The Affordable Care Act Goes into Action - What should you do? Call us first.

The Patient Protection and Affordable Care Act (ACA) has been the subject of speculation and uncertainty since it was passed by Congress in 2010.

Nonetheless, the law’s provisions have been enacted according to a specified timetable, and after surviving legal and political challenges, the ACA enters a pivotal phase of implementation in 2013. This may be an appropriate time to consider how the ACA could impact your situation as a taxpayer and a consumer.

New Taxes in 2013

Some of the most immediate issues for high-income Americans are two taxes effective this year that are intended to help pay for the expansion of health coverage and other benefits under the law:

An additional 0.9% Medicare payroll tax on earned income (wages/salaries) exceeding $200,000 ($250,000 for joint filers).
A 3.8% Medicare unearned income tax on net investment income for people with adjusted gross incomes (AGIs) exceeding $200,000 ($250,000 for joint filers). Unearned income includes capital gains, dividends, interest, royalties, rents, and passive income.

In addition to these Medicare taxes, two potential tax reductions could affect taxpayers regardless of income level:

The threshold for deducting unreimbursed, qualified medical expenses increases from 7.5% of AGI to 10% in 2013. However, this increase is postponed until 2017 for individuals aged 65 and older.
Flexible Spending Account (FSA) health-care contributions are capped at $2,500 in 2013, with adjustments for inflation in future years. Previously, FSA contributions were subject only to employer plan maximums.

Employer Coverage

Beginning in 2014, employers with 50 or more full-time employees will be required to provide minimum essential health coverage or face an annual penalty. Not surprisingly, many employers are now assessing their options. In a recent survey, 84% of U.S. employers reported that they are very likely or definitely will continue to provide health insurance to full-time employees in 2014. Only 1% indicate that they will not provide health coverage.1

A temporary, three-year assessment to help fund the law’s requirements to cover pre-existing conditions may also impact employers. This fee, which will be assessed on all “major medical” insurance policies (employer-based and individual policies), begins at $63 per capita in 2014, drops to about $40 in 2015, and phases out completely by 2017. Because most large employers pay employee health insurance in advance, they are likely to owe this fee directly and could pass all or part of the cost to their employees.2

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Insurance Exchanges

In 2014, individuals and small businesses (with up to 100 employees) will be able to purchase health insurance through exchanges. Some large companies that do not want to provide employee health coverage might be willing to pay the required penalties and allow their employees to obtain individual coverage through the exchanges.

As of December 14, 2012 — the deadline for submitting plans for state-based insurance exchanges to the Department of Health and Human Services (HHS) — 18 states and the District of Columbia had declared that they will establish a state-based health exchange.3 Six of these have had their plans conditionally approved.4

Of the remaining states, seven plan to participate in federal-state partnership exchanges, and 25 states would default to an exchange administered by the federal government.5

HHS regulations for health insurance plans address cost-sharing limits and the valuation of coverage. Plans will be standardized based on the percentage of expected health-care costs they will cover: bronze (which covers 60% of the actuarial value of expenses), silver (70%), gold (80%), and platinum (90%).6

Applications for the exchanges will begin in October 2013, with coverage beginning January 2014. If you think you might obtain insurance through an exchange, it might be wise to monitor developments in your state.

Meanwhile, you might continue staying abreast of any developments with your employer coverage and include any additional taxes in your calculations for 2013.

1) Employee Benefit News, December 10, 2012
2) Huffington Post, December 10, 2012
3, 5) Kaiser Family Foundation, 2012
4) HealthCare.gov, December 10, 2012
6) Employee Benefit Adviser, December 7, 2012

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald Connect.

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Despite the pick-up in volatility at the end of January, risk assets continued their upward ascent throughout the month. Expectations surrounding the implementation of the newly passed tax reform bill and the weakening US dollar served as positive catalysts for the month. Macroeconomic data was mixed; fourth quarter real GDP growth came in slightly below expectations but manufacturing activity accelerated and the US jobs report was positive. Although we have seen initial signs of rising inflation, levels remain subdued as low unemployment has yet to translate into meaningful wage growth. We expect the Federal Reserve (Fed) to remain on track with interest rate normalization and the positive, albeit choppy, market momentum we have seen to date indicates that markets can likely withstand an additional Fed rate hike in March.

