By FPA member Leslie T. Beck, CFP®, MBA
Last Updated: May 3, 2010
The massive healthcare overhaul bill (2,000+ pages!) will definitely affect you — that much is known. The important questions you should be asking are:
- How will my coverage change?
- How much will it cost me?
- When will the changes take place?
Many of the answers to these important questions are unknown — much of the bill's details are subject to the development of regulations by the Secretary of Health and Human Services, and little guidance has been issued to date. Most experts agree that health insurance premiums will rise and in fact have already begun doing so — the question is by how much, and to what extent the federal government will step in to regulate rates.
In addition, many of the changes depend on the cooperation of the states — and to date, almost half of them have sued to prevent the implementation of certain aspects of the bill.
A number of web sites are available to you, as a consumer, to keep you informed as the regulations begin to be formulated and adopted. Two good ones to keep in your favorites list include the Health and Human Services site and the Kaiser Foundation's site.
Looking at what's already known or stated in the bill, here is a checklist of some items that may affect you, both near- and long-term:
- Coverage Changes
- Children permitted to stay on parents' insurance policies until their 26th birthday. This change, although not formally effective until September 23, 2010, is already being implemented by a number of large insurance companies, including Blue Cross Blue Shield, Kaiser Permanente and Humana. Check with your employer or carrier to see if your child can remain (or be added) to your policy now.
- Eliminating lifetime limits on coverage and restricting the use of annual coverage limits. These changes take effect in September 2010.
- Establishment of a national long-term care program. This program, called CLASS, would provide individuals with a stipend of up to $75 per day to purchase non-medical services and support necessary to maintain a community residence, following a five year vesting period. Although the program is voluntary, all working adults will be automatically enrolled in the program unless they opt out, effective January 1, 2011. Premiums have not yet been determined. Check with your company's benefits department or speak with your financial planner to determine if this program would be of value to you.
- Provide a $250 rebate to Medicare beneficiaries who reach their Part D coverage gap. This provision is retroactive to January 1, 2010. Through the use of increasing discounts, the "donut hole" is expected to be filled in completely by 2020.
- Tax Changes
- Limiting the amount of contributions to flexible spending accounts (FSAs) to $2,500 per year (annual cost-of-living adjustment applicable). Effective January 1, 2013. In addition, over-the-counter (OTC) drugs not prescribed by a doctor will no longer be eligible for reimbursement from an FSA, health savings account (HSA), or Archer medical savings account (MSA), effective January 1, 2011. If you regularly take such a medication, consider asking your physician for a prescription for it.
- Imposing a tax on individuals without "qualifying coverage." The tax is the greater of $695/year up to a maximum of three times that amount per family, or 2.5 percent of household income. Phase-in begins in 2014. By that time, American Health Benefit Exchanges should be established to provide subsidized coverage for those within certain income ranges. At this time, it is uncertain whether those subsidized premiums will be less than the potential taxes imposed.
- Increasing the Medicare Part A tax rate on wages by 0.9 percent on earnings more than $200,000 for individuals and $250,000 for married couples filing jointly. Effective January 1, 2013. A tax on employer-sponsored health plans whose premiums exceed certain amounts may also trickle down to employees, effective January 1, 2018.
- Imposing a 3.8 percent tax on unearned income for higher-income taxpayers (amounts not indexed for inflation). Effective January 1, 2013. Consult your financial planner or tax adviser for suggestions on re-allocating your portfolios to minimize the impact of this additional tax.
These are just a small fraction of the many changes coming down the road on the healthcare issue. With an estimated 32 million more Americans due to be eligible for healthcare coverage by 2014, it is predicted there may be a shortage of doctors willing to take on new patients in some areas. So if you have coverage now, you may want to make sure you're on a primary doctor's patient list before then.
Sources: Department of Health and Human Services; Kaiser Family Foundation; Financial Planning Association.
FPA member Leslie T. Beck, CFP®, MBA, is one of the founders of Compass Wealth Management LLC, a fee-based financial planning and advisory firm based in Maplewood, N.J.