And Now For The Bad News

Once the jubilation over the Supreme Court decision to uphold “Obamacare” dies down it will be time to fully enact the Affordable Care Act – including the provisions to pay for it.

Part of the money will come from cuts to the current health care costs incurred by the government, but the bulk of the $1 trillion that will be spent over the next ten years will come from taxes. Americans will pay an additional 9/10 of one percent on income over $200k to help finance the system. Those with investment income may be subject to a new 3.8% tax on some of their capital gains and dividends.

Businesses that offer what are considered “excellent” or “Cadillac” health care plans will also pay more: plans that cost over $10,200 for individual coverage and $27,500 for family coverage will be subject to new excise taxes. Many business analysts claim businesses will try to avoid this tax by reducing their plan offerings or even cutting health care plans altogether. The theory is this will translate to higher wages or higher profits, and thus higher tax revenues – so either way the government is covered.

There is also a new tax deductible cap on “flexible spending plans”, and new regulations that limit what such plans can pay for, plus a 20% penalty for non-qualified expenses.

The limit for deductions for medical expenses will rise from 7.5% of income to 10% – although that provision will not kick-in until 2016 for those over 65 years-of-age.

Those who enjoy indoor tanning salons have been paying a 10% excise tax since 2010, supposedly because of the health care costs associated with irradiating your skin with UV light.

And finally there is the controversial “individual mandate”, that requires those who can afford health insurance but who choose not to get it to pay a penalty. This will be phased-in in a graduated plan between the years 2014 to 2016, starting at $285 per family or 1% of income (whichever is greater), and growing to $2,085 per family or 2.5% of income (whichever is greater). Initially Obama resisted this provision but bowed to pressure from insurers who claim without it people will take advantage of the law’s lack of “preexisting condition” exclusions by waiting to buy insurance after they get sick. The insurers thus need the mandate to turn a profit and stay in business. Under the original proposed law these people would have been served via a “public option” offered directly through the government, but this was gutted from the law by Republicans who considered it to be “socialism” (unlike taking money from the insurance lobby, which is “capitalism”).