans," said Chuck Loveless, the legislative director of the American Federation of State County and Municipal Employees. As for the co-ops, he said they were "designed to fail, and it's a great boondoggle for the insurance companies. We don't think it's going to increase competition or bring down costs."

Big employers would dodge what many of them considered the most costly bullet among Democrats' health care proposals — a mandate to offer health insurance — although they would have to pay a modest fee if the government ended up subsidizing employees' coverage.

The Business Roundtable, which represents corporate executives, cheered Baucus' proposal in a statement from Eastman Kodak CEO Antonio M. Perez that called it "bold" and "a step in the right direction."

Drug makers who had previously cut a deal with Obama and Baucus to kick in $80 billion to help pay for the overhaul would see that agreement preserved, while rival proposals in the House that would force them to cover more drug costs for elderly people would cost them considerably more, as much as $140 billion.

The Pharmaceutical Research and Manufacturers of America, which plans to spend tens of millions on an ad campaign promoting a health overhaul, stayed relatively quiet, issuing only a brief statement that said it was reviewing Baucus' plan.

Ken Johnson, PhRMA's spokesman, said the industry would "continue to be a constructive partner" in the effort to enact health reforms.

Some businesses would see increased costs under Baucus' plan, and they were pushing hard to avoid them. Medical device makers would have to pay fees amounting to $40 billion while clinical laboratories would pay $7.5 billion.

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