New Healthcare Reform Legislation

There are several provisions of this legislation that are effective in 2010. Below is a brief summary of some of those provisions:

New qualification requirements for nonprofit hospitals.For tax years beginning after Mar. 23, 2010, detailed new qualification requirements apply to any not-for-profit organization that operates at least one hospital facility. These requirements include: conducting, implementing and widely publicizing a community health needs assessment; adopting and implementing a written financial assistance policy; and adopting and implementing a nondiscriminatory policy to provide emergency medical treatment to individuals.

Tanning services excise tax.For indoor tanning services performed on or after July 1, 2010, a new 10% excise tax is imposed on any indoor tanning service, whether paid for by insurance or otherwise. The tax is imposed on tanning service recipients (although the provider is secondarily liable).

Small employer health insurance credit.For tax years beginning after Dec. 31, 2009, an eligible small employer (ESE) is entitled to a tax credit for making non-elective contributions to buy health insurance for its employees. An ESE generally is an employer with no more than 25 full-time equivalent employees (FTEs) employed during its tax year, and whose employees have annual full-time equivalent wages that average no more than $50,000. However, the full amount of the credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of less than $25,000.)

Expanded dependent coverage in employer health plans.Effective on Mar. 30, 2010, the general exclusion for reimbursements for medical care expenses under an employer-provided accident or health plan is extended to any child of an employee who hasn't attained age 27 as of the end of the tax year. This change is also intended to apply to the exclusion for employer-proved coverage under an accident or health plan for injuries or sickness for such a child. A parallel change applies for voluntary employees' beneficiary associations. Also, self-employed individuals are allowed to take a deduction for health insurance costs of any child of the taxpayer who has not attained age 27 as of the end of the tax year.

Eased rules for adoption credit and exclusion for employer-provided adoption assistance.For tax years beginning after Dec. 31, 2009, the maximum adoption credit is increased to $13,170 per eligible child (a $1,000 increase) for both non-special needs adoptions and special needs adoptions. The adoption credit is made refundable. The maximum exclusion for employer-provided adoption assistance also is increased to $13,170 per eligible child (a $1,000 increase).

Tax breaks eliminated for health organizations with medical loss ratios below 85%.For tax years beginning after Dec. 31, 2009, health organizations whose medical loss ratio is below 85% cannot take advantage of the favorable tax provisions of Code Sec. 833 including treatment as a stock insurance company.