The 35% Healthcare tax you never heard about!

The 35% Healthcare tax you never heard about and why your next health insurance renewal will remind you of 1985 – read what you need to do now to prepare. 

To start orienting yourself to this NEW health insurance era, think 1985.

Yes, think back to your health insurance from 25 years ago. Remember, you had a $500 deductible and 80% of the next $5,000? Welcome to the new world of buying health insurance in 2011. New policies will have cost sharing components to them like the old days regardless of who you’re seeing – no more $50 copay open heart surgeries! In Network coverage, will look like Out of Network coverage with deductibles and coinsurance, i.e. $1,000 – $2,000 deductibles and 80% coinsurance after that. Since partners trend towards plans with both In / Out of Network coverage, even $5,000+ cost sharing plan designs will be in the discussion.

The game changer point here:

The new plans for 2011 will be shifting more of your health care costs from PRE-TAX health insurance premiums to POST-TAX user costs (deductibles, and coinsurance) and for partners this is a critical point, that you need to think about from a tax perspective.

For every dollar that you shift from premiums to user costs, you pay $1.35 (your $1 in claims plus the loss of the tax advantage of being able to deduct your premium costs). You will be literally trading pre-tax dollars (premium) for more expensive post tax dollars (user costs) – Not a good deal!

Why this matters and what do you need to do now?

Bring your broker and tax advisor together with you to discuss your strategy for 2011.  Usage and tax analysis of your plans will yield the best solution. Plan models that need to be considered and reviewed include HSA compatible plans, as well as non-HSA plans that are customized to minimize user costs for services you will tend to use. Last year’s strategies won’t work for your future health insurance planning.

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