Question 23: Guide to Obamacare
I used to put $5,000 a year into my health-care flexible savings account. Now I can only put away half that. Why the change?
A couple of reasons. One, your FSA funds are pre-tax dollars, and the government needs all the money it can get. Second, under the IRS’s “Use it or lose it” rules, FSA money you squirrel away but don’t spend gets forfeited at the end of the year—not to the government, but in most cases to your employer. Which leads to the third reason: Every December, doctors and surgeons see a flood of patients determined to use the last penny of their FSAs before the year ends, even if they don’t really need that new knee—or nose. The lower limit should help discourage such unnecessary health spending.
Question 24: Guide to Obamacare
Should I worry about having all my medical history stored electronically?
Maybe. How paranoid are you? Chances are your doctor’s office already has a computerized system; starting in a couple years, Obamacare requires all physicians and hospitals to switch. There’s been a lot of fuss over the fact that the changeover hasn’t yet shown any cost savings, but down the line, electronic records will generate savings by letting the government track treatments and outcomes and coordinate care. Of course, any electronic system is potentially vulnerable to hacking. But Americans have been yielding their most intimate financial data to the IRS electronically for decades now. Chances are we’ll get used to this, too.
Question 25: Guide to Obamacare
I keep hearing that the ACA is going to kill small businesses. Will it?
Before Obamacare, half of America’s uninsured were small-business owners and employees and their dependents. Premiums for small-business owners offering insurance rose by 123 percent from 1999 to 2009, and the percent providing coverage fell from 65 to 59. One of the main goals of the act was to provide these groups with affordable coverage. As of next year, small businesses with more than 50 employees that don’t offer acceptable health-insurance plans will pay a penalty; those with up to 100 employees (or 50, in some states) can buy insurance for employees on the exchanges. Small businesses can get tax breaks of up to 35 percent of their share of premiums if they have fewer than 25 full-time employees (25 percent for nonprofits), increasing to 50 percent (35 for nonprofits) next year. Writing in Forbes, contributor Charley Moore said of the act’s impact: “[T]here is nothing to suggest that the health-care shakeup will hinder job creation and economic growth.” Penn’s Daniel Polsky expects it to spur entrepreneurship: “People who want to take risks and start a small business will be able to provide insurance for employees. There’ll be more competition for your business, and you’ll get a better price.”
Question 26: Guide to Obamacare
My 83-year-old mother is doing okay, but she takes a lot of medications and is paying extra for her Medicare Advantage plan. What will Obamacare do for her?
If all goes as hoped, she’ll benefit from better coordinated and organized care; all her caregivers will know what the others are doing, to help avoid overmedication and drug interactions. Obamacare phases out the prescription-drug “doughnut hole”; according to the Kaiser Family Foundation, “By 2020, Part D enrollees will be responsible for 25 percent of the cost of both brands and generics in the gap, down from 100 percent in 2010.” The potentially bad news is that to pay for insurance for the uninsured, the act is cutting funding for Medicare Advantage, through which 28 percent of seniors get private insurance. The government hopes to shift some of those seniors from Medicare Advantage to Medicare to save costs.
Question 27: Guide to Obamacare
With all the controversy over kids and vaccines, what does Obamacare cover?
As part of its emphasis on preventive care, the ACA mandates that all the usual childhood vaccines—DTP, flu, polio, measles, chicken pox, etc.—as well as those for meningitis and HPV be free, with no co-pay, coinsurance or deductible, when given in-network. Adult shots are covered, too; for more on free services, go to healthcare.gov.
Question 28: Guide to Obamacare
We have health insurance through my husband’s employer. We’ve had it for years. Now his company says he and our kids will be covered under his plan, but I no longer will! Can they do that?
They can—and more and more will, to save costs. Under the ACA, this year, employers must pay a “per life” fee of just a dollar or two on each person insured under an employee’s policy. That fee shoots up to $65 next year. While the ACA mandates coverage of children up to age 26, it doesn’t require coverage of a spouse. A fifth of all employers now discourage spouses from enrollment, mostly by charging extra fees—an average of $100 a month. But last year, 10 percent of “large” and “huge” companies cut spousal coverage altogether. Insurance-industry experts expect that percentage to increase as insurance exchanges open. Employers justify the practice by noting that spouses are most often wives, and women use health care more and cost more to insure. Ironically, Obamacare outlaws “gender rating,” or charging women more than men for identical insurance benefits, starting in 2014.
