The Patient Protection and Affordable Healthcare Act: What does it mean?
More commonly known as the healthcare bill, this major piece of legislation has far reaching implications for all of us. By way of a brief summary, based on the information released to date, here is how it may affect many, if not most, Americans.
Health Insurance Companies Cant Drop your CoverageHealth insurance companies often practiced rescission, the act of dropping customers when their health insurance claims began to rise. Starting this fall, your health insurance company will no longer be allowed to "drop" you (cancel your policy) if you get sick. The practice became relatively common in 2009, as the recession ate away profits in 2009. This may prove to be a significant benefit of the legislation for all Americans over the long run.
Lifetime Maximums are EliminatedFrom personal experience, I can attest to the devastation of hitting your lifetime maximum on your health insurance policy. Aside from having no insurance, this practice was possibly the worst possible event for those with terminal illnesses or long-term care needs. Prior to the new law, health insurance companies set a maximum limit on the monetary amount of benefits that a policyholder could receive. Starting this year, companies will be barred from instituting caps on coverage.
Pre-existing ConditionsIf you currently have pre-existing conditions that have prevented you from qualifying for health insurance for at least six months, you will have coverage options before 2014. Starting this fall, you will be able to purchase insurance through a state-run "high-risk pool", which will cap your personal out-of-pocket expenses for healthcare. You will not be required to pay more than $5,950 of your own money for medical expenses; families will not have to pay any more than $11,900. This is a significant change, once again one that benefits all Americans as the costs incurred while waiting out the pre existing condition time requirement have bankrupted many individuals and families.
Pre existing condition: childrenStarting this year your child (or children) cannot be denied coverage simply because they have a pre-existing health condition. Insurance companies will be required to cover these children under your current benefits plan, likely with much lower out of pocket costs than those listed just above. In 2014, when the full plan goes into effect, health insurance companies will also be barred from denying adults applying for coverage if they have a pre-existing condition.
Most Everyone Will be Required to Have CoverageOne controversial point in the legislation is that under the new law starting in 2014, you will have to purchase health insurance or risk being fined. If your employer does not offer health insurance as a benefit or if you do not earn enough money to purchase a plan, you may get assistance from the government. The fines for not purchasing insurance will be levied according to a sliding scale based on income. Starting in 2014, the lowest fine would be $95 or 1% of a person's income (whichever is greater) and then increase to a high of $695 or 2.5% of an individual's taxable income by 2016. There will be a maximum cap on fines. While the fines themselves are not huge dollar costs, some have spoken out against the concept that coverage be mandatory.
Your Children cant be Automatically Dumped at age 19 or When Leaving CollegeThis point issue alone has caused many parents countless sleepless nights. Starting this year, if you have an adult child who cannot get health insurance from his or her employer and is to some degree dependent on you financially, your child can stay on your insurance policy until he or she is 26 years old. Currently, many insurance companies do not allow adult children to remain on their parents' plan once they reach 19 or leave school.
What about those on Medicare?Starting this year, if Medicare is your primary form of health insurance you will no longer have to pay for preventive care such as an annual physical, screenings for treatable conditions or routine laboratory work. In addition, you will get a $250 check from the federal government to help pay for prescription drugs currently not covered as a result of the Medicare Part D "doughnut hole".
However, if you are a high-income individual or couple (making more than $85,000 individually or $170,000 jointly), your prescription drug subsidy will be reduced. In addition, if you are one of the more than 10 million people currently enrolled in a Medicare Advantage plan you may be facing higher premiums because your insurance company's subsidy from the federal government is going to be dramatically reduced.
Paying for all these ChangesStarting in 2018, if your combined family income exceeds $250,000 you are going to be taking less money home each pay period. That's because you will have more money deducted from your paycheck to go toward increased Medicare payroll taxes. In addition to higher payroll taxes you will also have to pay 3.8% tax on any unearned income, (such as dividends, interest from savings, etc.), which is currently exempt from Medicare payroll taxes.
What Happens when the Full Legislation Kicks in 2014?Starting in 2014 (when you will be required by law to have health insurance), states will operate new insurance marketplaces - called "exchanges" - that will provide you with more options for buying an individual policy if you can't get, or afford, insurance from your workplace and you earn too much income to qualify for Medicaid. In addition, millions of low- and middle-income families (earning up to $88,200 annually) will be able to qualify for financial assistance from the federal government to purchase insurance through their state exchange.
ConclusionIf you currently have health insurance coverage, most likely you will receive correspondence from your insurance carrier over the coming weeks. There may be specific references to changes in your policy as a result of the new law. Make note of these changes and most importantly be prepared to ask questions on any points you dont fully understand.
©Patrick J. Catania 2010
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Baxter Credit Union, its Board of Directors, or its employees. The author is responsible for the content. Readers should consult with, and seek professional advice from their own attorneys, accountants, and financial advisors with respect to their individual financial needs and circumstances.
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