Health Care Reform – What You Need to Know

by Ryan Guina

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

Health care reform - ObamacareThe 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.

Infographic by Compare health insurance options from many different providers!

What are your thoughts on the new health care bill?

Published or updated October 29, 2012.
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{ 21 comments… read them below or add one }

1 fredct

Excellent summary. My favorite comprehensive overview so far.

I think I’ll bookmark it. What can I say, I’m a sucker for bullet lists.


2 fredct

“Also, if we put a ceiling on malpractice claims and amounts paid, it will reduce malpractice insurance for doctors and they can reduce costs.”

“If you disagree with me, go look at the house your doctor lives in….in most cases he isn’t hurting.”

It’s amazing to me how much in-conflict these two statements are. One is saying that we should reduce costs for doctors, and the other is saying doctors already make too much.

What’s ever more disappointing is that both are – generally – false. At least in the most important sense.

Medical malpractice costs are indeed a big problem, but they are not a silver bullet for medical cost problems. States that have instituted caps and other reforms have seen only minor improvements in insurance costs compared to other states that haven’t.

I do support reforms – and it’s a reason why I wished the Republicans had worked with the bill rather than simply obstructing it – I believe the bill would be better with malpractice reform in it. But it’s a small piece of the puzzle.

Second, while many doctors make a good living, most aren’t making a killing these day… not like the old stereotypes. Having some medical people in my family, I know people in the medical community, and I know of doctors who have had to shut down their practices and have been unable to turn a profit. I know of ones who have had to sell out to bigger providers or hospitals to keep working. I know of ones who have declared professional bankruptcy because of it. Many doctors do well, but they’re not all raking it in. And again, it’s not the driver of costs that you wish to imagine it is.

“the amount of doctor’s that a medical school can accept and ultimately graduate is regulated. Why? ”

Through what means is it regulated? I’m not familiar with this.


3 basicmoneytips

I agree that something needs to be done here but I still think the underlying problem is not being addressed. The biggest problem is health care costs. If those are capped the other things can fall into place. If health care costs are cheaper then insurance companies to not have charge so much, rates go down, and more people can get insurance.

Also, if we put a ceiling on malpractice claims and amounts paid, it will reduce malpractice insurance for doctors and they can reduce costs.

If you disagree with me, go look at the house your doctor lives in….in most cases he isn’t hurting.


4 basicmoneytips

One other thing I want to add here… the amount of doctor’s that a medical school can accept and ultimately graduate is regulated. Why? What other industry says you cannot produce more than X amount of people in the labor pool? If we allowed more doctors in the medical schools, more doctors would be available to practice once they graduate, competition kicks in and prices go down.

What’s wrong with that?


5 Chris@BeDebtFreeAmerica

Thanks for the nice summary. I have to wonder, will all those senators and congressmen have to pay a 40% excise tax on their “Cadillac plans”. I suspect they didn’t include themselves in that, even though they have the best insurance plans in the world.


6 Ryan

Probably not, Chris.


7 fredct

I do not know of any exemption from the Cadillac plan tax, but the best information I can find says that the federal plans are far below the ‘Cadillac’ thresholds. So despite your statement poised as fact (“they have the best insurance plans in the world”), the statement is false.

According to this article in USA Today (, average federal premiums are $5400 for individuals and $12,00 for families. The article is specifically talking about plans for lawmakers. Both well, well below the Cadillac threshold.

This other article explains that “Wyden and other members of Congress use the same health care program as every other federal employee”. So there’s nothing special about the Congressional health care plan. And yes, they do pay part of their costs. (

I’m sorry, Chris, but posts like yours really tick me off. You make up two different facts that are convenient to the way you wish to see the world (Congress exempted themselves, and Congress has the best health plan in the world)… “facts” that it literally took me 5 minutes on Google to determine were false. A nice little hit-and-run post that is completely incorrect.


8 Chris

I wasn’t shooting from the hip on my comment. I, as well, just did a 5 minute google search.

Since you mentioned an Oregon website, here is what Rep Earl Blumenauer, US Representative from Oregon states:

” It is ironic to me that members of Congress enjoy some of the best health insurance in the world through our government-administered health care”

So please don’t tell me I’m wrong when I state that members of Congress have some of the best health insurance plans in the world. If you feel the statement is wrong, consider emailing Rep Blumenauer about it.

“But this isn’t the case for members of the U.S. Congress. Representatives and Senators alike receive some of the best health care benefits in the country, much of it paid for with taxpayer dollars.”

9 fredct

Chris, please note the distinct difference between what you said now and what you said before. ‘Some of the best health insurance plans’ versus ‘the best health insurance plans in the world’.

That’s a substantial difference, for two key reasons. First, it allowed you to assume that members of Congress get something special… something that 10s or 100s of thousands of other federal employees do not. It allowed you to set them up as a specially privileged class.

While the federal health plan may be good, they do pay for it. That second article above shows that while a family plan costs ~$12K total (not atypical nationally), the employee pays over $4K for it… around 35%. That’s nothing majorly special. There’s millions upon millions of private employees who have similar plans with similar or lesser contributions.

