Affects of the Affordable Care Act on Taxpayers
The Affordable Care Act, largely known as “ObamaCare” was signed into law by current president Barrack Obama in 2010. As of 2010, approximately 50 million Americans were uninsured, ObamaCare was signed into law to significantly reduce the number of people currently uninsured, as rising health care costs can lead to insurmountable debt in the case of a tragedy. The recessionary economy at the time of signing played a huge role in the overall acceptance of ObamaCare; however, there were many side effects to such an overhaul and monumental health care reform law. Many-a-times, the real effects of such a program get lost in all of the biases presented from both the left and right winged. ObamaCare significantly affects taxpayers as it introduces new laws and regulations for individual tax payers and businesses alike.
Net Investment Income Tax
Little attention has been paid to the tax ramifications for American citizens as the deadline to apply for healthcare coverage quickly approaches. The Affordable Care Act affects three specific taxable areas for individuals, families, and businesses. The new law has seen extreme dissent and disapproval by upper-income level individuals and families because of the Net Investment Income Tax. Under this new tax proposal, as a provision of ObamaCare, a 3.8 percent Medicare surtax applies to the lesser of a taxpayer’s net investment income or the excess above the modified adjusted gross income thresholds of $200,000 for individual tax payers and $250,000 for joint filers. Looking at an example, if an individual taxpayer has net investment income of $100,000 and modified adjusted gross income of $250,000 the taxpayer would look to pay surtax of $1,900 (Berry). This is equal to 3.8 percent of the excess of $50,000 of modified adjusted gross income. Such a tax implementation has serious implications to upper income level individuals, which is the reason that ObamaCare has seen the backlash that it has from higher income individuals since its proposal in the late 2000s. There has been a lot of confusion about this new tax mainly due to the vague description of what Net Investment Income includes and does not include. According to the IRS newsroom, Net Investment Income includes capital gains and interest income, but does not include distributions from qualified retirement plans and IRAs (IRS FAQ, “Questions and Answers on the Net Investment Income Tax”).
Wage and Self-Employment Income Surtax
Next in the series of new taxes being imposed under the Affordable Care Act are the wage and self-employment income surtax. This is yet another round of Medicare surtax which applies to the compensation received by employees and small business owners who have self-employment income. This new tax imposes 0.9 percent surtax on single tax payers earning over $200,000 and joint taxpayers earning over $250,000. This threshold includes non-cash income including fringe benefits paid-out by employers. Even though this tax burden is not as great as the Net Investment Income tax burden of 3.8 percent, it still creates more liabilities for upper income tax payers. Additional provisions were made stealthy to this new law calling for automatic withholding by employers of employees earning more than $200,000 regardless of filing status or other reported and unreported income. Additional confusion is caused here, because tax will automatically be withheld if a tax payer is above this threshold, but may ultimately be exempt from this if he/she files jointly and earns under the $250,000 limit (IRS FAQ, “Questions and Answers for the Additional Medicare Tax”). This excessive burden and confusion is yet another reason for the amount of backlash that ObamaCare has seen from upper-level income tax payers from both the left and right winged political affiliation.
Health Insurance Provider Fees
The last in the series of new taxes being imposed under ObamaCare affects businesses rather than individual taxpayers. This new tax, Health Insurance Provider Fees, is a flat tax that is targeted at small businesses and individual markets. Beginning in 2014, covered entities, defined as any provider of health insurance coverage except for governmental entities, certain non-profit entities, and organizations that qualify as “voluntary employees beneficiary association” (VEBA), will be subject to this tax based on the net premiums written after 2012 (Berry). This is essentially based off the market share of the insurers, however, IRS regulations published that any entity that is a self-insured entity to the extent that such employer self-insures its employees health risks are exempt from this new excise tax. What is little known is that about four out of every five employers with more than 500 employees and most unionized health plans are self-insured, therefore, these organizations are exempt from this new tax (Berry). This irregular political selectivity basically allows all the “high profile” organizations to be exempt from this tax and causes this burden to fall on the self-employed and individuals, who ironically, are least able to afford this new tax.
Initially, the White House had reported that the majority of this tax burden would fall on the deep-pocketed insurers, but that has already been discredited by the various exceptions already discussed. In a recent debriefing by the Congressional Budget Office it was reported that the tax will likely be passed on to consumers in the form of higher premiums and would ultimately raise insurance premiums by 2-2.5 percent. It is estimated that the premiums will rise by as much as $500 per covered worker by the end of this decade (“A Large New Tax on Small Business”). This comes as huge surprise to most citizens; the purpose of the Affordable Care Act was to lower premiums on health insurance to make it more affordable, not to increase premiums by adding unnecessary “fees” and taxes. To make this burden even worse, this imposed tax is not deductible for corporate income tax purposes, basically, health plans pay the tax and then federal and state taxes on the taxed amount. This unusual “tax on taxes” rule means that the actual affect on premiums is higher than the dollar amount of the tax itself.
Recent studies have estimated that these new levies will shrink hiring by 146,000 jobs over the next five years, with the majority of those losses hitting the small businesses. Studies have also recognized that this will cause employers to push their employees to the Health Care Exchanges. It is also estimated that this new tax levy will aggregate to be more than the ObamaCare taxes on medical devices and prescription drugs combined. In 2014, the aggregate annual fee will be $8 billion, increasing to $11.3 billion in 2015 and 2016, then going to $13.9 billion and $14.3 billion in 2017 and 2018 respectively (Randofsky).
