Health Care Reform Update, Part 1: What’s Already Happened
Eileen St.Pierre, The Everyday Financial Planner
President Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010. This column is the first in a 4-part series providing an update on the health care reform law. It focuses on the parts of the law that have already been implemented.
What’s already happened
- Parents can keep dependent children on their insurance plans until they are age 26.
- No more lifetime limits on insurance policies. Insurer’s ability to enforce limits on annual benefits is restricted – annual limits will be banned completely in 2014.
- Children (under the age of 19) cannot be denied coverage because of pre-existing conditions. Your insurance policy cannot be cancelled because you get sick.
- Insurers are no longer allowed to charge co-payments or deductibles for preventive care and medical screenings unless the plan was grandfathered.
- In August 2012, free preventative care for women was expanded to include 8 new benefits, including FDA-approved contraception coverage (not all contraception is covered). Originally, churches and other religious organizations were exempted from complying, but religious-affiliated universities, hospitals and social-service agencies were still required to provide this coverage. After much controversy, the Obama administration decided to give all religiously affiliated organizations an additional year while it seeks a compromise.
- Free preventative care is now standard for all Medicare beneficiaries.
- Insurers are required to provide information on how they are spending your premiums. Insurers are required to spend 85% of large-group and 80% of small-group plan premiums on health care or to improve health care quality (not administrative expenses or executive salaries) or return the difference to you as a rebate. This is known as the Medical Loss Ratio (MLR) standard.
- High risk insurance pools were established to offer coverage to those with medical problems who have had trouble obtaining insurance in the past. This program is known as the Pre-Existing Condition Insurance Plan (PCIP). The PCIP serves as a bridge program, until health insurance exchanges become operational in 2014. In Oklahoma, this program administered by BCBS of Oklahoma had 788 enrolled as of 6/30/2012.
- Small businesses can receive tax credits for up to 35% of premiums if they offer coverage to their employees. There are some restrictions, such as on the number of employees, the average wage, and the amount of the premium covered by the employer. The tax credit will rise to 50% of premiums in 2014. For more information go to http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers.
Starting in 2013, new taxes to help pay for the Affordable Care Act take effect:
- The Medicare payroll tax on earned income rises to 3.8% from its prior level of 2.9% for couples who earn more than $250,000 ($200,000 for individuals). Before, workers and companies had split the 2.9% tax – each paying 1.45%. But in 2013 and beyond, these higher income workers will have the extra 0.9% taken out of their paychecks.
- A 3.8% unearned income Medicare contribution tax is assessed on all investment income for couples who earn more than $250,000 ($200,000 for individuals). Investment income includes interest, dividends and capital gains. This tax is in addition to the increased Medicare payroll tax.
- Tax-free contributions to a flexible spending account, which allows you to pay for out-of-pocket health costs, will be limited to $2500. Starting in 2011, you were no longer able to pay for non-prescription medications out of your FSA account.
- The qualifying medical expenses deduction for those filing Schedule A increases from 7.5% to 10% of earned income.