Home > Hospital and Medical Practice Management > Timeline of Taxes and Penalties in the Affordable Care Act

Timeline of Taxes and Penalties in the Affordable Care Act

Below is a timeline and  listing of when the taxes and penalty provisions of the Affordable Care Act will be implemented.

Starting in 2009

(Sec. 9007) Establishes new requirements applicable to nonprofit hospitals. The requirements would include a periodic community needs assessment and certain limitations on charges.

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(Sec. 9021) Provides an exclusion from gross income for the value of specified Indian tribal health benefits.

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Starting in 2010

Imposes a ten percent tax on amounts paid for indoor tanning services in lieu of the tax on cosmetic surgery. Indoor tanning services are services that use an electronic product with one or more ultraviolet lamps to induce skin tanning. The tax would be effective for services on or after July 1, 2010.

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Starting in 2011

(Sec. 9004) Increases the additional tax for HSA withdrawals prior to age 65 that are used for purposes other than qualified medical expenses from 10 percent to 20 percent. The additional tax for Archer MSA withdrawals not used for qualified medical expenses would increase from 15 percent to 20 percent

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(Sec. 9008) Imposes an annual flat fee of $2.3 billion on the pharmaceutical manufacturing sector beginning in 2010. This non‐deductible fee would be allocated across the industry according to market share and would not apply to companies with sales of branded pharmaceuticals of $5 million or less.
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(Sec. 10108) Requires employers that offer coverage and make a contribution to provide free choice vouchers to qualified employees for the purchase of qualified health plans through Exchanges. The free choice voucher must be equal to the contribution that the employer would have made to its own plan.

Employees qualify if their required contribution under the employer’s plan would be between 8 and 9.8 percent of their income. Excludes free choice vouchers from taxation and voucher recipients are not eligible for tax credits.

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Starting in 2012

(Sec. 9006) Requires businesses that pay any amount greater than $600 during the year to corporate and non‐corporate providers of property and services to file an information report with each provider and with the IRS. Information reporting is already required on payments for services to non‐corporate providers.

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(Sec. 9022) Establishes Simple Cafeteria Plans that ease participation restrictions so that small businesses can provide tax‐free benefits to their employees. Under this provision, self‐employed individuals are included as qualified employees. The provision also exempts employers who make contributions for employees under a simple cafeteria plan from pension plan nondiscrimination requirements applicable to highly compensated and key employees.

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Starting in 2013

(Sec. 4375) Imposes a fee on each specified health insurance policies and self‐ insured health plans for each policy year ending after September 30, 2012, a fee equal to the product of $2 ($1 in the case of policy years ending during fiscal year 2013) multiplied by the average number of lives covered under the policy or plan. (Termination September 30, 2019).

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(Sec. 9009) Imposes an annual flat fee of $2 billion on the medical device manufacturing sector beginning in 2010. This non‐deductible fee would be allocated across the industry according to market share and would not apply to companies with sales of medical devices in the U.S. of $5 million or less. The fee does not apply to any sale of a Class I product or any sale of a Class II product that is primarily sold to consumers at retail for not more than $100 per unit (under the FDA product classification system).

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(Sec. 9012) Eliminates the deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees.

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(Sec. 9013) Increases the adjusted gross income threshold for claiming the itemized deduction for medical expenses from 7.5 percent to 10 percent. Individuals age 65 and older would be able to claim the itemized deduction for medical expenses at 7.5 percent of adjusted gross income through 2016.

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(Sec. 9014) Limits the deductibility of executive compensation under Section 162(m) for insurance providers if at least 25 percent of the insurance provider’s gross premium income from health business is derived from health insurance plans that meet the minimum essential coverage requirements in the bill (“covered health insurance provider”). The deduction is limited to $500,000 per taxable year and applies to all officers, employees, directors, and other workers or service providers performing services for or on behalf of a covered health insurance provider.

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(Sec. 10902) Indexes the $2,500 limit on contributions to a flexible spending arrangement by CPI‐U for years after December 31, 2011.

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(Sec. 10906) Modifies the increased HI tax rate for single taxpayers with income in excess of $200,000 and couples filing jointly with incomes in excess of $250,000 from 0.5 percentage points to 0.9 percentage points.

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Starting in 2014

(Sec. 36B) The premium assistance credit amount is calculated on sliding scale starting at two percent of income for those at or above 100 percent of poverty and phasing out to 9.8 percent of income for those at 400 percent of poverty. The reference premium is the second lowest cost silver plan available in the individual market in the rating area in which the taxpayer resides. The premium assistance credits do not take into account benefits mandated by States. Employees offered coverage by an employer under which the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs or the premium exceeds 9.8 percent of the employee’s income are eligible for the premium assistance credit. This section also provides for reconciliation of the premium assistance credit amount at the end of the taxable year and for a study on the affordability of health insurance coverage by the Comptroller General.

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(Sec. 125 (f)(3)) Plans provided through the exchange will not be an eligible benefit under an employer‐sponsored cafeteria plan, except in the case of qualified employers (i.e., small employers, and, after 2017, large employers in electing states) offering a choice of plans to their employees through the exchange.

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(Sec. 1514) Requires large employers to report to the Secretary whether it offers to its full‐time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer‐sponsored plan, the length of any applicable waiting period, the lowest cost option in each of the enrollment categories under the plan, and the employer’s share of the total allowed costs of benefits provided under the plan. The employer must also report the number and names of full‐time employees receiving coverage.

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(Sec. 9010) Imposes an annual flat fee of $6.7 billion on the health insurance sector beginning in 2010. This non‐deductible fee would be allocated across the industry according to market share and would not apply to companies whose net premiums written are $25 million or less and whose fees from administration of employer self‐insured plans are $5 million or less. The public option, as well coops and the national plan, will be subject to the insurance provider fee.

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Starting in 2018

(Sec. 1401)  Reduces the revenue collected by the tax by 80 percent. This is achieved by: delaying the application of the tax until 2018, which gives the plans time to implement and realize the cost savings of reform; increasing the dollar thresholds to $10,200 for single coverage and $2 for family coverage ($11,850 and $30,950 for retirees and employees in high risk professions); excluding stand‐alone dental and vision plans from the tax; and permitting an employer to reduce the cost of the coverage when applying the tax if the employer’s age and gender demographics are not representative age and gender demographics of a national risk pool. Under the modified provision, the dollar thresholds are indexed to inflation and the dollar thresholds are automatically increased in 2018 if CBO is wrong in its forecast of the premium inflation rate between now and 2018.

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