For Many, Health Care Relief Begins Today

A number of the provisions provided in the Patient Protection and Affordable Care Act will take effect today, offering relief to thousands of Americans. The act now prohibits insurance companies from excluding children because due to pre-existing health conditions, and insists they offer coverage to children under 26 on their parents insurance. Read more from the NYTimes.com story below.

Sometimes lost in the partisan clamor about the new health care law is the profound relief it is expected to bring to hundreds of thousands of Americans who have been stricken first by disease and then by a Darwinian insurance system.

On Thursday, the six-month anniversary of the signing of the Patient Protection and Affordable Care Act, a number of its most central consumer protections take effect, just in time for the midterm elections.

Starting now, insurance companies will no longer be permitted to exclude children because of pre-existing health conditions, which the White House said could enable 72,000 uninsured to gain coverage. Insurers also will be prohibited from imposing lifetime limits on benefits.

The law will now forbid insurers to drop sick and costly customers after discovering technical mistakes on applications. It requires that they offer coverage to children under 26 on their parents’ policies.

Continue reading at NYTimes.com…

IRS Lacks Clout to Enforce Mandatory Health Insurance

Last year the IRS processed over 230 million tax returns, and responded to nearly 70 million phone calls from American taxpayers. They are responsible for enforcing the 71,000 page tax code, and beginning in 2014 the IRS will also take on the task of making sure Americans have qualifying health care plans. According to Sandra Block of USA Today.com, more than 4 million Americans could be subject to penalties of up to $1,000 by 2016 if they fail to obtain health insurance.

While the IRS can impose liens or levies, seize property or seek jail time against people who don't pay taxes, it's barred from taking such actions against taxpayers who ignore the insurance mandate. In the arsenal instead: the ability to withhold refunds from taxpayers who decline to pay the penalty, IRS Commissioner Doug Shulman said this month.

Still, compliance with the health reform law will be largely voluntary, says Timothy Jost, a law professor at Washington and Lee University. "By taking criminal sanctions and liens and levies off the table, the IRS' hands are tied, to a considerable extent."

Continue reading at USA Today.com…

Questions for the Tax Lady: March 29th, 2010

Check out the following new Questions for the Tax Lady answers. Feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Is it true that the IRS is going to be in charge of enforcing the mandatory health insurance requirement?

Yes. Unfortunately, it looks like the IRS has been given the “enforcement job” by the new health care reform package passed by Congress. As I explained in my appearance on CNN last week, they are probably going to modify the IRS Form 1040 to include a section where you provide information on your health insurance coverage. If you do not have coverage and thus do not report health care coverage on your tax return to the IRS, you will be assessed a tax penalty.

Question #2: How do I find out if the IRS has sent my refund check yet?

The IRS’ website features a handy “Where’s my Refund” tool where you can monitor the status of your refund. You will need to provide your Social Security Number, filing status, and the dollar amount of the refund you are anticipating.

Health Insurer Profits not so Fat

As the reform debate continues in Washington, recent reports have emerged showing that the health insurance industry is not as profitable as many would assume. Calvin Woodward of My Way News has posted this interesting article looking at some of the claims about health care profits and a more detailed look at the numbers regarding those claims. According to Woodward, farm and construction machinery, Tupperware, the railroads, Hershey sweets, Yum food brands and Yahoo are all more profitable than the health insurance industry.

Democrats and their allies have gone after insurance companies as rapacious profiteers making "immoral" and "obscene" returns while "the bodies pile up."

Ledgers tell a different reality. Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.

Insurers are an expedient target for leaders who want a government-run plan in the marketplace. Such a public option would force private insurers to trim profits and restrain premiums to compete, the argument goes. This would "keep insurance companies honest," says President Barack Obama.

The debate is loaded with intimations that insurers are less than straight, when they are not flatly accused of malfeasance.

They may not have helped their case by commissioning a report that looked primarily at the elements of health care legislation that might drive consumer costs up while ignoring elements aimed at bringing costs down. Few in the debate seem interested in a true balance sheet.

Obama: Requiring Health Insurance is not a Tax Increase

In his recent media campaign to promote his health care President Obama told ABC's "This Week" on Sunday that forcing people to obtain health care coverage is not a tax increase. Therefore, it does not break his promise to raise taxes on middle income Americans.

"For us to say you have to take responsibility to get health insurance is absolutely not a tax increase," Obama said in response to persistent questioning, later adding: "Nobody considers that a tax increase."

A proposal going before the Senate Finance Committee this week includes the mandate for health coverage. Obama has praised the plan in general, and indicated in the interview conducted Friday that he could back the coverage mandate.

He noted that consumers currently pay higher health insurance premiums due to the costs run up by hospitals and other facilities providing care to uninsured people.

Those unable to afford health insurance should get government help, Obama said, but others who can afford coverage but choose not to get it should face coverage requirements similar to those for auto insurance.

Continued at CNN.com…

California Senate Approves Tax on Health Insurers

California lawmakers went forward with a $196-million plan yesterday to keep nearly 700,000 children on the State’s Healthy Families program. The State Senate passed the measure which taxes health insurance companies in order to fund the program. Check out the following article on the recent development courtesy of LA Times.com.

Reporting from Sacramento - State lawmakers pushed forward Wednesday with a $196-million plan to keep nearly 700,000 children from being yanked off a government health insurance program for the working poor.

The state Senate passed a measure to create a new tax on insurance companies and bring in federal money to rescue the decade-old Healthy Families program, which had been cut deeply in recent months as lawmakers scrambled to balance the state budget.

