Affordable Care Act and Taxe Exclusions

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Two Federally Subsidized Health Insurance Programs are One Too Many: Reconsidering the Federal Income Tax Exclusion for Employer-Provided Health Insurance in Light of the Patient Protection and Affordable Care Act

Nicholas M. Drew

Boston College Law Review

July 15, 2013

Boston College Law Review, Vol. 54, No. 5, 2013

Abstract:
Health care costs in the United States have increased significantly over the past few decades. As a result, the current trends of federal health care spending are unsustainable. Section 106 of the I.R.C. contributes to the nation’s increasingly large federal health care bill because it excludes employer-provided insurance benefits from the federal income tax. This results in losses of over $750 billion a year of federal revenues through what is essentially a federal spending program. This Note argues that the recent passage of the Affordable Care Act has altered many of the underlying assumptions in which the traditional arguments against repeal of I.R.C. § 106 had been grounded. By examining those arguments in light of the predicted implications of the ACA, this Note posits that the arguments in favor of sustaining I.R.C. § 106 have been rendered largely irrelevant, inapplicable, or generally less compelling – whereas the arguments in favor of repeal seem all the more convincing today.

Attachments:

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Here is the text of the final regulations on the individual healtcare directive of Obama Care


Most Americans will be required to have health insurance starting in 2014 and will have to report whether they had coverage on their 2015 tax returns. An individual who opts against carrying insurance will be subject to a fine of $95 next year or 1% of income above a certain threshold, which is ever greater. The penalty increases to $695 per person in 2016 and beyond – or 2.5% of taxable annual income – with the amount rising by inflation.
There are exceptions in the law for people with incomes below the threshold that’s required to file an income tax return, which is about $10,000 for an individual in 2013. People with certain religious exemptions and those who are members of Indian tribes are exempt from requirements under the health law. People who lack insurance coverage for less than three months in a given year also won’t be penalized.
People who obtain health insurance through an employer, or are on Medicare, the federal health insurance program for people age 65 and older, qualify as having insurance and won’t be subject to any penalties. The federal government and states are setting up online exchanges or marketplaces where people can purchase health insurance starting Oct. 1. Many people are expected to qualify for tax credits to offset the cost of monthly insurance premiums.
In a statement posted on Treasury Department’s website, the agency said the requirement for individuals to carry health insurance is “integral to delivering the Affordable Care Act’s consumer protections at an affordable cost.”

Attachments:

2013-21157_PI.pdf (197.81 KB)