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 Affordable Care Act

With the full implemetation of the ACA (Affordable Care Act, aka Obamacare) will be effective on Jan 1, 2014, I would like to at this time to prepare everyone for the upcoming Health Reform changes. As many of you were aware that the law was passed with no lawmakers having read it, and with 15,000 pages long, it has many hidden agendas, but I will only highlight some of the key changes and the potential financial costs to the consumers:

The ACA requires all States to establish a Public Exchange, an online marketplace, where individuals and small business with fewer than 100 full time employees ( in 2017 the exchanges will expand to serve those with 100+) can shop for only medical & dental insurances, and will be facilitated by the States, Federal, or both.

Funding to establish these exchanges is coming from various forms of new taxations, including new insurance fees & non-insured penalties (the reason the Supreme Court used to uphold the law) and $716B Medicare cuts.

The ACA also provides for Private Exchanges, being facilitated by private industry stakeholders (insurance providers, brokers, or benefits consultants). Unlike the Public Exchanges, the Private Exchanges have more flexibility and options, because they are not associated with the ACA guidelines, where the consumers can purchase ALL products & services, including voluntary insurance, and can help employers to move from a “defined benefit plan” to a “defined contribution plan”, that can better control health care costs.

The word “Affordable” applies to the fact that a premium limitation is set at 9.5% of an employee's income or if the plan pays less than 60% of covered health expenses. If the employee's plan charges more than this, then the employee can qualify to obtain health plans through the Public Exchange.
“Affordable” also sets a maximum cap of $6,350 for “out-of-pocket” annual expenses.

However, the reality is that healthcare premiums will be sky rocketing. For 2013, it has increased 5.3%, due to besides the normal inflationary factors, also the initial requirement of insuring children up to age 26.
For 2014 the prediction of a 40% average will be because of the initial influx of all consumers with “pre-existing conditions” and insurance companies CANNOT charge them higher rate; therefore, the insurance companies will charge higher premiums for EVERYONE! The rates will be determined by demographic areas & due to # of claims. This will be an ongoing annual adjustments initially. Some areas may go up as high as 80%!

Also, another factor that will increase cost is the elimination of the annual & lifetime maximum cap for medical expenses.
There will be an individual (up to max 3 family members) penalty of $95/person (max $285) annually for those without health insurance and will increase to $695 (max $2,085) by 2016. Afterwards, the penalties will increase by the previous year's inflation amount.

For companies with 50+ employees without health insurance, a $2K annual penalty for EACH EMPLYEE will be charged! And a $3K penalty/employees for companies, who offer health insurances, but the employees buy insurances at the Public Exchanges AND receive a subsidy! Penalties are not tax-deductible, but health premioums are; therefore, there are no incentives to offer the best plan for their employees.
The Public Exchanges will offer only 4 Plans: Bronze (60/40), Silver(70/30), Gold(80/20), & Platinum (90/10).

The Public Exchange is the ONLY place for consumers to obtain subsidies (tax credits), but they can ONLY choose the benchmark 70/30 Health Plan. Individual household incomes up to 400% of the poverty level (state avg $23,550) are eligible for these tax credits. Small businesses may be eligible for a tax credit of up to 50% of their premium payments if they have 25 or fewer full-time employees whose average annual wages are no more than $50K.

Some of the new taxes are 2% tax on medical equipments, 3.8% Medicare Tax for high earners, 3.8% tax on investments for high earners, the eventual “40% Cadillac Tax”, etc.

The ACA also will expand the Medicaid program; thus, will be costing each state's taxpayers more taxes, because unlike the Federal Government, each State MUST balance their budget.

Exemptions for certain groups are constantly increasing (if the current Immigration Bill passes, the illegals will also get exempt); thus, this will decrease the taxpaying group; therefore, it will be costing the supporting group more.

Results and Solutions for the taxpaying group:
1) Supplemental Insurances, similar to Supplemental Medicare, will become more popular to off-set copays, coinsurance, & higher deductibles.

2) H.S.A. Plans are becoming more popular. For those that are healthy and do not want to be associated with the higher premiums caused by the infusion of the high-risk pre-existing people, they are opting for the higher deductibles (much lower premiums) with the tax-deductible, tax-deferred, and tax-free features of the H.S.A. Plans.

3) Some companies are cutting staffs or not expanding or cutting hours to maintain less than 50 full time employees.

4) The industry will be evolving from the current “Defined Benefits” to employee participating “Defined Contributions” plans, similar to the retirement industry's changing from “Pension Plans” to “401K Plans” to control costs in the recent past.

5) Those who are forced to go to the Public Exchanges may incur a surprising 10% cost increase, due to the change from the traditionally popular 80/20 Plan to the 70/30 Plan.

6) For those, who miscalculated their income in order to obtain the “tax credits”, will be charged penalties up to $2,500 plus repaying the entire subsidy when filing their 2014 tax returns.

7) Some companies may discontinue offering health benefits and pay the penalties instead. Definitely some individuals will just pay the $95 penalty until later years.

8) Some companies may offer health benefits for their top-tier employees only and pay penalties for the remainder.
With 15,000 companies currently applying for exemptions from the ACA, newer lawsuits based upon the fact that the Senate do not have the Constitutional right to start a tax bill or law (it is the legal responsibility of the House), and the Public Exchanges are behind in their implemetation set-up for the Oct 1 deadline, some experts think that these confusions are purposedly planned; therefore, we might be heading toward a single-payer system. Furthermore, most of the largest Health Insurer such as UnitedHealth, Cigna, & Aetna will not be participating in all Public Exchanges, but only in selected States where they may not lose, because they do not want to be stuck with sick customers with uncertain costs. Only local insurers and the Non-profit Blue Cross plans will be the main players in the Public Exchanges initially. Please stay tuned....

Hope this help! I think you all got the idea that this is not an “Affordable” plan.

 2013/7/1 8:02

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