Question

Calculating Taxes under the Patient Protection and Affordable Care Act

The PPACA imposes taxes on employers who choose not to provide health insurance benefits or who choose to offer highly expensive health insurance plans. Let’s assume that a company has 500 workers. Calculate the costs of the following scenarios.

Questions:

10-9. The company chooses not to provide health insurance. How much will the penalty be based on the formula presented in this chapter?

$940,000 is what I think the answer is...

10-10. The company prices health insurance for its workforce, and determines that the annual cost is $2,500,000. Based on your answer to 10-9, how much money would it save by not offering health insurance?

$1,560,000 is what I think the answer is...

10-11. The company is considering the purchase of a high-priced health insurance option. The cost is equal to $16,000 per employee for individual coverage and $30,000 per employee for family coverage. Half of the employees subscribe to individual coverage. Based on the guidelines presented in this chapter, calculate the Cadillac tax.

No idea on the answer

Answer 1

10-9 Under PPACA, an employers will have to pay a penalty of $ 2320 per employee for 2018 if they dont comply with ACA for the year.

Penalty under the act =500*2320 = $ 1,160,000\-.

10-10. Annual Cost of Insurance = $ 2,500,000\-,

Money saved by not offering Insurance = 2,500,000-1,160,000 = $ 1,340,000\-.

10-11. Cadillac Tax is 40% excise tax on employer plans exceeding $ 10200 for individual coverage and $ 27500 for family coverage.

Company is providing plans @ 16000 for Individual and $ 30000 for family.

snince half of employees subscribed for individual plan, Cadillac Tax can be calculated as.

=250*(16000-10200)*0.4 + 250*(30000-27500)*0.4

=580000+250000 = $ 830,000\-.

Please Note that President Trump has signed a bill postponing the imposition of Cadillac Tax until 2020.