Most major provisions of the Affordable Care Act will be phased in by 2014. How will it affect your finances in the coming year? We ask two experts.
[linda pietroburgo, principal, moneta group]
Many of my clients don’t want to like the Affordable Care Act, but the more they learn about it, the more they see it offers them a degree of flexibility they didn’t have in the past. For example, over the years many corporate executives who wanted to retire early could not, because their preexisting medical issues kept them from being eligible for private insurance. These were vital, creative individuals who longed to start their own businesses or pursue a long-held dream. Now, thanks to the ACA, they’ll be able to retire at 55 and still obtain insurance coverage.
The ACA also benefits parents who worry about providing for their adult children with chronic medical issues and physical and mental disabilities. This is a huge issue, even for high-net-worth individuals, because the cost of Missouri’s Insurance of Last Resort, or High Risk Pool, is extraordinarily high. Now they’re starting to relax a bit, because of the possibility their offspring will be covered.
The ACA means there are more options and, for some people, it will also save them money. I expect that many people who now have personal private coverage will either opt for ACA coverage or negotiate with their current insurance company to lower their premiums.
The act has two associated taxes, a 0.9 percent Medicare payroll tax increase and 3.8 percent on the lesser of net investment income or modified adjusted gross income over thresholds. But, strictly speaking, their stated purpose is to offset Medicare expenses for people over 65. The taxes apply only to individuals with income over $200,000 or joint filers with income over $250,000. The real kicker is for those who make more than $400,000 or joint filers who make more than $450,000, who are also being hit by the Taxpayer Relief Act legislation and ACA legislation. Their federal capital gains tax has risen from 15 percent to 23.8 percent, among other increases.
I honestly don’t think the ACA will affect business owners as much as naysayers believe. Medical insurance rates are going up for everyone, but that’s primarily due to utilization, chronic illnesses and poor lifestyle choices. Businesses with 50 or more employees (and more than 90 percent of the nation’s firms fall into this category) may have to pay penalties if they don’t offer coverage—but more than 95 percent of them already provide medical benefits. Companies with fewer than 50 employees won’t be penalized for not offering coverage, and their employees will be able to buy insurance on the online marketplace. And a tax credit is now in place to make health coverage more affordable for even smaller business (fewer than 25 employees) and nonprofits.
[mimi schmid, ahm financial group]
Overall, ACA allows and forces everyone to have coverage, but the individual coverage is generally more expensive and usually less robust than current plans—and will likely continue to go up in price. The young and healthy will take on more cost to support the older generation.
As even the president admits, you may not be able to keep coverage you’re happy with. Most carriers are allowing current individual policyholders to renew their 2013 coverage through 2014, but they’ll still need to transition to an ACA plan at that point.
Anthem and Coventry are the only individual carriers in Missouri participating in the exchange for 2014, but as of now, Anthem will not be including BJC in any of its networks. So if you’re happy with Anthem you can keep it for now, but you’ll eventually have to switch to a plan that’s ACA-compliant and won’t include BJC. Coventry offers one plan type that includes BJC and another that does not.
ACA rules apply only to major medical plans for ages 65 and under. They don’t affect Medicare and Medicare supplements or long-term care policies.
The media are making it seem like you have to go through healthcare.gov, but you can still go through a broker at the same cost.
I’m encouraging anyone who asks to weigh their options.
By Tony Di Martino