Health Care Reform – What it means to YOU

To the surprise of many, Health Care Reform legislation was upheld by the Supreme Court.  Whether you support the law or not, we must now live within the details and requirements this law presents to us.  Many ask “how will this affect me?”  While this blog doesn’t address every issue, we owe it to our clients and the public to explain a few details as we understand it.  For regularly updated Health Care Reform information, visit http://www.creeksideadvisors.net/

Business Owners:  1-25 full time equivalent employees (FTEs) with average salaries below $50,000 can get up to a 35% tax credit now (up to 50% in 2014) on what you pay towards employee health insurance.  Credit is reduced for employers who have 10-25 FTEs and/or whose average salary is greater than $25,000.  Employers above 25 FTEs and/or $50,000 average salary are not eligible for this credit.  Beginning 2014, employers of 50+ FTEs must offer health insurance to their employees or pay between $2000-$3000 tax per employee.  There is however an exemption for the first 30 full-time employees on this penalty.  Tax deductibility of premiums is still allowed, but deductible amount is reduced by tax credit received.  The tax credit is ONLY available for 2 years!  Note: FTE is calculated by total number of hours worked per year by entire workforce divided by 2080 (40 hrs. per week x 52 weeks per year).  Group health quotes prior to 2014 can visit http://www.creeksideadvisors.net/group-health-products/

Individuals under age 65:  If health insurance is not offered through an employer, you will be required to purchase coverage for you and your family members or pay a tax beginning January 1, 2014.  Individual households up to 400% of poverty level will be eligible for a partial or full tax credit to help pay for this coverage if purchased through an exchange.  Current 2012 Poverty levels (annual income) are as follows:  Household size 1: $11,170, Household Size 2: $15,130, Household Size 4: $18,671.  It is our belief that individual policies purchased prior to January 1, 2014 will hold rates lower than policies issued after that date.  This is because the insurance company can assign your rate based on medical history now, but will have to adjust rates higher in 2014 to compensate for a higher risk pool.  Note:  Purchase individual coverage prior to 2014 if pre-existing conditions permit.  You can always switch later if necessary, but you will not be able to go back to a grandfathered plan. For current rates, go to http://www.creeksideadvisors.net/individual-insurance/under-65-healthcare/

Individuals age 65+ or Medicare Eligible due to disability:  Medicare coverage will remain mostly unchanged with the exception of increasing Part B premiums and lower funding for Medicare Advantage plans.  Those who prefer Medicare Advantage plans to Original Medicare, as a result, will likely see a combination of higher premiums and higher copays moving forward.  Also, doctors and other medical providers will see reduced reimbursements from Medicare which may adversely affect the number of providers willing to participate with Medicare in the future.  Time will be the test of these outcomes.  Medicare Supplement insurance will still require pre-existing medical underwriting except for the first six months of Medicare Part B eligibility.

Pre-existing conditions:  Beginning January 1, 2014, individuals under age 65 cannot be denied coverage for pre-existing medical conditions.  However, age and tobacco use can be used to adjust premium amounts.  It is our prediction that coverage purchased prior to January 1, 2014 will likely have more long term price stability than coverage purchased on or after January 1, 2014 as unadjusted medical risks are passed on to this group in the form of higher premiums. Currently, if you have been denied health insurance due to pre-existing conditions and have been without coverage for at least 6 months as a result, you can apply through the Federal Government for a Temporary Plan called PCIP.  PCIP will terminate on January 1, 2014 when other options become available.  You will need a letter from the denying insurance company or your insurance agent to confirm this.  Go to www.pcip.gov for more details.

Exchanges:  Beginning January 1, 2014, Virginia and many other states are expected to make Insurance Exchanges available for individuals under age 65 and small businesses (fewer than 100 employees) to purchase health insurance directly.  These Exchanges will either be administered by the state or non-profit entities.  In order for individuals and/or small businesses to receive any tax credit during the two year period as outlined above, they will be required to purchase through the exchanges rather than through a private health insurance company.  For those who are not eligible for the tax credit, there will be no advantage to use the exchanges except for the analysis of benefits and cost versus the private health insurance market.  It is unknown if the exchanges will provide personal face-to-face assistance to individuals and/or businesses dealing with plan details, analysis and selection, provider choice searches or claim assistance that is currently provided by our staff.  As we approach January 1, 2014, more details will hopefully surface.

Please note that these facts and opinions are based on information reviews in the public domain.  A great resource of information can be found at http://healthreform.kff.org/Timeline.aspx

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