Between myself and my fiance, we have worked for four large private companies as white collar employees, and while it’s good, it’s hardly anything unusual. The percent contributed it actually a good bit higher than normal from my experience.

But, more importantly, it allows you to theorize your little conspiracy theory… That since they ‘supposedly’ have ‘the best’, and since ‘cadillac plans’ are taxed, they must certainly be greedy and selfish and have exempted themselves. Which is not even the slightest bit the truth.

I could care less exactly how high on the scale of ‘good’ you put the federal plans. I do care that you don’t assume facts trying to imagine conspiracy and selfishness, when the facts themselves are false.


10 Chad

Thanks for a concise and understandable summary of a long and confusing bill!


11 Dan

A few thoughts:

Why are we levying a 2.9% tax on medical devices in 2013? That will raise the cost of medical devices….

Why is the government redefining adulthood to start at the age of 26? This move will discourage young adults from the productive path of moving out of Mom and Dad’s basement, getting a job, paying for housing, getting married, raising a family. The actual text from the bill states “….when the child turns 26….”.

How many businesses will lay people off, cut salaries and other benefits, and/or not expand because they can’t afford to provide insurance for the entire company starting in 2014?

Nothing in the Constitution grants Congress the right to mandate individual health insurance purchase. The Commerce Clause grants it authority to regulate economic activity, not inactivity. With this precedent, there is no limit to future Congressional economic regulation – Let’s mandate everyone buy a GM to help the auto industry, or orange juice to help Florida farmers. How about a requirement for every citizen to buy life insurance, in order to keep premiums down.


12 fredct

“Why is the government redefining adulthood to start at the age of 26? This move will discourage young adults from the productive path of moving out of Mom and Dad’s basement, getting a job, paying for housing, getting married, raising a family. The actual text from the bill states “….when the child turns 26….”. ”

This is silly. Who’s going to live with mom & dad or not get married for health insurance? The bill doesn’t require you live at home, or not have a job. It just allows you the option of still being covered until you’re established. One of my co-workers has a kid who wasn’t happy at the college he chose, so he left and he’s going to transfer elsewhere. In the meantime, since he’s no longer a student, he can’t be covered on his parents insurance. That’s silly, and the bill fixes it.

“Nothing in the Constitution grants Congress the right to mandate individual health insurance purchase. The Commerce Clause grants it authority to regulate economic activity, not inactivity.”

First, it doesn’t really *mandate*, it simply says that if you chose to do so, you don’t have to pay an additional tax.

Second, no less a stature than the supreme court disagrees with you. Two cases have already decided that economic inactivity counts, when the behavior has an economic impact on society. “Wickard v. Filburn” (1942) and “Gonzales v. Raich” (2005).


13 Dan

No, the age-26 ruling doesn’t force anybody to do anything. But it does enable a culture of non-self-reliance among our youngest and strongest that will result in abuse of the system by some. Current insurance practices regarding this aren’t silly – at a certain age they kick adult kids off to prevent free-loading. Not all of them are free-loaders as in the case you mentioned, but there’s enough.

Owing a tax (or shared-responsibility-payments as it’s been called) in lieu of certain behavior is a mandate. You can choose to not buy coverage and pay the penalty the same way you can choose to not pay your income taxes and go to prison.

“Two cases have already decided that economic inactivity counts, when the behavior has an economic impact on society” – Neither case you mention is an example of regulation of inactivity:

In Wickard vs. Filburn, a farmer was prohibited from growing excess wheat beyond the federal limit for price-control purposes, even though he wanted the excess wheat only for his own personal use. The court considered the growing of the excess wheat to be an economic activity – regardless of the farmer’s intent for personal use. Inactivity was not being regulated here. Had a law been passed requiring citizens to purchase or grow wheat – that would be regulating inactivity. Such a law would be prohibiting people from choosing to be inactive in a particular market.

In Gonzales vs. Raich, similarly, the court upheld the law that says you can’t grow weed in your basement. Marijuana cultivation creates a substance that is highly valued in the market – economic activity. The weed-grower claimed he needed it for individual medical purposes, but the court once again ignored private intent and considered it to fall under the umbrella of active commerce.

So in both rulings, the court considered it constitutional to tell people to stop engaging in specific economic activities. The health insurance mandate tells everyone to start engaging in a specific economic activity, thus regulating people out of inactivity. There is no precedent for this.

Logically speaking, any inaction can be considered to have an economic impact on society. My not buying a car affects the economy in that I’m withholding revenue from the auto industry. So if it’s legal to pass a mandate requiring some form of product purchase because of economic implications down the road, what can’t Congress do in terms of economic regulation? What are their limits?


14 Daddy Paul

Nice post. I like the lay out on what is going to happen if the law is not amended which you can bet your last nickel it will be to some extent.
All I can say is this bill has some good points but overall it is an overcomplicated disgrace. My congress man said he understands the bill. I think that rises to the level of read my lips no new taxes or I did not have sex with that woman.