Question 29: Guide to Obamacare
I belong to a union, and I have killer health insurance benefits—no co-pays, no caps, no deductibles. What’s in Obamacare for me?
Starting in 2018, so-called “Cadillac” insurance plans like yours will be subject to an excise tax, to be paid by insurers. “Right now, you don’t get taxed for health insurance,” Penn’s Daniel Polsky points out. “This has led to people getting more of their income through health insurance. Plans have become bloated as a way of avoiding taxes.” It’s not just hedge-fund managers and Wall Street titans who have Cadillac plans; it’s union members, government workers and university employees, too. The tax will start out at 40 percent of the amount of the combined employer and employee contributions of premiums of more than $10,200 for an individual and $27,500 for a family (not including vision or dental coverage), with annual increases for inflation thereafter. The idea is to discourage you and other Cadillacs from getting unnecessary medical care just because it’s covered by your plan. So expect that killer health care to become less awesome.
Question 30: Guide to Obamacare
Granted, I’m pretty well off, but in January, my paycheck shrank—and I’m not talking about the fiscal-cliff stuff. What’s going on?
January 1st brought a 0.9 percent hike (from 2.9 percent to 3.8) in the Medicare tax for individuals making more than $200,000 and couples making more than $250,000. There’s also a new Medicare tax of 3.8 percent on your unearned income—either your net investment income, or your modified adjusted gross income above those same limits, whichever is less. Congratulations! You’re in the top four percent of all taxpayers!
Question 31: Guide to Obamacare
My housekeeper is here illegally from Honduras. Will she finally be able to get health insurance?
Sorry, no. “Undocumented immigrants aren’t covered by the act,” says Jefferson nursing prof Mary Lou Manning—though from a health-care standpoint, she wishes they were.
Question 32: Guide to Obamacare
I’ve always deducted my medical expenses on Schedule A, since they’ve always been at least 7.5 percent of my adjusted gross income. Suddenly, my accountant says the threshold is 10 percent. Is she right?
She is if you’re under 65—and come 2017, the new set point will apply to everybody. Only some six percent of taxpayers utilized the deduction at 7.5 percent, and like most tax breaks, it favored the wealthy. The change is expected to raise $23 billion over the next decade to help pay for Obama-care. (Paying the Alternative Minimum Tax? The threshold remains 10 percent.)
Question 33: Guide to Obamacare
I got a raise from my boss this year. (He doesn’t offer me health insurance.) But next year, he says, he’ll cut my salary and start up an employer-matching pension plan. He swears this will save us both money. How?
Since the ACA uses your wages and salary to determine whether you’re eligible for tax credits toward paying for insurance bought through the exchange, it makes tax sense to keep that total low. Contributions by your employer to a pension plan are exempt from payroll and personal income taxes; you’ll pay taxes on that money when you retire and your tax bracket is, presumably, lower. So putting money that would have gone to a raise into a pension plan does benefit you, if it keeps you below the threshold at which you can get premium assistance—and benefits your employer as well, since he won’t have to pay as much payroll tax.
Question 34: Guide to Obamacare
There’s nothing wrong with the American health-care system! It’s the greatest system in the world! Why did the President have to go and mess with it?!?
Last year, a report by the Organization for Economic Cooperation and Development (OECD), which has 34 member nations, showed that while Americans spend two and a half times more on health care than similar European states, we get far from superior results: We don’t live as long, we’re fatter, we’re hospitalized for asthma twice as often, we have more cesarean births and coronary bypasses. … We spend 17.6 percent of our GDP on health care, compared to an average in OECD nations of just 9.5 percent. True, we lead the world in medical research and some cancer outcomes. But everything related to health care costs more here—often much, much more. The average hospital stay rings up at $18,000, compared to the OECD average of $6,200. “Our quality and expense curves go in different directions,” says Einstein medicine chair Steve Sivak. Almost everyone agrees something had to be done to turn the boat around. “Obamacare is a very complicated act,” says Fox Chase’s Richard Fisher, “but if we all get behind it and work on it while we keep the values of the best patient care, we’ll wind up with a better system.”