Ok, I know I said I didn’t want to skip around, but there is also no way I am finishing this before the election. So, I’m going to skip ahead to sections 9001 through 9017, which are the Revenue Offset Provisions. As in, how are we going to pay for this thing? Then I’ll go back and get back on track with Section 2701 and so on.
Section 9001 places an excise tax on any employer that provides an excess benefit, and therefore higher cost, insurance. In general, this is defined as $10,200 for an individual, or $27,500 for a family. This isn’t to say that if you happen to cost your employer more than that a year, that they will be taxed, but rather if the plan in general provides that much general, on average, to every employee. (Disclosure: I was covered under one of these types of benefit plans, so I can tell you some personal anecdotes about this. We changed to a plan that required more cost-sharing, as required by this change. The other one was nice, but my economist soul always balked at the high level of benefit.)
An interesting note on this is that if you were employed in high-risk profession, or as a person who repaired or installed telephone lines, the amounts are $1650 and $3450 higher respectively. High risk employees are defined as law-enforcement, firepeople, paramedics, long-shorepeople, construction, mining, agriculture, forestry and fishing. Me thinks the telephone line people were a bit of an afterthought (especially since that particular line was modified).
I have mixed personal feelings about this section, and not just because my insurance changed. On the one hand, if employers feel that they can recruit higher quality workers by offering insurance with essentially no cost-sharing (which is how mainly get this type of increased benefit), then they should. On the other hand, a lack of cost-sharing can lead to making poor choices, by both the patient, and the provider, who knows that the patient isn’t paying for any of it, so might order expensive testing that may not be necessary, driving up the cost of insurance for everyone. Realistically, most employers will just reduce their benefits, and this will not be much of a source of revenue.
Section 9002 provides that the information about how much health insurance costs will be placed on the W-2. It doesn’t indicate that it will be taxed, but this information will be used in the previous sections to determine eligibility for Exchanges.
Section 9003 removes the ability to pay for drugs that are not prescribed drugs or insulin with your health savings account. So anyone that had been using it to pay for vitamins, and witch hazel, and hydrogen peroxide, will no longer be able to. But it does seem that you could still buy over the counter Prilosec and have that reimbursed.
Section 9004 increases the tax for people who use their HSA monies for non-medical reasons from 10% or 15% (depending on which kind you have) to 20%.
Section 9005 limits the type of benefits you can receive from a cafeteria plan if the plan allows you to put more than $2500 in per year.
Section 9006 increases some information that corporations have to give the IRS.
Section 9007 increases the requirements to qualify as a charitable hospital. Although it seems to be less increasing them as it is adding any at all. And adds a tax if the hospital doesn’t meet these requirements.
Section 9008 adds a yearly fee to branded drug importers or manufacturers. There is a sliding scale of how much of the sales are included in the fee calculation, ranging from 0% if the entity sells less than $5,000,000 a year, up to 100% if the entity sells more than $400,000,000 a year. The fee itself is the ratio of your branded drug sales to the total amount of branded drug sales. A little example:
So – if you sold between $125,000,000 and $225,000,000 of branded drugs in a given year, then 40% of those sales would be included in the fee calculation. Let’s assume the higher number. 40% of $225,000,000 is $90,000,000. This year, the PPACA defines the amount of branded drugs sales as $2,800,000,000. So your fee would be $90,000,000/$2,800,000,000 of your sales. Which is .032 * $225,000,000 or $7,232,142.86. Given that the US pharma companies made $64.5 billion dollars in profit last year, this is a pretty good source of revenue.
Sales from orphan drugs, or those intended to treat specific rare diseases, are not included.
The fees go to Medicare.
Ok – there are a few more of these. But in an effort to save your sanity for driving home after all that math I’ll put those in a separate post for today.
stayathomeeconomist 