[IMGCAP(1)]Currently, about 32 million Americans do not have health insurance.

That is a significant number of people now entering the health care system as a result of the newly enacted health care reform bill, the Affordable Care Act. By 2014, all U.S. citizens will be required to be insured or face fines and penalties. The reform bill will provide extra funds to employ additional doctors and nurses to help with the extremely large increase in people to require such services.

Small businesses make up 98 percent of our nation’s firms. You may be wondering what effect this will have on your business. First and foremost, businesses with less than 50 employees will not be required to offer health insurance for their employees but will definitely be encouraged to do so. For the years 2010-2013, employers with 10 to 25 or fewer full-time employees that have average annual wages of less than $25,000-$50,000 will have a credit up to 35 percent of their premium contribution available to them.

A requirement for this credit is that the employer must contribute at least 50 percent of the total premium cost. For the years 2014 and onward, small business employers that purchase coverage through the health insurance exchanges can receive a credit for two years for up to 50 percent of their contributions.

The exchanges are state-based health insurance programs set up through the reform beginning in 2014. Their purpose is to offer the same types of private insurance that the President and members of Congress will have and to also reduce administrative costs. Additional items to keep in mind are that beginning on Jan. 1, 2010, a Simple Cafeteria Plan will be available for small businesses in order for them to provide tax-free benefits to their employees including independent contractors.

Beginning in 2013, employers will no longer be able to take the deduction for maintaining prescription drug plans for their Medicare Part D eligible retirees. Larger companies with 50 or more full-time employees that do not offer coverage for all their eligible employees, as well as companies that offer only the bare minimum coverage at unaffordable rates, and companies that offer minimum coverage in which the plan’s share of the total allowed costs of benefits is less than 60 percent, will have to pay penalties for each employee that purchases their own individual insurance through the exchange.

Now let’s take a look at the health care reform bill on an individual level. No longer will pre-existing conditions prevent individuals from being insured nor will suddenly becoming extremely ill cause individuals to be terminated from their coverage.

Dependents will now be allowed to stay on their parents’ or guardians’ insurance until the end of the year in which they turn 26 with no full-time student requirement. Beginning in 2010, the adoption tax credit will increase by $1,000 to $13,170 and will be made refundable. The adoption assistance exclusion will also increase by $1,000. The adjusted gross income limit on this credit is $182,180 and will be available through 2011.

Beginning in 2011, health reimbursement accounts, flexible spending accounts, health savings accounts, and medical savings accounts will no longer include over-the-counter medications as eligible tax-free medical expenses. (While there will be limitations on using FSAs and HRAs for OTC products, participants will be able to continue to use their accounts to purchase over-the-counter medications, but they must have a directive, similar to a prescription or a doctor's note, from their doctor for the OTC item.)

By 2013, FSA contributions will be limited to $2,500 per year under cafeteria plans, and the 7.5 percent AGI threshold for medical expenses to be taken on Schedule A of your 1050 will increase to 10 percent.

There are definitely two sides to every story, and in this case it depends on which way you look at it. The pros consist of more coverage, a more competitive insurance industry, and the promise that the insurance companies will not be able to deny anyone coverage.

The cons consist of cuts in Medicare, an increase in the U.S. economy’s already alarmingly large deficit, and more taxes. The money has to come from somewhere, and one strategy is to place a 2.9 percent excise tax on medical device makers and require families who earn more than $250,000 a year to pay higher Medicare taxes.

There’s no doubt that our nation needs a change in our health care system, but at what cost?

Kaitlin Leigh Mason is a staff accountant at Klausner Bendler + Associates, P.C., an accounting firm in Bethesda, Md.


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