Archive for March, 2013

Family health care premiums exceed 20% of income

Family health insurance premiums in California went up 52 percent between 2003 and 2010 and now exceed 20 percent of income, according to a study released today.

A state-by-state analysis by the Commonwealth Fund, a philanthropic research group, found the average annual family health premium in California in 2003 was $9,091, which was slightly lower than the national average of $9,249.

By 2010, those premiums jumped to $13,819 in California, on par with the national average. Premiums for families nationwide rose an average of 50 percent during that same time period to $13,871.

The report examines the period of time leading to the passage of the federal health overhaul law in March 2010. The authors say if insurance keeps rising at the current rate, the cumulative impact will result in a 72 percent increase in premiums and push the average family premium to almost $24,000 by 2020.

“Costs vary by state, but no matter where you live – whether it’s Wyoming, Texas, West Virginia, California, New York – health insurance is expensive,” said Cathy Schoen, senior vice president of the Commonwealth Fund and lead author of the report.

In a growing number of states, including California, premiums already equal or exceed 20 percent of the median income, the study found.
Outpacing income

In 2003, health premiums in California amounted to 14.9 percent of income but jumped to consume 21.5 percent in 2010. Twenty-three states shared that distinction last year, while just seven years earlier, West Virginia was the only state to top that 20 percent threshold.

Premiums outpace income in virtually every state, but Schoen said they take a bigger bite out of overall income in states that have lower median incomes.

In California, the study reported, the median family income in 2009-10 was $61,162, which is lower than the average national median income of $67,357 for families.

The report also found that the annual amount employees pay toward their health insurance policies increased nationally an average of 68 percent for individuals and 63 percent for families between 2003 and 2010. In California, the amount increased by 121 percent for individuals and 68 percent for families.

Anthony Wright, executive director of the consumer advocacy coalition Health Access California, said it’s hard to say why employer-backed individual policies jumped so much. Family coverage has long been hit with increases, so employers may have turned toward increasing the share individuals pay in recent years, he said.

The liberal-leaning Commonwealth Fund notes that the federal health law has the potential and opportunity to lower premium growth.
Effects of law

Wright, a backer of the federal law, said some provisions – such as subsidies provided to lower- and middle-income people to buy health insurance – will by definition curb the percentage of income people have to devote to health insurance. It’s unclear whether many of the elements will lower costs, he said.

The health law “almost certainly doesn’t do everything we need it to do to bring down the cost of health,” he said. “At the same time, it’s the most any Congress has ever done to try.”
Commonwealth Fund’s findings

See the report at

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Anyone, Anyone…Small Business Tax Credits??

What You Need to Know about the Small Business Health Care Tax Credit…

How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014. Additional information about the enhanced version will be added to as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return there’s still time to file an amended return.

Click here if you want more examples of how the credit applies in different circumstances.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

Let us break it down for you even more.

You are probably wondering: what IS a full-time equivalent employee. Basically, two half-time workers count as one full-timer. Here is an example, 20 half-time employees are equivalent to 10 full-time workers. That makes the number of FTEs 10 not 20.

Now let’s talk about average wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average wages you divide $200,000 by 10 – the number of FTEs – and the result is your average wage. The average wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit you receive will be less.

If you need assistance determining if your small business or tax exempt organization qualifies for the credit, try this step-by-step guide.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don’t ordinarily do so.

Don’t forget … if you are a small business employer you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.

Still have questions?  Give us a call at 916-932-2357 – anytime!


Posted in: Business Insurance, Covered California, Health Care Reform (ACA), News You Can Use

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