For the past three years we’ve been hearing about “Obama-care,” the healthcare reform act that is intended to overhaul our current healthcare system. I’ll admit I’m at the point where my eyes glaze over when I hear the words “healthcare reform,” but it’s time to start listening again. (Trust me, I hear those words over the dinner table more times than I’d like to recall, as my husband’s in the “industry,” but it’s even time for me to start paying attention again. Can you sense my excitement?) While many of the changes have already started taking place, a lot of the big ones start taking effect in January 2014. That may seem far off still, but open enrollment, the period when you can sign up for a new plan, starts October 1st — that’s right around the corner.
Just for the record, Obamacare, The Affordable Care Act, and health care reform all refer to the same thing, though it is officially called the Patient Protection and Affordable Care Act (PPACA). (I may or may not be sharing that tidbit of information right up front because I was way too stubborn to ask my insurance-know-it-all husband if they were all the same.)
The Affordable Care Act should expand insurance coverage to around 32 million of the 55 million current uninsured. The two main ways of broadening coverage are by expanding the Medicaid program, and providing new subsidized insurance programs through state-based health “exchanges” (or plans). Individuals who have a lower income but make too much to receive Medicaid will be given assistance in paying for private insurance through the new exchanges. The whole program will cost the federal government $960 billion over 10 years; $438 billion of those dollars will come from new taxes. In addition to providing insurance access to more people, the PPACA aims to improve quality of care, better care coordination, and improved technology. The White House explains that some of the goals of the Affordable Care Act are to prevent insurance companies from dropping you if you get sick, opting to not cover you if you have a pre-existing condition, charging you too much because you’re sick, or limiting your lifetime benefits. The new health care laws should also prevent coverage loss due to change in jobs or being laid off. As an advocate of preventative health care, I’m a fan of the next law change: health insurance companies will be required to cover preventative care without co-pays. That includes (but isn’t limited to) wellness visits, immunizations, mammograms, and colonoscopies.
Better coverage, cheaper costs … All of this sounds great, so what’s the big fuss? A surprising number of people are concerned what the new law will mean for their health care. A Fox News poll found 68% of people were worried about the new healthcare system, with 43% being “very concerned”. Less than 40% of voters approve of the job President Obama is doing when it comes to reforming health care, which on an approval rating scale puts it somewhere between terrorism (better approval rating) and the economy (worse approval rating).
But the biggest problem (in my eyes) is that only 1 in 4 people understand the impact the new health care laws will have on them, and one third report they don’t understand the new healthcare changes at all, or at the most, not much. I didn’t think the changes would affect me much at first because I’m lucky to have a policy where some of these things are already standard — One of my favorite things about my health insurance is that I don’t have a co-pay for preventative health care, like yearly physicals, well-baby check ups, or routine OBGYN appointments. Not having to fork over money with each visit makes it a lot easier to swallow actually going to the doctor. But there are still some major changes with Obamacare.
One group (and I’m included in this group) that may fall into the category of not knowing how healthcare reform may affect them? Moms! Under the PPACA, employees are required to provide a non-bathroom private space and break time for breastfeeding moms to pump during the workday for a year after childbirth. In addition, breast pumps are covered under insurance, as well as pregnancy and newborn care — the latter of which fall under covered “preventative services” in the new state-based health exchanges. I wish I could have gotten a breast pump covered by insurance so I wouldn’t have been stuck with a not-so-good pump that barely pumped anything. If you’ve ever been at the mercy of a bad pump, you know what torture this can be.
Insurance companies will also no longer be allowed to charge women more for the same conditions as men. I find it ridiculous this even happened before — I was discriminated against and didn’t even know it. The ACA also helps moms and families by requiring health insurance companies to cover kids up to age 19 regardless of pre-existing health conditions. Kids can also stay on their parents insurance until they’re 26, instead of just 18 or 19. Being able to stay on my parents’ insurance after college would have made a huge difference, as I could have avoided the supremely dumb decision to forego health insurance until my husband and I had jobs. It just seemed so expensive at the time. (Oh hey, mom? Pretend you didn’t read that.) Of course now that I have a kid I completely understand the value of health insurance, and I’m particularly grateful of the new rule on covering pre-existing conditions — my son was recently “not-diagnosed” with asthma so it wouldn’t affect his insurance status later in life.
