The Patient Protection and Affordable Care Act includes changes in the delivery of health insurance and several new income tax provisions. The implementation of these new rules over several years is a major focus of continuing education for Enrolled Agents and other tax professionals.
Coverage Changes
Starting in 2010, an adult child up to age 26 who is unable to obtain health insurance from an employer may remain covered by the employer plan of a parent. This replaces the common insurance company provision of not covering any child who reaches age 19 and is not a full time student.Tax CPE courses address how this provision may affect claiming older children as dependents.
Also new for 2010 is a provision that health insurance coverage for children cannot be denied solely because of pre-existing health conditions. In addition, health insurance coverage for anyone can no longer be terminated as a consequence of illness.
Policy maximums have also been eliminated beginning in 2010. Insurance companies are barred from instituting lifetime caps on coverage.
Starting in 2014, insurance companies cannot deny coverage for pre-existing conditions. This provision requires a pooling of risk involving mandatory coverage for everyone. Failure to obtain coverage beginning in 2014 will incur fines based upon individual incomes. Financial assistance will become available for families earning up to $88,200 per year. State operated insurance exchanges in 2014 will provide coverage options in addition to private insurers.
For those who have been denied coverage in 2010 due to pre-existing conditions, coverage is available through state-operated high-risk pools. The maximum out-of-pocket cost under this coverage is $5,950 for individuals and $11,900 for families.
Starting in 2010, Medicare beneficiaries no longer have out-of-pocket cost for preventative care such as physical exams, testing for treatable conditions, and laboratory work. In addition, the federal government will send $250 to those covered by Medicare to cover prescription drug costs not currently covered by Medicare Part D.
However, those with annual incomes of $85,000 ($170,000 on joint returns) incur a reduced prescription drug subsidy in 2010. In addition, government subsidies for Medicare Advantage plans are being reduced so those covered by such programs face higher premiums. To assist in tax return preparation, a registered tax agent must inquire about whether clients received their $250 checks.
