The Basics for Those New to Universal Health Coverage
Although the Act was approved back in 2010, there has been little specific information on what this might mean in concrete terms until very recently. The Act goes into effect very soon—October 1 is the target date for new health care exchanges, and we will all be required to have health coverage of some sort by January of 2014 or face a tax penalty.
As I write, the Act has become a political football in the debt ceiling debate on Capitol Hill. The House Republicans threaten to vote against raising the debt ceiling unless ACA is defunded; however, political analysts give low odds to any defeat of the Act given a Democratic majority in the Senate and a threatened presidential veto.
So what should we expect? Those of us residing in Massachusetts know the drill, as the national legislation is modeled to some degree on our move to universal health coverage several years ago. But for everyone else, there seems to be a lot of confusion about who needs to get health insurance from the new exchanges, what the exchanges are, and last but hardly least, what costs might be.
A good place to start with an overview of the Act is the following Wall Street Journal article: http://online.wsj.com/article/SB10001424052702304213904579093371338509610.html. They cover the basics about who will be most affected, who needs to shop on the new exchanges, etc. Remember that the new exchanges apply to people without coverage from another source, like an employer.
Another article, also from Dow Jones at http://www.marketwatch.com/story/10-things-health-exchanges-wont-tell-you-2013-09-27 provides some perspective on how one might react to ACA, assuming you need health coverage. With reports of systems glitches, and government entities racing to meet the ACA deadlines, their key piece of advice is well taken: wait if possible and do not attempt to sign up for coverage on October 1 unless you really have to. Since the Act was only initiated in 2010, followed by challenges to its constitutionality, etc. governments have been deliberate about implementation. Many states whose voters disagree with the Act also declined to create their own exchanges and will use federally created exchanges. The bottom line is that there has been a lot of scrambling to implement some very large systems. So unless you are without health coverage and really need to act quickly, it may pay to wait a bit.
If you live in Massachusetts, ACA will mean less change for you. The main change is in who would qualify for a federal subsidy. The income limits for subsidies on health care premiums are higher for the federal program than they were under the state program. So if you did not qualify before and were close to the cutoff, or if you have recently retired and are not yet Medicare age, you may want to check into this.
There are other benefits as well, which are detailed in the following article: http://www.masslive.com/politics/index.ssf/2013/09/affordable_care_act_brings_cha.html. Also note that if you are currently enrolled in a plan through Commonwealth Choice, you may need to re-enroll.
So who might benefit from ACA, and what financial planning opportunities does it present?
- Those who had pre-existing conditions and could not obtain individual health insurance policies if they needed them are key beneficiaries. For these folks, ACA represents an opportunity to put this important health and financial safety net in place. Some analysts estimate that medical emergencies cause as many as 50% of personal bankruptcies in the United States. Whatever the statistic is, it is clear that the cost of medical treatments for a serious illness or injury could easily wipe out the savings of a middle class family.
- The self-employed could benefit as well through access they may not have had before to coverage.
- Those who retired early, either through a planned retirement or a downsizing. ACA will help those folks access coverage for the years until they qualify for Medicare.
- Those who qualify for tax credits to make coverage affordable. Importantly, when it comes to figuring tax credits for health premiums, the Act only takes into account income, not assets. This can be a particularly important point for early retirees, those downsized who are in their 50s, etc. This means that you may not have to drain your savings for health care coverage, or take the risk of going without it just prior to your senior years. This can dramatically change options for retirement or career planning, or make the difference in financially surviving a downsizing late in your career. For a calculator on the subsidies, please see a page at the Kaiser Foundation website: http://kff.org/interactive/subsidy-calculator/.
- Young people who need coverage can stay on their parents’ policy through age 26.
- The “donut hole” in Medicare prescription drug coverage will be closed.
This is a lot of information packed into a very short space. The main message is to study the information becoming increasingly available on the Act, and to find out whether it applies to you. It might help even if you already have adequate coverage; as one of the articles pointed out, preventative care will be free under the Act for existing policies. So even if you make no change in your coverage, you may benefit.