The S&P 500 Index was up 5.7% for the month with cyclicals outperforming defensive sectors. Consumer discretionary (+9.3%) led while tax cuts and a solid job market served as positive catalysts. Information technology (+7.6%) and financials (+6.5%) also posted strong returns for the month. Utilities (-3.1%) and REITs (-2.0%) were down as traditional bond proxy sectors experienced headwinds amidst rising interest rates. Growth outperformed value and large-cap outperformed both mid-cap and small-cap equities.

Developed international equities (+5.0%) performed in line with domestic equities. Fundamentals within the Eurozone continued to improve and sentiment is high. The focus remains on European Central Bank policy and how the reduction of its quantitative easing purchases will impact markets. Emerging markets were up 8.3%. A weaker dollar and stronger demand for commodities served as tailwinds for both emerging Asia and Latin America regions.

The Bloomberg Barclays US Aggregate Index was down -1.2% for the month. Interest rates surged with 10-year Treasury yields increasing 31 basis points, ending the month at 2.7%. Tightening monetary policy and improving US growth expectations will likely continue to put upward pressure on the long end of the yield curve. High yield was the only sector to post positive returns in January, as credit spreads continued to grind tighter. Like taxable bonds, municipals were negative for the month.

We remain positive on risk assets over the intermediate-term, although we acknowledge we are in the later innings of the bull market and the second half of the business cycle. While this cycle has been longer in duration compared to history, the recovery we have experienced has been muted, supported by the extended recovery period. While our macro outlook is biased in favor of the positives, the risks must not be ignored.

We find a number of factors supportive of the economy and markets over the near-term.

Pro-growth policies of the Administration: The Trump administration has delivered a new tax plan and a more benign regulatory environment. We could see additional government spending on infrastructure in 2018.
Synchronized global economic growth: Growth in the US has started to accelerate, and growth in both developed international and emerging economies has meaningfully improved. The tax cuts could also help to boost GDP growth in 2018.
Improvement in earnings growth: Corporate earnings growth has improved globally and corporate tax reform should further benefit US-based companies.
Elevated business sentiment: Measures like CEO Confidence and NFIB Small Business Optimism are at elevated levels. This typically leads to additional project spending and hiring, which should boost growth. The corporate tax cut should also benefit business confidence and lead to increased capital spending.

However, risks facing the economy and markets remain, including:

Fed tightening: The Fed will continue to tighten monetary policy, with at least three interest rate hikes priced in for 2018. We may see tightening from other global central banks as well.
Higher inflation: Current levels of inflation are muted but inflation expectations have ticked higher and the reflationary policies of the Administration could further boost levels. Should inflation move higher, the Fed may shift to a more aggressive tightening stance.
Geopolitical risks: Geopolitical risks including trade policies and global challenges could cause short-term market volatility.

Despite the volatility experienced over the last week, the technical backdrop of the market remains favorable, credit conditions are supportive, and global economic growth is accelerating. So far President Trump’s policies are being seen as pro-growth, and business and consumer confidence are elevated. The onset of new policies under the Trump administration and actions of central banks may lead to higher volatility, but our view on risk asMarchsets remains positive over the intermediate-term. Higher volatility can lead to attractive pockets of opportunity we can take advantage of as active managers.

Brinker Capital Barometer (as of 1/5/18)

Source: Brinker Capital. Leigh Lowman, CFA, Investment Manager. Views expressed are for informational purposes only. Holdings subject to change. Not all asset classes referenced in this material may be represented in your portfolio. Indices are unmanaged and an investor cannot invest directly in an index. All investments involve risk including loss of principal. Fixed income investments are subject to interest rate and credit risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. S&P 500: An index consisting of 500 stocks chosen for market size, liquidity, and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of US equities and is meant to reflect the risk/return characteristics of the large-cap universe. Companies included in the Index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor’s. Bloomberg Barclays US Aggregate: A market capitalization-weighted index, maintained by Bloomberg Barclays, and is often used to represent investment grade bonds being traded in United States.

Views expressed are those of Brinker Capital, Inc. and are for informational/educational purposes. Opinions and research referring to future actions or events, such as the future financial performance of certain asset classes, indexes or market segments, are based on the current expectations and projections about future events provided by various sources, including Brinker Capital’s Investment Management Group. Information contained within may be subject to change. Diversification does not assure a profit not guarantee against a loss.

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The Affordable Care Act Goes into Action - What should you do? Call us first.

The Patient Protection and Affordable Care Act (ACA) has been the subject of speculation and uncertainty since it was passed by Congress in 2010.

New Taxes in 2013

Employer Coverage

Connect and Read More About Us

Connect To Get Discount Health Insurance

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Independent objective advice on Economics, Tax, Planning, Investments and Insurance.