Health Insurance

From 2014-2018, all uninsured U.S. citizens and legal residents were required to obtain health care coverage or pay a tax penalty. However, starting in 2019, with the passing of the Tax Cuts and Jobs Act in December 2017, the individual mandate that required all Americans under 65 to have health insurance or pay an annual penalty, is repealed. Americans without health coverage in 2019 and beyond will not be subject to a Federal tax penalty.

To assist those who cannot afford the full cost of premiums, the Medicaid program enrolls uninsured individuals with incomes below 138% of the Federal poverty level (FPL). Subsidies will be provided on a sliding scale to individuals with lower to mid-level incomes who do not qualify for Medicaid. Families and individuals with incomes up to 400% of the FPL may be eligible for a premium assistance tax credit to help them purchase basic coverage through an exchange.

To help raise revenue, the law broadens the Medicare tax base for higher-income taxpayers. This includes an additional Hospital Insurance tax rate of 0.9% on earned income in excess of $200,000 for individuals and $250,000 for married couples filing jointly, as well as a 3.8% unearned income Medicare contributions tax on the lesser of net investment income or the amount by which modified adjusted gross income (MAGI) exceeds the same $200,000/$250,000 threshold amounts. Some trusts and estates will also be liable for this 3.8% tax.

The Cadillac tax was originally meant to be a 40% nondeductible excise tax will be imposed on health insurance providers or plan administrators for any “Cadillac” health insurance plan with annual premiums in excess of $10,200 for individual and $27,500 for family coverage, with both amounts adjusted for inflation and higher thresholds for employees in certain high-risk professions and non-Medicare retirees age 55 and older. Insurance providers and plan administrators are permitted to pass along the excise tax to consumers through higher premiums. However, this tax was permanently repealed in December 2019.