Health care bill passes: How will it affect you?

Now that President Barack Obama has signed the health care reform bill into law, coverage will reach 95% of all Americans, who will be able to buy health insurance in a "competitive, transparent marketplace." So about 32 million uninsured Americans will have improved chances of getting covered. That means something a little different for everyone.

Here's a timeline of how this will unfold.

Starting immediately:
  • You will pay a tax of 10% on the amount paid for indoor tanning services.
Within 90 days:
  • People with pre-existing conditions will be able to get insurance through temporary pools.
Within six months:
  • College students will be able to stay on their parents' insurance until they are 26-years-old.
  • Insurers will not be able to cancel coverage because you get sick, unless the insurance company can prove fraud
  • Children with pre-existing conditions, such as diabetes or asthma, will be able to get coverage.
Beginning January 1, 2011:
  • You will no longer be able to use Health Reimbursement Accounts (HRAs) or Flexible Spending Accounts (FSAs) to pay for over-the-counter drugs not prescribed by a physician.
  • If you use an HSA or Archer MSA account to pay for over-the-counter drugs, they will be considered non-qualified medical expenses. Withdrawals for these non-qualified expenses will be taxed at 20% rather than the current 10% for an HSA and 15% for an Archer MSA.
Beginning January 1, 2013:
  • Your contributions to an FSA for medical expenses will be limited to $2,500 per year, but this will be increased annually by a cost of living adjustment. Currently, there is no statutory limit on these accounts, but some employers limit them to $2,000 or $3,000. Since they are use it or lose it accounts, people are careful not to overfund them.
  • The taxable threshold for unreimbursed medical expenses will increase to 10% of adjusted gross income (AGI). Until that time, it will only be 7.5% of AGI. This increase is waived for individuals over age 65 and older for tax years 2013 through 2016.
Once the law takes effect on January 1, 2014, this is what will happen:
  • Insurance companies will not be able to refuse coverage for pre-existing conditions.
  • You'll be able to buy insurance on state-based health insurance exchanges.
  • You will be required to have health insurance or you'll have to pay a tax penalty. That penalty will be $695 per year up to a maximum of $2,085 per family or 2.5% of household income. The penalty will be phased in gradually over three years, starting with $95 in 2014.
Let's take a closer look at some key provisions of the law ... and what they really mean for you:

Temporary high-risk pool

Most won't see any changes until January 1, 2014, but people without insurance because of pre-existing conditions will be able to tap into a temporary, high-risk pool that will be available within 90 days and be effective until the new health insurance rules take effect. Any U.S. citizen or legal immigrant who has pre-existing conditions and who has been uninsured for at least six months will be able to tap into this pool. Here's how this will work:
  • All will receive subsidized premiums.
  • The pool will be established based on the rates for a standard population and may vary no more than 4 to 1 due to age.
  • Maximum cost sharing will be limited to current Health Savings Account (HSA) law: $5,950 for an individual and $11,900 for a family in 2010.
Pre-existing conditions can't knock you out of health coverage
Individuals who can't get access to a group plan, either through their employer or their union, will find it much easier and more affordable to get insurance. All plans:
  • Will be guaranteed issue and require renewability, which means you can't be denied health insurance because of a pre-existing condition, nor can you be kicked out of a health plan because you got sick.
  • Will only be allowed to rate people based on age, and that premium difference can only vary by a 3-to-1 ratio.
Benefit tiers
The law provides for four benefit categories for health insurance plan designs, as well as a catastrophic option:
  • Bronze plan: Covers 60% of the benefit costs of the plan with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit of $5,950 for individuals and $11,900 for families.
  • Silver plan: Covers 70% of the benefit costs of the plan with the HSA out-of-pocket limits.
  • Gold plan: Covers 80% of the benefit costs of the plan with the HSA out-of-pocket limits.
  • Platinum plan: Covers 90% of the benefit costs of the plan with the HSA out-of-pocket limits.
Out-of-Pocket limits will be reduced for those with incomes up to 400% of the Federal Poverty Level (FPL). If you earn 100% to 200% of the FPL, your out-of-pocket limits will be one-third of HSA or $1,983 for an individual and $3,967 for a family. Those earning between 200% and 300% FPL will see their out-of-pocket limits lowered to one-half of the HSA limits.

Creation of health insurance exchanges

The law also calls for creating state-based American Health Benefit Exchanges and Small Business Health Options Program Exchanges that will be administered by a governmental agency or non-profit organization. Individuals and small businesses up to 100 people will be able to purchase insurance through these exchanges.

Who will pay?
Will you see increases in fees or taxes to help fund this reform? Probably, if you:
  • Make more than $200,000 individually or $250,000 as a married couple. These taxpayers will need to pay 0.9% more in Medicare taxes. The total Medicare payroll tax rate will be 2.35%. The current rate is 1.45%. The tax rate will apply to unearned income, such as dividends and capital gains, if the reconciliation bill is passed.
  • Have a high premium insurance plan. Taxpayers who get high premium insurance plans from their employers, which some think are a luxury, will need to pay a "Cadillac Tax." If your employer plan exceeds $8,500 for a single person or $23,000 for a family in premiums per year, you could be stuck with that tax.
  • Are a young adult. There's a 3-to-1 limit on how much insurers can charge older people. Since insurers can't charge seniors more than three times the amount younger people pay, premiums for younger people will likely increase. But since the insurance pools will be much larger, the increase may not be that great.
This list is not meant to summarize all the provisions of the health reform legislation, but instead highlights some key provisions. You can read a detailed comparison of the law at The Henry J. Kaiser Foundation's Web site.

Lita Epstein has written more than 25 books, including "The Complete Idiot's Guide to Social Security" and "Medicare and The Pocket Idiot's Guide to Medicare Part D."

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