What Health Care Reform Means for You

The revenue-enhancing reforms and regulatory aspects of the Patient Protection and Affordable Care Act (better known as the “Obamacare law”) are just now making themselves felt. Some provisions – such as restrictions on the ability of insurers to decline covering children because of pre-existing conditions and the elimination of lifetime benefit caps have already become law.

The constitutionality of the law, however, is in question. A majority of states have joined in a lawsuit challenging the authority of the federal government to impose a mandate for citizens to purchase a given product or service – an unprecedented expansion of government power, if allowed to stand. The U.S. Supreme Court is scheduled to hear arguments this spring and will rule on the issue this year.

There is a chance that the entire law will be struck down, in which case we return largely to the status quo ante. Another scenario is that the Supreme Court will strike down only the portion of the law that requires citizens to buy government-approved insurance or face a fine. However, since the system depends on the healthy buying into the system along with the sick, in order to contain costs versus revenues, it would be nearly impossible for the law to go into effect without the mandate.

We cannot predict how the Supreme Court will rule. As things stand right now, however, here is how you may be affected by the law:

Overall Effects

The law will likely benefit the currently dispossessed, unemployed, underemployed, and those with pre-existing conditions who have trouble getting health insurance on the individual market. The law will also potentially benefit U.S. companies that do business abroad, on the theory that exporters can offload a significant part of their current health care expenses to the government – thus making them more competitive against competitors from countries with socialized health care systems.

Those who currently have good health insurance, including executives, managers, professionals, certain government employees, and those in established unions with generous health benefits may see the quality of your coverage and available care deteriorate substantially.

What has happened already?

These changes have already occurred:

As mentioned, lifetime limits have been revoked. You can never exhaust your benefits.

Plan members can keep their unmarried dependents on their plan until they turn 26. This will benefit college-age people without access to a student health plan, and unemployed or underemployed young people in transition.

Coverage for certain preventative screenings and tests such as colonoscopies, high blood pressure, diabetes, STDs and osteoporosis has been expanded.

Plans are now required to cover smoking cessation counseling.

Future Changes

As of 2014, all uninsured individuals must purchase a health insurance plan. The government will subsidize the purchase for low-income individuals.

Those who have pre-existing health conditions will be able to purchase coverage from a government-subsidized exchange, also available in 2014.

Those who remain uninsured will have to pay a penalty of as much as 1 percent of their income. (Some may choose to pay the penalty rather than buy coverage, especially since pre-existing conditions are no longer an obstacle to obtaining coverage.)

Wait times to see a doctor could increase. Many more people will increase their demand for care once they have coverage – but the supply of available health professionals will not increase. The result could cause wait times to more than double in some markets.

Administrative and regulatory requirements could force many smaller practices out of business, moving patient loads to larger clinics and institutions.

Medicare

In order to fund the more general benefits under the PPACA, Congress stripped roughly a half trillion dollars from Medicare over the next eight years. Consequently, we are likely to see more stringent cost controls on Medicare patients. We could see a sharp reduction of costly procedures and screenings for the elderly.

Employers will cut back offered benefits. So-called “Cadillac” plans will nearly disappear, under threat of government fines, as of 2019. This could affect your access to retirement health benefits (such as those provided under some union contracts) and even private vision and dental plans. It could also make it difficult or impossible for you to see a specialist without first obtaining a referral, since the vast majority of health care will convert to “managed care” models such as HMOs and PPOs.

Benefits for Women

As of 2014, all insurers must cover maternity benefits on an equal basis with other medical procedures. Employers are also required to allow break times for nursing mothers and a suitable place in the workplace for lactating mothers to pump breast milk.

Recently, regulations passed by the Department of Health and Human Services are also requiring employer health plans to provide coverage for birth control, including the RU-486 abortion-inducing pill. This provision has been hotly contested this year by some employers, including the Catholic Church and affiliated charities and hospitals. As of March 2012, the Obama Administration is still requiring this coverage. However, if Obama loses the presidential election, we expect that these requirements will be loosened for religious employers or repealed altogether.

Higher Taxes

Beginning in 2013, a 3.8 percent Medicare payroll tax will take effect on certain “unearned income” for those with incomes over $200,000 a year – or $250,000 for married couples. An additional 0.9 percent Medicare contribution tax will also kick in for higher income individuals, unless Congress acts to repeal this provision.

The tax will also apply to gains on real estate transactions – which will become a significant planning consideration for those involved in the real estate market. The $250,000 exemption for single taxpayers and $500,000 exemption for married couples on the sale of a qualified personal residence will still apply, however, for the purposes of calculating the unearned income Medicare contribution tax. If your home qualifies, you will only be subject to the 3.8 percent tax on gains exceeding the exemption.

About Brian Hendricks

Brian Hendricks is the President of Fidelity Insurance Group. Brian started Fidelity in 2003 with 0 clients. Today Fidelity Insurance Group is a Premier Independent Insurance Agency in Florida with over 3,000 families and businesses insured. Brian currently serves on advisory boards for 2 of the largest property insurance companies in Florida. Knowlege, Integrity, and Committment are his and his agency's guiding principles.
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