Effects of PPACA on Homeowners’ Property Taxes

Connie Gee

Jul 12, 2013

Connie Gee addresses the many taxes of PPACA

 Some of the 22 taxes imbedded in the Patient Protection Affordable Care Act (PPACA), more commonly referred to now as “Obamacare,” are starting to be imposed. Most people have already figured out how these taxes will increase the costs of health insurance coverage. The question is, how will these taxes affect other taxes paid by working individuals, and how will it influence the costs of consumer items?

Public schools, county governments and county sheriff's offices are just some of the public organizations funded by taxpayer property taxes. They are also employers who will start paying PPACA taxes on the health insurance coverage they provide for their employees.

The first tax that is due to the IRS by July 31st of this year is the PCORI Tax that is intended to fund the new Patient Centered Outcomes Research Institute provided by PPACA. The PCORI tax is to fund research on pharmacy and medical treatments, and is based on the number of members in an employer group’s health benefit plan. Members include the employees, their spouses and dependent children up to age 26. The tax will cost $1 per member this year, will increase to $2 per member in 2014 and will increase each year thereafter based on medical inflation. This tax is expected to end with the 2019 payments.

The other tax that publicly funded organizations will pay on their health benefit plan is the Transitional Reinsurance Tax. This tax is to be collected by insurance companies and given to other insurers who will be paying for large medical claims of individuals who may otherwise have not had insurance coverage because of their high-risk conditions. This tax will cost $5.25 per member per month and is expected to be collected for three years, 2014 through 2016.

How it Breaks Down

Using the rates for the PCORI Tax at $2 per member and the Transitional Tax at $5.25 per-member-per-month, here is how these taxes will affect costs for a public school with 10,000 members. In 2014, the school will pay a $20,000 (10,000 members times $2) PCORI tax and file the required paperwork with the IRS. Every month the school will also pay $52,500 for the Transitional Reinsurance Tax. These two PPACA taxes will cost the public school an additional $650,000 per year. Additional costs could include new staff needed to administer these transactions, and actuarial costs to certify accuracy.

Larger school districts with more members on its benefit plan will pay incrementally much more. A school with 20,000 members will pay $40,000 per year for the PCORI tax and $1,260,000 per year for the Transitional Tax. Their total PPACA tax bill will be $ 1,300,000 per year.

The first question is; where will the public schools get the money for these taxes? Public Schools already have shrinking budgets, and any funding is supposed to go to the children's education. The choice is to raise premiums and cost share paid by employees, which in the example above will cost each member $65 per member. Therefore, an employee who has their spouse and two children on the benefit plan, a total of four members, will pay an additional $260 per year for their health insurance coverage.

The other option is to ask for more money from the taxpayers who pay property taxes. Judging from Hillsborough County tax data, for example, schools are already the biggest cost item on a tax bill (about 43 percent of the tax bill). The other publicly funded organizations that are also employers providing health insurance coverage are the county government, 24 percent of the tax bill, and city government, another 24 percent of the tax bill. The schools’ portion of property taxes in Hillsborough County was increased 6.2 percent in 2011 and another 3 percent in 2012. County Government and City Government property tax portions were both increased by 2 percent in 2011 and another 5 percent in 2012. This is just one example.

The homeowners who pay property taxes can expect that taxes will continue to increase. To what extent will the increased costs of public schools, and other public employer groups who are paying the PPACA taxes, impact homeowners? Let's not forget that homeowners in Florida, for example, also pay an 11 percent additional tax on their homeowner’s property insurance premiums to fund a Catastrophic Fund and other funds that benefit the public.

What the Future Holds

Increases in property taxes could influence the real estate industry by slowing the demand for home ownership. It will also affect the affordability and therefore the competitiveness of our cities, counties and states. People may opt to move to more affordable locations in this uncertain economic time of when local and state governments are making all the best attempts to thrive. Higher property taxes could only thwart these efforts and slow the recovery process.

It is yet to be determined how the funds will be allocated, but the numbers tell the story of how this may play out for homeowners, cities, counties and states.

Whether you are an employer concerned about healthcare or not, it is important for all taxpayers to understand and be prepared for how reform could take money from their wallets.

About The Author

Connie Gee is a Healthcare Data Analyst and Wellness Strategist. She serves as Vice President of Med-Vision, LLC, which uses data analytics to customize action plans that improve quality of care and decrease healthcare costs. She has helped corporations, healthcare facilities, municipalities, and school districts to reduce risks, reverse trends, and reduce costs. Gee, the former Wellness Leader for Tampa General Hospital has over 20 years of experience working in health promotions, disease management, workforce utilization, wellness programming and leadership seminars. Gee’s full profile is available at http://www.linktoexpert.com/conniegee, which includes wellness speaking topics and a full biography. Self-funded employers interested in healthcare data analytics and wellness services may visit www.med-vision.com or contact Connie Gee directly at 813-205-1577 or connie.gee@med-vision.com