15 fredct

Why? I understand the bill. I’m not saying I’ve memorized each and every provision, but I *understand* them. Why is that impossible to believe?


16 Disabled? Not disabled? That is the question...

I have been out of work for a year due to complications of MS. I have been looking for a part time job all year long. One that wouldnt require me to stand as I cannot for more than 10 minutes. I have student loans in excess of 10,000 that I have had to get an economic hold on payments for. I am a 30 year old single mother of 4 children, all under 15, and recieve state insurance. I do not qualify for state insurance (medicaid) because I recieve a grand total of 725.33 per month in child support for 4 children (I know, I mopped the floor with those deadbeats right?) I have applied for disability/SS payments and have been turned down. I went to a lawyer who explained there was no way I could get it because my state does not recognize multiple sclerosis fatigue as a disability, but my legs give out, I fall, I cant see etc. etc. I have a job coming up in nov. that is part time and I can do it from home. The kicker is that I will only make 1,100 a month BEFORE taxes and I will lose most of the child support, leaving me with a grand total of about 1,400 a month, and thats if I am lucky. My bills will be $1,000 a month because once working I will have to begin student loan payments again. At that point I will also lose most of our food benefits, leaving me with $75 a month in food help plus the $400 left from income to feed 5 people, and that says nothing about gas to take the children to their doc apps and things of that nature. I personally have not been to a doc in a year because I cant afford it. So, will you tell me how I will pay for health insurance, or fines for not being able to afford it? And, I am not alone, there are plenty of people in my situation that hit a brick wall whatever way they turn. Im sorry, but you can rationalize this crap bill until you are blue in the face, people like me will never accept it, we will never look at it as a good thing.


17 fredct

So let me try to ease some of your concerns. First off, if you’re only making $1100/month gross with 4 kids, you will not be owing taxes. Quite the contrary, you will quality for child credits and earned-income-tax-credits that almost certainly leave you as a net recipient of federal dollars. Unless you have some significant other source of income, that is certainly try.

Second, as to the health care bill itself, it will expand medicaid eligibility, so you may well qualify. But if you still don’t, then, assuming you’re still under the federal poverty level (which your current income is by a good margin), then you would have to pay no more than 2% of your income to purchase insurance. That means that to purchase insurance coverage for you and your family, you would have to pay no more than about $300, and for that you can preventive care without co-pays, and know that if one of your children get sick, you don’t have to declare bankruptcy to be able to treat them.


18 Disabled? Not disabled? That is the question...

Im still not getting it though. I mean $300 a month for insurance? That leaves me with $900 a month income, to pay my necessary bills and buy groceries as paying for insurance, I dont believe, is not a deduction that hepls qualify for food stamps. Trust me, all of my bills are necessary, my children have had no more than 3 fuzzy channels on the television for over a year. There is NOTHING that I can cut back, I got a job so that I could afford things for my family and the government is going to take it away. Maybe I should use my medical condition as a means to NOT work, live off of $600 a month, food stamps and welfare, I dont want that but the government is pushing me and thousands of others into it.


19 fredct

2% of your income is roughly $300 PER YEAR, not per month.

Also, while I’m not familiar with the details, there are hardship exemptions in the bill. So I don’t even think you’d be required. However, at $300 PER YEAR, it’ll probably save you a lot of money to sign up. If any of your children ever get sick or hurt or need any medication, you won’t find yourself suddenly owing tens of thousands of dollars for care.


20 Disabled? Not disabled? That is the question...

Well I can handle per year, I will just pay a yearly premium when I get my tax return. You seem to be an expert on the healthcare reform, wouldn’t it be easier and get more money for the economy if they changed the law to require drug testing for welfare and foodstamps? I mean the government will save millions or billions even per year on those programs if it doesnt pay out to people who use it for drugs. I have heard the arguement that they cant allow the children to suffer, but really what drug addict do u know that makes sure their kids get 3 meals a day and makes sure the lights stay on? All the money they get goes to support their habit, they sell their stamps to buy drugs, and they cannot properly take care of a child while stoned. You can speak to these people and they will tell you that it will never happen because it is their constitutional right to get both, they are not afraid of being caught, they brag about how much they sold their stamps for, while I am being investigated because they think I am hiding income or resources and that no one pays $600 worth of bills on $600. I am just good like that, I do without a whole lot and so do my children, we unfortunately have to suck it up and accept hand me down clothes and shoes from people trying to help, but I budget very well. I have made reports on several individuals in particular only to go to the grocery store a week later and hear them brag about how they got out of it. Drug testing for benefits would give the state an opportunity to get the children into a safe environment and get the parents cleaned up. I’m just saying that is the ideal way to save our country’s economy and stop the downward spiral of the dollar.


21 fredct

So it seems I explained to you what’s actually in the law, and what is means for you, rather than all the fear mongering and misinformation that’s out there, and you seem to now understand that it’s actually a good thing for you and your family… making health care affordable and protecting you.

So then you change topics to rant about something different? Let’s stick to the subject of this posting, shall we?

I’m hardly an ‘expert’, by the way, I just read the good articles on this site and other explaining what is and isn’t in the law.


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