The Health Care Reform Act – What it Means to You and What to do About it

Patient Protection and Affordable Care Act (PPACA)* – sometimes known as Obamacare – will be fully implemented starting January 1st 2014. The act has actually been phasing in gradually since it was passed in 2010, but most major components will be in full effect as of the first of the year.

This will be the most sweeping healthcare reform in US history, and it will have an effect – usually a major one – on just about all things related to healthcare.

The Act will generally expand benefits

One of the most significant changes the act brings about is the inclusion of 50 million Americans who currently have no health insurance. Many of these people are currently uninsured because previous health conditions have rendered them uninsurable. Many more are uncovered simply because of the prohibitive cost of maintaining health insurance in the absence of an employer-sponsored plan.

The act will make radical changes in the current healthcare landscape:

1. Insurance companies will not be permitted to exclude customers from coverage due to pre-existing health conditions,
2. They will not be permitted to charge higher premiums for pre-existing conditions either, and
3. They will no longer be able to cancel policies on patients due to serious illness or injury.

These two provisions will virtually eliminate pre-existing conditions as a reason for not having health insurance. This is really going to help retirees get health insurance.

Some other significant changes include:

• Deductibles on employer-sponsored plans will be limited to $2,000 for singles, and $4,000 for family plans.
• Insurance companies can no longer limit lifetime benefits on essential services.
• On new policies, certain preventative care procedures will become mandatory, including annual physicals, colonoscopies and mammograms. In addition, the services will not be subject to co-payments deductibles or coinsurance provisions. This provision will apply to all health insurance policies as of 2018.

• The uninsured will now be covered

  There’ll soon be nearly 50 million newly insured people on America’s health insurance policies. Health insurance exchanges must be in place by January 1, run by the individual states or under a federal program if the states opt out. In addition, the act provides various subsidies that will make coverage more affordable for lower income households.

  The cost of the coverage will be determined by household income relative to the federal poverty level. The subsidies will apply to households with incomes ranging from 133% to 400% of the federal poverty level. The subsidies will come in the form of refundable tax credits that will allow the person or family to receive the credit even if they pay no income taxes.

  What it will cost

  Various tax changes are going into effect that will help to pay for the cost of healthcare reform. Some of the highlights include:

  • A .9% tax on income in excess $200,000 for singles, and $250,000 for married filing joint, has already gone into effect.
  • An increase in the Medicare tax of 3.8% on unearned income, also exceeding the same thresholds as above.
  • An increase in the Schedule A medical deduction threshold from 7.5% of adjusted gross income (AGI), to 10%. If you have medical expenses that you wish to deduct on a $100,000 income for example, you will only be able to deduct the portion of those expenses that exceed $10,000 (10% of your AGI).
  • Coming soon: beginning in 2018, there’ll be a 40% excise tax on health insurance plans costing more than $10,200 for individuals, and $27,500 for families.

  Since it’s new, expect changes

  Since the reform act has been gradually rolling out, and will fast-forward on January 1, we should expect to see changes as it moves ahead. The act is enormous, and not all the provisions have been tested in the real world.

  But as it stands now, if you do not have health insurance, you should fully expect to be covered by the beginning of the new year.

  The bill should also be expected to cause a number of major changes, particularly as it relates to employment. Employers may decide to move more employees into either part-time or contract status so as not to be required to provide coverage for all employees. If you’re a business owner with employees this could be an option for you.

  If you’re an employee however, you’ll need to consider the possibility that your group coverage from your employer may be terminated, or at least it may be terminated for you. You may have to consider obtaining private insurance, and that may even result in you taking advantage of the state or federal health insurance exchanges.

  Since the bulk of this bill has not yet hit the market, it is not entirely possible to assess how it will play out or what strategies can be used to deal it. Best advice: be prepared for anything!

  In the meantime, keep your eyes and ears open as the plan rolls out. This one could be a game changer!

  *http://dpc.senate.gov/healthreformbill/healthbill04.pdf

  Sources: http://fleming.house.gov/uploadedfiles/hc_timeline.pdf
  http://en.wikipedia.org/wiki/Obamacare
  http://dpc.senate.gov/healthreformbill/healthbill04.pdf