As anyone who watches the news realizes, there are quite a few changes taking place within the next eight years due to the health care reform bill, the Affordable Care Act, instituted by President Obama. While some of the changes may affect you and your loved ones, and others may not, it’s important to understand at least the basics of this bill.
Cost and Requirement to Buy Health Insurance
The health care reform bill will cost approximately $940 billion over ten years, but according to the Congressional Budget Office (CBO) it will not only pay for itself, but it is also expected to reduce the federal deficit by $143 billion over the first ten years. Note: the health care bill also included student loan reforms which ended government subsidies to banks for managing private student loans.
The goal of the health care reform bill is to require everyone in the US to have health insurance by 2014 (or face an annual fine of $695). This will be accomplished by several methods. It will require some businesses to provide health insurance to their employees or face large fines per employee, and other individuals will be required to pay for their own insurance.
What if I can’t afford health insurance or can’t get approved for health insurance?
These are common questions – there are an estimated 32 million Americans without health insurance. These topics are addressed several ways, most notably through health insurance exchanges and subsidies. People who are self-employed or do not currently have health-insurance will be able to purchase health insurance via state health insurance exchanges. There will be subsidies available to those whose income is between 100% and 400% of the Federal Poverty Level (Federal Poverty Level for family of four is $22,050).
2014 will be a big year for requirements to roll out. Starting in 2014, insurers will not be able to reject applicants based on their health status or pre-exisiting conditions. In the mean time, high-risk insurance pools will be created to make it easier for those who have been denied health insurance to be able to get coverage. Also starting in 2014 there will be separate health insurance exchanges for small businesses to purchase insurance for their employees.
How health care reform affects taxes
There is no magic bullet here – health care is not cheap and the only way we can pay for this is through taxes. The Congressional Budget Office made the statement that not only will this plan pay for itself, but also work toward reducing the federal deficit. Here are some of the tax changes we will see in the coming years:
- 2010 – 10% federal excise tax for using indoor tanning facility
- 2013 – Medicare payroll tax increase from from 1.45% to 2.35% for couples earning more than $250,000 a year, and individuals earning more than $200,000 a year.
- 2013 – Flexible spending account contributions will be limited to $2,500 for medical expenses.
- 2013 – The threshold for itemized deductions for health care expenses will increase to 10 percent from 7.5%.
- 2018 – 40% excise tax on the portion of employer-sponsored “Cadillac plans” that exceeds $10,200 a year for individuals and $27,500 for families.
Summary of health care changes in 2010:
- Anyone under the age of 26 will be covered under their parents’ insurance, regardless of their school status.
- Insurance companies must provide coverage for children regardless of pre-existing conditions.
- Adults with pre-existing conditions will be covered in a high risk health insurance pool. They’ll remain in this pool until another plan is in place.
- Annual and lifetime insurance limits will be prohibited.
- New health insurance plans will be required to cover preventative services in full.
- A temporary reinsurance program will be put into place for 55-64 year olds who retire early.
- New insurance plans must follow the new regulations appeals process when a claim is denied.
- Companies with less than 50 employees will receive tax credits equal to 35 percent of their health care premiums.
Summary of health care changes in 2011:
- Wellness visits will be offered free for Medicare patients and new Medicare plans will include preventative coverage with no out of pocket expense.
- Those enrolled in the Medicare Advantage or prescription plan will receive a 50 percent discount for name brand drugs.
- There will be a 10 percent increase on the penalty tax when Health Savings Accounts are distributed before the age of 65 on non-qualified medical expenses.
- Small businesses will be offered tax free benefits when they use alternatives to cafeteria plans.
- Those who make more than $200,000 will be assessed a Medicare payroll tax increase of 2.35 percent.
Summary of health care changes in 2013:
- A $2,500 per year cap will be placed on flexible spending accounts.
- Tax deductions for employers who have employees participating in Medicare part D will be eliminated.
- Medical devices will have a 2.9 percent excise tax added to the cost.
- Those earning more than $200,000 will see a 9/10 percent increase on hospital insurance tax.
- Uniform standards will be in place for those who need to exchange health care information. This will include electronic communication and other means that will reduce administrative costs.
- The threshold for itemized deductions for health care expenses will increase to 10 percent.
Summary of health care changes in 2014:
- Beginning in 2014, anyone who does not have insurance will be fined.
- Eligibility standards for newly formed health care exchanges will be put into place.
- Businesses with 50 or more employees, who don’t offer insurance will be fined.
- Pre-existing conditions must be covered and higher health insurance rates will not be allowed for them.
- Medicaid eligibility standards will be increased to provide only for those less than 133 percent above poverty level.
- Health care providers will see annual fees levied based on their total premiums.
Summary of health care changes in 2018:
- Excise taxes will be levied on employers who provide plans that cost more than $27,500 for families and $10,200 for individuals.
There are many more changes that will take affect between now and 2018, but these are the major issues. If you’re concerned about the changes, talk to your employer about how the health care reform bill will affect your health coverage.
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What are your thoughts on the new health care bill?