Even before this healthcare revamp was proposed I found health insurance to be a rather confusing and overwhelming beast. Now it seems even more abstract and hard to swallow because not only are there changes, but many of them come with a heavy side of opinion. It can be tough to dig through the politics to come up with a clear picture of what’s coming (and what’s already happening).
All opinions and personal thoughts aside, here’s a (hopefully) understandable version of what you need to know come October (or what you may need to know to understand what’s already different).
A Healthcare Reform Cheat Sheet 1 of 19
Unofficial disclaimer: Please note the following information is my best interpretation of the resources I have found. I'm not a health insurance or tax expert, a politician, or a genius on understanding giant concepts that change all the time.
Look here for a great cheat sheet of health care reform definitions.
The 80/20 Rule 2 of 19
For every dollar you spend on your health insurance premium your health insurance company has to spend 80 cents on either health care itself or making improvements to health care. If they don't, you get a refund check in the mail. This is officially called the Medical Loss Ratio or 80/20 Rule.
Why? To help insurance companies operate more efficiently. In 2012, the average family earned back $100 and we saw a drop in premium rates.
Scrutinized Rate Increases 3 of 19
If an insurance company raises their rates more than 10% per year, they must publicly justify it.
Why? To make sure they're not being sneaky-sneaks. In 2012, the number of requests from insurance companies to increase their premiums over 10% dropped from 75% to 14%.
What you may not know: Premiums may increase over the next few years to help cover additional costs, just not at a rate of greater than 10% each year.
Coverage for Pre-Existing Conditions 4 of 19
Insurers cannot turn down kids under the age of 19 because of pre-existing health conditions. They also can't charge people with pre-existing health conditions more than anyone else.
Why? Previously companies could opt not to cover children that already have health problems such as asthma or diabetes, which left about 17.6 million kids uncovered. You can imagine those health care bills could get quite expensive! 100,000 Americans have been able to get insurance coverage with this new rule and it doesn't even have to take effect until 2014.
What you may not know: This doesn't apply to insurance plans that are "grandfathered" in, meaning group plans or individual policies purchased prior to March 23, 2010.
Closing the Donut Hole 5 of 19
The gap in drug coverage under Medicare Part D that's un-affectionately known as the "donut hole" will be improved. This includes decreased prices on brand name medications while in the donut hole. The donut hole is the situation that occurs once Medicare has covered a certain dollar amount worth of medication. The individual then has to reach another dollar amount (by paying for drugs out of pocket) before Medicare covers the costs again.
Why? A gap in coverage could mean people can't afford to continue their medications or take them regularly. It's estimated that closing this gap will save an average consumer $5,000 between 2010 and 2022. Those that have high prescription costs will save even more. The goal in 2020 is to eliminate the donut hole.
No Drops 6 of 19
If you get sick or make a mistake on your health insurance application, companies can't drop you.
Why? Because that's nice. (And honestly, that's when you need it most -when you're sick.)
No Lifetime Maximums 7 of 19
Insurance companies will not be allowed to place lifetime limits on coverage with a fixed dollar amount.
Why? Who's to say upfront how much your health will cost? This way you can't be forced into bankruptcy because you maxed out your insurance.
Young Adults Covered 8 of 19
Young adults can now stay on their parents' insurance until age 26.
Why? This helps eliminate gaps in coverage or the need for self-paid insurance between graduation and finding a job, etc. This allows about 3.1 million young adults to have coverage that wouldn't have it otherwise.
Right to Appeal 9 of 19
- Denied coverage can be appealed.
- If your insurance company deems something unnecessary, you're allowed to argue back.
Cutting Down on Fraud 10 of 19
Increased fraud prevention. Through screenings, technology, and high penalties, the new law can help decrease health insurance fraud.
Why? This has saved approximately $7.90 for every dollar spent on fraud prevention in the last three years. Your credit card company fights fraud, so why shouldn't your health insurance?
