We’ve had a lot of questions regarding this topic since the bill was signed into law, so I’d like to separate some fact from fiction.
The following is not a comprehensive listing of all of the changes included in the bill to medical insurance. All of the changes were too numerous to included.
The following is simply the changes that would affect many entrepreneurs, which include…
ACA Marketplace
1 – Reduced Eligibility: The OBBBA restricts eligibility for marketplace coverage based on factors like immigration status and income documentation.
2 – Stricter Enrollment: Re-enrollment periods are shortened, and annual income and immigration status documentation are required, making enrollment and maintaining coverage more difficult.
3 – Increased Costs: Enhanced premium tax credits, which make coverage more affordable, will expire at the end of 2025, potentially leading to higher premiums.
4 – Loss of Premium Tax Credits: Premium tax credits will be unavailable during special enrollment periods, and there are limits on advance payment recapture for those with lower incomes.
5 – No More Auto-Enrollment: Passive re-enrollment in individual health insurance plans through the Exchange will be prohibited.
General Changes
6 – Telehealth Coverage: The bill makes permanent the temporary telehealth coverage exception for high-deductible health plans (HDHPs) introduced during the pandemic.
7 – Direct Primary Care: The law allows individuals to contribute to Health Savings Accounts (HSAs) while participating in Direct Primary Care (DPC) service arrangements, which were previously not allowed.
As far as I can see, there were no other major changes to Group Health Insurance Policies or their deductible, other than the ones already mentioned.
Let me leave you with this…
Most importantly, there were no changes to the Health Insurance Bi-Pass originally allowed during the set-up of Obamacare. In order to explain how this works, please allow me to use and example.
Joanne B. Owner has an S Corp where she has a $100K W-2 and a $250K K-1. She also has a group medical policy for the company where her family’s portion of the insurance costs $25,000 annually.
Schedule A of your 1040 has a 7.5% limitation of Gross Income where medical deductions are excluded. In Joanne’s case, the first $26,250 that she pays for healthcare is non-deductible.
Under this provision, she’ll lose her entire medical deduction of $25K for the year. But there’s a bi-pass which will allow her to get a $25,000 deduction for her medical expenses.
It must be added in a very confusing way to her W-2. Once completed, it allows us to “piggy-back” the self employed health insurance deduction on schedule 1 of her return. Since her effective or average income tax rate is 25%, this will save her $6,250 this year alone.
The Health Insurance Bi-Pass made it through all of the negotiations unscathed and is an important part of tax planning for many entrepreneurs. It may be something that we need to discuss.
I’m here. Please let me know…
We’re all going to get through this. Let’s get through it together.
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Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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