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healthcare reform in the United States. This mammoth legislation comprised thousands of pages of rules and regulations. This section highlights the most important portions of the legislation that you need to understand.

      Now, employer group health plans (with 50 or more full-time employees) are subject to these rules:

       Plans offering dependent coverage must offer coverage to adult children up to age 26. The coverage isn’t taxable to the employee or dependent.

       Plans must provide preventive care without cost-sharing and must cover certain child preventive care services as recommended by the government. This rule applies only to new group health plans.

       Employers must offer minimum essential coverage to full-time employees or make nondeductible payments to the government.

       Plans must remove all annual dollar limits on participants’ benefit payments. They may not impose lifetime limits.

       Plans must limit cost-sharing and deductibles to levels that don’t exceed those applicable to a health-savings-account-eligible, high-deductible health plan.

       Plans must remove all preexisting-condition exclusions on all participants.

       Plans may not have waiting periods of longer than 90 days.

      Higher income taxpayers are now hit with higher tax rates on their investments as well as higher Medicare tax rates to help pay for Obamacare. Taxpayers with total taxable income above $200,000 (for a single return) or $250,000 (for a joint return) from any source are subject to a 3.8 percent tax on the lesser of the following:

       Their net investment income (for example, interest, dividends, and capital gains)

       The amount, if any, by which their modified adjusted gross income exceeds the dollar thresholds

      Taxpayers with earned income above $200,000 (for a single return) or $250,000 (for a joint return) are subject to an additional 0.9 percent Medicare tax (in other words, rising from 1.45 percent to 2.35 percent) on wages in excess of those amounts. Employers aren’t required to match the payment of this incremental increase, which is applicable only to the employee.

      Buying health insurance

      You can buy many health plans through agents, and you can also buy some directly from the insurer. When health insurance is sold both ways, buying through an agent usually doesn’t cost more.

      Solicit proposals from the larger and older health insurers in your area. Larger plans can negotiate better rates from providers, and older plans are more likely to be here tomorrow. Nationally, Aetna, Anthem, Assurant, Blue Cross, Blue Shield, CIGNA, Kaiser Permanente, and UnitedHealth Group are among the older and bigger health insurers.

Also check with professional or other associations that you belong to, because plans offered by these groups sometimes provide decent benefits at a competitive price because of the purchasing-power clout that they possess. A competent independent insurance agent who specializes in health insurance can help you find insurers that are willing to offer you coverage.

      

Health insurance agents have a conflict of interest that’s common to all financial salespeople working on commission: The higher the premium plan they sell you, the bigger the commission they earn. So an agent may try to steer you into higher-cost plans and avoid suggesting some of the strategies I discuss in the following section for reducing your cost of coverage. (Good agents can help guide you to the best plans that cover preexisting conditions and offer the lowest costs for your medications. Be sure to provide them with this information and compare options carefully.)

      Noting other ways to save on healthcare spending

      Regarding out-of-pocket medical expenses, you can offer a flexible spending or healthcare reimbursement account. These accounts enable employees to pay for uncovered medical expenses with pretax dollars. The business saves on payroll taxes for the amounts deferred into these accounts. Employees can also use these accounts to pay for vision and dental care.

      

Be forewarned of the major stumbling blocks you face when saving through medical reimbursement accounts:

       First, you need to elect to save money from your paycheck prior to the beginning of each plan year. The only exception is at the time of a “life change,” such as a family member’s death, marriage, spouse’s job change, divorce, or the birth of a child.

       You also need to use the money within the year you save it because these accounts contain a “use it or lose it” feature (you have through two and one-half months of the end of the calendar year to spend that year’s money).

      Health savings accounts (HSAs) are another option, especially for the self-employed and people who work for smaller firms. Employers with fewer than 50 employees can offer HSAs.

To qualify for an HSA, you must have a high-deductible (for 2021, at least $1,400 for individuals and $2,800 for families) health insurance policy. Then you can put money earmarked for medical expenses into an investment account that offers the tax benefits — deductible contributions and tax-deferred compounding — of a retirement account. And unlike a flexible spending account, you don’t have to deplete the HSA by the end of the year: Money can compound tax-deferred inside the HSA for years. Begin to investigate an HSA through insurers offering health plans you’re interested in or with the company you currently have coverage through.

      Finally, you may be able to save on taxes if you have a substantial amount of healthcare expenditures in a year. You can deduct medical and dental expenses as an itemized deduction on Schedule A of IRS Form 1040 (see Chapter 9) to the extent that they exceed 7.5 percent of your adjusted gross income for those under age 65. Unless you’re a low-income earner, you need to have substantial expenses, usually caused by an accident or major illness, to take advantage of this tax break.

      Other benefits

      Companies can offer lots of other benefits to their employees. Here are the highlights of some other commonly considered ones:

       Dependent care: Reimbursed costs for the care of kids under the age of 13 are tax-deductible to the business and a tax-free benefit for employees for up to $5,000 for a married couple filing jointly and $2,500 for others. Note that this is separate from the dependent care tax credit available on your federal tax forms.

       Long-term-care insurance: As with the dependent care benefit, a business can provide long-term-care (LTC) insurance and deduct the cost of providing it, and the benefit is tax-free to the employee. Alternatively, individuals can pay for the cost of an LTC policy themselves and deduct the cost as an itemized deduction on Schedule A of their personal income tax return.

       Group term life insurance: So long as a company has at least ten covered employees, it can deduct the cost of a provided term life policy, and the benefit is tax-free to employees for up to $50,000 of coverage.

       Educational expense reimbursement: Educational costs that are directly related to an employee’s job may be deducted if paid by the business, and the benefit is tax-free to the employee.

       Auto costs: You can write off the costs of using your car for certain business purposes, and a small business can deduct certain costs as well. Turn to Chapter 8 for the details.

       Meals: When a company provides food on-site, it can deduct all costs and provide a tax-free benefit to employees, subject to certain criteria being met. For example, if employees are working late or lack sufficient time to get their own food, the business may pay for the cost

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