The Election Didn't Kill ObamaCare (yet): What You Need to Know

As Americans awoke on the morning of November 9, 2016, the reality of a Donald Trump presidency began to sink in. Many believed that a Trump administration would mean the end of the Affordable Care Act (a.k.a. the ACA or ObamaCare) on day one. Well, the reports of ObamaCare’s death have been greatly exaggerated (or are at least premature). ObamaCare is alive and well for 2017 and Open Enrollment began November 1st and runs through January 31st. Here’s what you need to know for what may be ObamaCare’s last ride:

• Turns out that insurance under the Affordable Care Act isn’t really so affordable: Unless you’ve been under a rock for the past couple of months, you know to be prepared for a bit of sticker shock. ObamaCare Premiums for 2017 are up by an average of about 25%, and eight states (Alabama, Georgia, Illinois, Minnesota, Nebraska, Oklahoma, Pennsylvania and Tennessee) will see increases of more than 30%. The steepest increase belongs to the Sooner State – as Oklahomans will see their premiums increase by an average of 76%.

• You may have to choose between paying more for insurance and paying more for not having insurance: Insurance premiums aren’t the only prices on the rise. The penalty for not having health insurance has increased as well, and is calculated in one of two ways. It’s either: a) 2.5% of your income; or b) $695 per adult and $347.50 per child, with a maximum of $2,085 per family. The penalty is whichever amount is higher. This means that anyone with an income of $83,400 or more who fails to obtain health insurance will be paying a penalty of at least $2,085, regardless of the size of their family.

• Not all employers are required to provide health insurance for employees: The “employer mandate” which requires employers to offer acceptable coverage to their workers or pay tax penalties was one of the most controversial aspects of ObamaCare. However, this mandate only applies to employers with 50 or more full-time employees, so many small businesses are off the hook. In addition, employers with less than 25 full-time employees with annual wages of less than $50,000 can qualify for employer tax credits through ObamaCare’s Small Business Health Options Program (SHOP). More information on SHOP is available at https://www.healthcare.gov/small-businesses/.

• A Health Savings Account (HSA) can be your friend: This strategy can be a huge opportunity for the small-business owner. Although non-business owners can also use a HSA, small-business owners have much more control over their health insurance plans and can utilize creative strategies to acquire the right type of insurance to allow for an HSA. In order to qualify, you have to enroll in a high-deductible health plan (HDHP), and if you’re generally healthy, this is a great chance to save on premiums and avoid the doctor as much as possible.

In the meantime, contributions to your HSA are deductible from your gross pay on the front page of your tax return, potentially putting you into a lower tax bracket. In 2016, the tax deduction is up to $3,350 for singles and $6,750 for families. The funds grow tax-free and aren’t a “use it or lose it” type plan. The account can continue to grow and build year over year for your future healthcare needs. You can also spend the money tax-free on qualified medical expenses, and you can invest the money in much the same way you invest an IRA. You can even invest HSA funds in real estate! Knowing the deadlines is huge in order to take advantage of an HSA in 2016 or 2017. There are two deadlines to be aware of: the Setup Deadline and the Funding Deadline: The Setup Deadline: Dec. 1, 2016 (as in this Thursday!!!) – In order to qualify to make contributions and take deductions in 2016, you must have established your HSA by this date. The Funding Deadline: April 15, 2017 – Deadline to contribute to your HSA for 2016 and receive the tax deduction on your 2016 tax return.

• Don’t forget about the Health Reimbursement Arrangement (HRA): This is a great strategy, but it only works for business owners, and it really benefits those with higher-than-average medical expenses. The HRA allows you to set up your own “benefit plan” for health care and reimburse yourself for ALL of your health care expenses — thereby getting a 100 percent write-off for all of your medical expenses.

The only challenge can be the structure you need to use in order to make the plan work. Sometimes it takes a little extra business planning and structuring – and certainly some attention to bookkeeping – to make it happen. But again, it can be very lucrative and worth the extra time. With a little bit of planning with an attorney or CPA who understands the HRA, you can take massive tax deductions for your healthcare expenses over and above your health insurance. The Trump administration and a Republican-controlled Congress means that in 2017 we may finally have the chance to bid a fond farewell to ObamaCare, but for the time being the ACA remains the law of the land. Take steps to make sure you are doing all you can to capitalize on its advantages and avoid its pitfalls.