Using The Affordable Care Act – What You Can Do (Part 3)

This is the third in my three part series on how the Affordable Care Act impacts all of us.

In this Part, I present the changes required by Obamacare that you can expect in coming years, including taxes, insurance premiums, health insurance coverage, and medical practice. Here’s the third Part:

Part 3: Coming Changes

Timetable.

To Date.

o Children no longer rejected for pre-existing conditions.

o Children up to 26 can be carried under parents’ policy.

o Lifetime limits on insurance plan benefits lifted.

o Phase-in of annual benefits limit removal.

o Policy cancellation for frivolous reasons ended.

o Small business tax credit of 35% begins.

o Medicare prescription “donut hole” phasing out.

o HSAs and FSAs prohibited from paying for OTC drugs.

o Income tax deduction threshold for medical expenses rises from 7.5% to 10%.

January 1, 2014 – D DAY!

o Medicaid eligibility rises to 133% of federal poverty line.

o Health exchanges open for business in participating States.

o Penalty (max. $285 in 2014) for not having insurance kicks in.

o Adults no longer rejected for pre-existing conditions.

o Adults under 30 eligible for low cost catastrophic insurance through State exchanges (cheap way to avoid Penalty).

o “Essential Health Benefits” must be covered in new insurance plans.

o Small business tax credit increases to 50%.

2015.

o Penalty for not having insurance goes up to max. of $975.

o Small business tax credit expires; small businesses must pay full employer costs.

o Independent Payment Advisory Board begins cost cutting proposals.

2016.

o Penalty for not having insurance goes up to max. of $2,085.

2017.

o States can open exchanges to large businesses (over 100 employees).

2018.

o Independent Payment Advisory Board proposals can be implemented.

o 40% tax on premium insurance plans begins.

2020.

o Medicare prescription “donut hole” disappears.

New Taxes (not including cuts to Medicare spending).

 Penalty for not having insurance (described above and in Pts. 1 & 2).

 Penalty on employers for not providing insurance (eligible companies).

 Medicare payroll tax increase on high earning employees from 1.45% to 2.35%, totaling 3.8%.

 New Medicare tax on investment income and home sales of high earners (transfer tax) of 3.8%.

 New fees on health insurance and pharmaceutical companies totaling CBO estimated $107 billion over next ten years.

 40% tax on premium health insurance plans (described above and in Pts. 1 & 2).

 Penalty for HSA and FSA OTC drug purchases increased from 10 to 20%.

 New excise tax on medical devices of 2.3% (from tongue depressors to MRIs). Expected to impact negatively investment in R & D.

 Medical expense income tax deduction threshold raised from 7.5% to 10%.

 New tax of 10% on tanning services.

Insurance Premiums.

 Insurance premiums are rising for almost every group. The Kaiser Foundation reported an increase of 9% from 2010 to 2011. The CBO estimate of the impact of Obamacare on premiums over all groups is a $2,000 increase.

 Employers pay 70% of the total cost of their employee health insurance plans, on average. Premium increases will cost them far more than they will cost their employees. Using the CBO estimate as a basis, it will be a $5,000 increase on employers’ premiums, bringing the average well above $15,000 per employee. Employers are weighing the advantages of dropping health insurance as an employee benefit and paying the $2,000 penalty instead.

Health Insurance Coverage.

 As of January 1, 2014 all new insurance plans, of any kind, must cover “essential health benefits.” The problem is that this term has not yet been defined. In November, 2012 the Department of Health and Human Services issued a list of ten general benefit categories, but gave no specifics as to each. The concern has not been allayed that insurance plans will be reduced over time to include only “essential health benefits” when end-of-life decisions are being made on allowable services.

Health Insurance Companies.

 Health insurance companies appear to be the big winners in Obamacare, at least in the short run. While the debate before its passage suggested that Obamacare might put them out of the health insurance business, and that might still be a long term objective, the addition of up to 30 million new government subsidized and/or guaranteed and/or mandated policy holders appears to have changed these companies from opponents to strong supporters.

Drug Companies.

 The big drug companies will also win under Obamacare. The additional 30 million in insured plus the additional drugs for existing policy holders motivated them to agree to the $107 billion in taxes (see above) and the additional rebates to Medicaid recipients.

Health Insurance Exchanges.

 Exchanges are proposed to be central “stores” in each State where people without insurance at their job can go to look at their options and to buy. Obamacare requires that there be an exchange in each State, but it does not require that each State provide one. A State may choose not to set up its own exchange, in which case the Federal Government’s exchange will be substituted.

 Several States have announced that they will not set up their own exchanges. One objection is that the Federal Government doesn’t know what will constitute an acceptable exchange, so States would have to guess only to be found inadequate after the fact. Another objection is that the Federal Government cannot predict how much State exchanges will cost each State. And, the biggest objection appears to be that the States will have to carry the full costs of subsidies as the Obamacare subsidies are withdrawn, either as scheduled or before.

 The participation of States in providing exchanges continues to change as the Federal Government tries to flesh out the plan and make adjustments. The deadline of 2014 appears to be in jeopardy for any quality solution.

Medical Practice.

 It appears that doctors will be the big losers in Obamacare – the profession that we least want to be damaged. They will be flooded with new patients whose requirements will challenge their schedules. They will receive lower fees for service, in many cases much lower. Their administrative costs and time requirements will multiply. They will still be liable for malpractice claims and malpractice insurance rates as before. The estimates of doctors leaving the profession appear to be real.

 Nurses, physicians’ assistants and allied health professionals will be winners in Obamacare. As attempts are made to force down the costs of health care, more procedures will be allocated to the technical level of the hierarchy from the doctoral level. It remains to be seen whether this will impact the quality of care. The doctors say yes; the nurses and physicians’ assistants say no.

 Hospitals and related facilities also stand to lose under Obamacare. Reductions in Medicare rates will decrease their income. While increasing the numbers of insured is designed to lower the demand for emergency room care, the theory is up against the tendency of people to continue their habits. The same can be said for community health centers which are designed to relieve the burden of illegal aliens and other uninsured on emergency rooms, but whose impact is speculative.

These seem to be the main Obamacare provisions that will affect us in the future. There are others, no doubt, that will come to light as the law is understood, interpreted, massaged by regulations, and, perhaps, amended. This entire area of public policy is likely to change, perhaps dramatically, as more people begin to find out what is in it, so attention to the news from Washington is strongly advised. Be an informed citizen.

In the course of researching this series on Obamacare, I came across a number of additional subjects that I would like to pass along, so I am adding a Bonus posting. In this Bonus I will cover subjects such as what was left out or struck out of the Obamacare Bill, whose idea was Obamacare in the first place and who wrote it, what is the ultimate goal of Obamacare, and what’s being done to implement it. This Bonus will be my next post.

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