Small Business Tax Relief 11 of 19
Tax credits for small businesses
Why? Small businesses often pay up to 18% more for health insurance than larger companies. The tax credit will help make it more affordable to offer health insurance to employees.
What you may not know: This applies to small businesses that employ less than 25 people.
The Exchange 12 of 19
The Health Insurance Marketplace (or exchange) is a website where you can see all your options in one place and only fill out one application.
What you may not know: This includes the state-based exchanges (plans) as well as private insurance options.
New Professionals 13 of 19
Improved training opportunities and support for new primary care doctors and nurses.
Why? Bonuses, scholarships, and loan repayment will help continue an in-flow of medical professionals.
Cutting the Red Tape 14 of 19
Why? If you've ever had to chase down a claim or fight for a certain plan, you know all about this. By reducing unneeded phone calls, switching to electronic billing, reducing paperwork, and increasing automated administrative processes, companies will save money and make the whole process for individuals easier.
What you may not know: Smaller companies may not be able to afford the technology for electronic billing and medical records.
Broadening Medicaid 15 of 19
Expands Medicaid (in some states), including options for coverage between the ages of 50-64.
Why? Increases the number of people, such as early retirees, that can have coverage.
What you may not know: States don't have to opt in. Likewise, private insurance companies don't have to get on board either.
Limits Deductibles 16 of 19
Deductibles will be limited to $2,000 for individuals and $4,000 for families.
Things You May Not Know 17 of 19
- The new law requires uninsured individuals (with some exemptions) to obtain coverage next year or face a fine (aka be taxed).
- Employers with over 50 employees will be required to offer some kind of health plan. If they don't, the will pay a penalty. (Speculation: in some cases the penalty may be less expensive than offering coverage or companies may reduce the number of employees so they don't have to provide insurance.)
- Premiums will be based on the ability to pay. This is a benefit for those that work yet have trouble affording insurance. It's a negative for those that make more.
- The goal is to balance out premiums for everyone. It remains to be seen exactly what effect this will have.
- Help paying for premiums will be available for those that use the insurance marketplace to purchase exchanges. Subsidies (through tax credits) are available for those that purchase their health insurance in the new exchange with an income up to 400% of poverty level.
- Insurance companies won't be allowed to charge women more than they do men for the same procedure (called gender rating), but only for individual coverage and small businesses with less than 100 employees.
Other Effects of Health Care Reform: Your Taxes Might Go Up 18 of 19
The following tax changes are for those making more than $200,000, or $250,000 if filing jointly, started in 2013. (Not tax advice!!!)
Medicare: Under the new health care law, Medicare taxes will increase from 1.45% to 2.35% on any earnings above the $200,000 or $250,000 threshold (depending on filing status). Employers usually hold this tax from your paycheck, but they may not hold enough now. This may especially affect those that work more than one job or are self-employed and don't reserve enough on their own.
Investment income: For those over the income threshold, taxes on the income you earn from certain investments will be 3.8%. This excludes income from Social Security, pensions, IRA distributions, and IRA annuity payments.
More Tax Changes 19 of 19
Flexible Spending Accounts: The most you will be able to put in a Flexible Spending Account (FSA) or Health Savings Account (HAS), a pre-tax medical fund, is $2,500, which is half of the previous $5,000 annual contribution allowed.(This cap will raise with inflation). You are also no longer allowed to purchase over-the-counter items with your FSA funds unless they're prescribed by a doctor.
Medical Expenses: Instead of deducting medical expenses that exceed 7.5% of your adjusted gross income, you will only be able to deduct those that are greater than 10% of your adjusted gross income. For those that are 65 and older (or married to someone 65 and older) the increase won't occur until 2016.
Health Plan "Cadillac" Tax: In 2018 insurers will be required to pay 40% tax on premiums above $10,200 for individuals and $27,500 for families, also known as "Cadillac" plans. It's up to them whether they pass the cost on to you or not.
If you want to know specifically about taxes or little tidbits you might not know, jump towards the end of the slideshow.