Insurance Providers Dropping Customers
This new few structure imposed on healthcare providers and the newly imposed “10 essential benefits” required by ObamaCare are causing healthcare providers to drop customers left and right. Over one million people have received cancellation notices from their healthcare providers because the expansion of the essential benefits would cause healthcare providers to lose money if such benefits were provided (Gorman). The new requirements under ObamaCare also call for consumers to have drastically lower annual cap on expenses and deductibles making the Affordable Care Act, not so affordable. This has come as a huge surprise to many currently insured people who were told by President Obama that if you were satisfied with your current health coverage, than you would be able to keep it. Most of the cancellations have occurred in what are known as “retirement states” such as Florida and California where the average consumer age is much higher, therefore, causing higher projections of pay-outs for healthcare providers.
Fines and Penalties for Being Uninsured
Aside from the new taxes being levied on taxpayers, the Affordable Care Act penalizes all US citizens for not having “minimum adequate coverage” health care coverage by March 31, 2014. Minimum adequate coverage is defined as coverage under certain government-sponsored plans, employer-sponsored plans, plans from the HealthCare Marketplace, or grandfathered healthcare plans. The penalty starting in 2014 is relatively harmless for most taxpayers but sees significant spikes in subsequent years. In 2014, an individual tax payer without minimum adequate coverage can expect to pay a penalty equal to the greater of $95 per adult, or half of that for all children under the age of eighteen, or one percent of household income. The maximum penalty for a household is $285. In 2015, the fee increases to $325 per person, with a family maximum of $975, or 2 percent of household income. In 2016, this fee jumps to $695 per person, with a family maximum of $2085, or 2.5 percent of household income (Luhby). Post 2016 fees will be properly indexed for inflation. Taxpayers that are uninsured for only part of a given year will pay the adjusted fee on a per-month-uninsured basis. Individuals are exempt from this fee if they are unable to afford minimum adequate coverage, or the cost of the plan exceeds eight percent of the individual’s household income for 2014 (Luhby).
These fees have seen significant backlash especially from the uninsured. In a recent survey conducted by Henry Kaiser Family Foundation, a research company, indicated that over half of the people uninsured in the United States currently, had a negative view of ObamaCare and the fees imposed (Young). It makes obvious sense that the people that are currently uninsured in the United States are in such a situation because they either do not want to spend the high amount on premiums or they cannot afford to. Not accounting for the individuals and families that cannot afford insurance and focusing on just those who choose not to purchase healthcare, gives an educated observer the answer as to why they are against it. These individuals and families simply do not want to spend the extra money on healthcare especially when many of them believe that their families are in great health conditions and catastrophic health incidents are not likely (Young). The negative backlash has been increasing as the deadline to sign up for healthcare nears. It remains yet to be seen how this will affect the Obama administration and what affects it will on the political landscape going into the next election cycle.
The reaction to the Affordable Care Act has been mixed since its inception. The inevitability of the bipartisan divide has caused many citizens of the United States to view ObamaCare and make their decision without all of the facts. Healthcare is an extremely important aspect of life especially in a country where the cost of healthcare without proper coverage can leave a family in debt for years, however, healthcare should be an option for one to purchase based on individual beliefs, financial circumstances, and personal choice. This healthcare reform that has been implemented should not be viewed from strictly a partisan perspective, but rather, objectively with all the facts in hand. The effects of all the taxes and fees being imposed upon citizens of the United States in lieu of ObamaCare should be understood objectively. Providing universal healthcare at discounted prices while maintaining the integrity of the US economic system comes at a cost, this cost must be endured by the people in order for such reform to work. These new taxes and fees that affect not only individuals but also businesses should be challenged if one believes, objectively, that they are unfair, too stringent, or otherwise unfit. As with any overhaul in political landscape, there will be believers and disbelievers, it is up to individuals to decide which side of the debate to be on. As citizens of the freest country in the world, it is our duty to vote on what we believe is to be right or wrong.

Works Cited
Berry, Ken. "New Final Regulations Clarify Obamacare Tax Rules." AccountingWEB. N.p., 2 Dec. 2013. Web. 21 Mar. 2014.
Gorman, Anna. "Thousands Of Consumers Get Insurance Cancellation Notices Due To Health Law Changes." KHN: Kaiser Health News. N.p., 21 Oct. 2013. Web. 21 Mar. 2014.
Luhby, Tami. "Uninsured next Year? Here's Your Obamacare Penalty." CNNMoney. Cable News Network, 13 Aug. 2013. Web. 21 Mar. 2014.
Randofsky, Louise. "How the ACA May Affect Health Caosts." The Wall Street Journal. Dow Jones & Company, 23 Feb. 2014. Web. 21 Mar. 2014.
Young, Jeffrey. "The Uninsured Are Turning Against Obamacare. That's A Problem." The Huffington Post. TheHuffingtonPost.com, 26 Feb. 2014. Web. 21 Mar. 2014.
"IRS FAQ." Questions and Answers for the Additional Medicare Tax. N.p., 2 Dec. 2013. Web. 21 Mar. 2014.
"IRS FAQ." Questions and Answers on the Net Investment Income Tax. N.p., 5 Mar. 2013. Web. 21 Mar. 2014.
"A Large New Tax on Small Business." The Wall Street Journal. Dow Jones & Company, 29 Dec. 2013. Web. 21 Mar. 2014.