Assembly officials expressed confidence that they would garner the needed two-thirds vote in the lower house, where the bill is expected to be taken up today. Administration officials said Gov. Arnold Schwarzenegger would sign the measure.

"Sitting on our hands in this situation is not an option for California's children," said state Sen. Dave Cox (R-Fair Oaks), one of three Republican lawmakers to break ranks with tax-wary GOP colleagues and join with the majority Democrats in approving the measure 27 to 8.

Health Insurance Stocks Dip Lower Than Market

From The Associated Press:

Managed care stocks dipped slightly lower than the overall market Wednesday, after insurers received more bad publicity with letters from Congress asking for executive compensation details and other financial information.

Several stocks fell around 1 percent while the broader Standard & Poor's 500 index climbed slightly. Wednesday's performance followed a managed care rally on Monday, after statements from the Obama administration downplayed the possibility of a government-backed public health plan that many investors fear would provide unfair competition to private health insurers.

The stocks have gone through several volatile periods since the health care reform overhaul debate started taking shape earlier this year.

Dozens of insurers received requests for information that included records relating to compensation of highly paid employees, documents relating to companies' premium income and claims payments, and information on expenses stemming from any event held outside company facilities in the past 2 1/2 years.

The requests were made in letters signed by Rep. Henry Waxman, D-Calif., who guided a portion of health care legislation through the House Energy and Commerce Committee last month as chairman, and Rep. Bart Stupak, D-Mich.

Of the largest publicly traded health insurers, only Louisville, Ky.-based Humana Inc. has said it plans to cooperate fully. Others have only said they received the letters.

Stifel Nicolaus analyst Thomas Carroll said the request implies that health insurers are doing something wrong.

"It's further demonizing of the health insurance industry, and it's pushing the stocks back down today a little bit," he said.

Tax Proposals Draw Critics in Talks on Financing Health Insurance

From the New York Times:

Even as Congress weighed options to finance health insurance for tens of millions of Americans, lobbyists mobilized Wednesday to head off proposed taxes on employer-provided health benefits, alcoholic beverages and soft drinks.

Labor unions began attacking a proposal by Senators Ron Wyden of Oregon and Max Baucus of Montana, both Democrats, to consider changes in the tax treatment of employer-sponsored insurance, the main source of health coverage for people under 65.

Radio advertisements, run this week in Portland and Eugene, Ore., at a cost of $60,000, say: “Senator Ron Wyden would tax the health care benefits we get at work, as if they were income. Taxing health benefits? That doesn’t make sense.”

The advertisements were bought by the National Education Association, with help from the United Food and Commercial Workers and the American Federation of State, County and Municipal Employees.

Health insurance and health benefits provided by employers to their employees are not counted as income and are not subject to income or payroll taxes. Mr. Baucus and many economists say the tax break is inequitable because its benefits go disproportionately to people with higher incomes.

“It’s too regressive,” said Mr. Baucus, the committee chairman. “It just skews the system.”

Mr. Baucus and Mr. Wyden have suggested that employer-provided health benefits above a certain value could be included in taxable income.

The proposed tax is among two dozen options considered Wednesday by members of the Senate Finance Committee as they looked for ways to pay for coverage of the uninsured. Almost every option faces opposition from some quarters.

Lightly Taxed Insurers Aim to Tap TARP

From the Wall Street Journal:

Several of the biggest U.S. life insurance companies are seeking a piece of the taxpayer-funded $700 billion federal bailout program, but pay little in income taxes themselves, securities filings show.

Consider Prudential Financial Inc., which last week announced that it is seeking an unspecified amount of aid through the federal Troubled Asset Relief Program, or TARP. Despite reporting pretax profits to shareholders of nearly $25 billion over the past decade, Prudential has paid just $1.3 billion in taxes to federal, state and foreign governments in that period, filings show, for an effective tax rate of 5.1%.

Senate Tax Panel Proposal Targets Offshore Insurers

From CNN Money.com:

Senate Finance Committee staff Wednesday sought comment on draft legislation that would tax related-party transactions by Bermuda-based insurance companies.

U.S. insurers including W.R. Berkeley Corp. (WRB), the Chubb Corp. (CB), and the Travelers Companies (TRV) have long charged that the Bermuda firms avoid taxes on their U.S. business by reinsuring the risk to the Bermuda parent.

The U.S. subsidiaries of firms including the ACE Group (ACE) and XL Capital Ltd. (XL) can then deduct the reinsurance premiums, lowering their U.S. tax liability. The Bermuda affiliate doesn't pay U.S. tax on the premium, while earning investment income subject to little or no tax.

"Thus, it is an efficient way of significantly reducing U.S. tax without transferring risk," according to a Finance Committee statement accompanying the draft legislation.

The Senate proposal would affect only related-party reinsurance transactions. It would deny a deduction for premiums in excess of an industry average of reinsured policies.

Bush Says No to Children's Health Insurance

A few days ago President Bush vetoed a bill that would have expanded a children’s heath insurance program by over $35 million over the next five years. Speaking in Pennsylvania, Bush claimed he vetoed the bill because he felt it was a step towards federalizing medicine and inappropriately expanding the program to help more children. Senate and House Democrats alike were quick to condemn the veto, which had received bipartisan support. House Majority Leader Nanci Pelosi has already announced plans to gain enough votes to overturn the veto. For more coverage on this issue, check out CNN.com.