If President Obama is re-elected, Americans must face the fact that the impact of the Affordable Care Act, commonly referred to as Obamacare, will take effect in a meaningful way beginning in 2013. The law affects different categories of Americans in different ways. First, Medicare recipients receive one important benefit, but, sadly, Medicare will be the area that is most adversely impacted by this legislation. The good news that seniors will receive, over time, is that the coverage gap (known as the donut hole) for prescription drugs that currently exists in Medicare Part D will slowly be closed and eventually disappear in 2020.
That benefit notwithstanding, seniors will pay through the nose for the ACA as a result of the cuts in Medicare that have already been announced. The cuts will center around two areas: a reduction in the number of plans that will be available and reduced benefits from the Medicare Advantage Program. This program currently allows recipients to augment their basic Medicare Part A coverage through private insurance subsidized by the Feds. Then too, the future reimbursement rates for physicians who accept Medicare patients will be reduced, and the bottom line may well be that many physicians will simply not treat Medicare patients at all.
The worst part of the impact on seniors, in my opinion, is the very real possibility that additional cuts to Medicare will be coming down the road by the establishment of an “Independent Payment Advisory Board.” This appointed body will have the power to make whatever cuts to Medicare in the future it deems appropriate unless Congress takes action to override those cuts. A super majority vote of 60 percent in the Senate would be required to overturn the actions of the IPAB.
The major beneficiaries of Obamacare are, naturally, the uninsured. If your income is beneath the newly raised threshold of 133 percent of the federal poverty level, you will now be eligible for Medicaid. Unfortunately, some states have already stated that they will not participate in Medicaid in the future, and citizens in those states will only be able to purchase subsidized coverage through a health insurance exchange in that state. These new exchanges are actually a good idea, in that self-employed and others who must purchase their health insurance individually will now have access to more affordable coverage through these exchanges. Anytime groups buy insurance, the cost per household is much less expensive than buying it as an individual family unit.
Another significant part of Obamacare that is already operative is the removal of the pre-existing condition exclusion for coverage eligibility. As a result, individuals with major health problems can no longer be denied coverage.
If you are currently uninsured by choice, and your income is greater than 400 percent of the poverty level, the new law will cost you money, since the Supreme Court ruled that you must either purchase coverage on your own (through these aforementioned exchanges) or pay a fine, which will rise to a maximum of $2,085 per year in 2016. Happily, it is estimated that only 3 percent or 9 million Americans may actually have to pay this fine.
A positive benefit of Obamacare is that many employers with fewer than 25 employees will provide health insurance for the first time, subsidized by significant tax credits from the Feds. Larger employers will receive no federal subsidy, and those companies who can hire and retain workers without offering health insurance may simply pay a fine and drop coverage entirely. Realizing this fact, the Feds have issued waivers to many larger employers, delaying the implementation date of the ACA through 2014. What happens beyond that date is anybody’s guess.
The AFA is a very complicated piece of legislation and this column only touches upon a few areas. If you are interested in learning more, I recommend an excellent book, “ObamaCare Survival Guide,” by Nick Tate. Much of the material in this column can be found in that book.
Got a financial planning question for Greg? You may email him at email@example.com.
Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience.