2013 Healthcare Changes: Make Sure Your Clients Are Ahead of the Curve
As you know, on June 28 the Supreme Court ruled in favor of the Affordable Care Act.
The curve ball of the day: the individual mandate, which requires all Americans to purchase health insurance, was deemed unconstitutional under the commerce clause, but survived as a tax.
That means healthcare reform will continue moving ahead full-speed, although numerous questions remain - many of which will not be answered until after the election this November.
Until then, the insurance industry must continue to prepare for changes and new requirements.
To help you serve your clients and speak intelligently about healthcare reform, here's a summary of changes that will take effect in 2013 and beyond.
Changes Coming in 2013 · Individuals earning $200,000 a year, or couples making $250,000, will pay a higher Medicare payroll tax of 2.
35 percent on earned income, up from the current 1.
45 percent.
This will be of special interest to your self-employed clients, as they pay 100 percent of the payroll tax, rather than splitting it with an employer.
Also, a separate tax of 3.
8 percent on unearned income, such as dividends interest, will be added in 2013.
· Medical expense contributions to flexible spending accounts (FSAs) will be limited to $2,500 annually.
Currently there is no limit on these accounts, which are used to purchase everything from contact lenses to children's braces.
Given the high cost of braces, for example, this tax provision will be an unwelcome surprise to many families.
The FSA cap will also impact special-needs children, whose tuition has been covered using FSA funds.
· The threshold for claiming itemized medical expense deductions will be increased to 10 percent of income, from the current 7.
5 percent.
This will impact clients who have the highest medical bills, including, potentially, those on high-deductible insurance plans.
Changes for 2014 and Beyond · Medicaid participation will be expanded to cover low-income individuals under age 65, up to 133 percent of the federal poverty level, or approximately $28,300 for a family of four.
While insuring more Americans is a goal of any reform effort, there are concerns about whether the nation's primary care physicians can handle this influx of new patients.
· Employers begin paying penalties if they do not provide qualified health care coverage to employees.
· Individual mandates begin, with penalties for individuals and families who don't participate.
Subsidies will be available to those who live at or below 400 percent of the federal poverty level.
· Guaranteed issuance, guaranteed renewability, modified community rating and minimum benefit standards become effective.
This has already triggered premium increases from insurers.
· State individual and small group health insurance exchanges become operational.
· Independent Payment Advisory board will begin its work overseeing Medicare payments to providers, drug and medical device companies and insurance plans.
· Pre-existing condition exclusions are prohibited.
· Additional new taxes take effect on health insurers.
Again, likely to trigger premium increases.
· Minimum medical loss ratio of 85 percent required for Medicare Advantage plans.
As with the small and large group medical ratio requirements that are already in effect, insurers are likely to respond by reducing agent commissions.
· In 2017, businesses with more than 100 employees can purchase insurance through exchanges.
· In 2018, the Cadillac Tax will be imposed on employer-sponsored health insurance plans that offer policies with generous levels of coverage.
· In 2020, the Medicare Donut Hole coverage gap will be closed.
Seniors will continue to pay the standard 25 percent of drug costs until the threshold for Medicare catastrophic coverage is reached.
As for exactly how these changes will play out...
well, I wish I had a crystal ball.
One side says these reforms will cure what ails the healthcare system, lowering premiums and expanding access to care for millions of Americans.
The other side says these measures will accelerate health insurance premium increases and that access to care will be restricted, due to demand outstripping the number of healthcare providers and, eventually, the systematic rationing of care.
While the debate rages on, at least you have the facts about provisions of the Affordable Care Act that take effect next year and beyond.
The curve ball of the day: the individual mandate, which requires all Americans to purchase health insurance, was deemed unconstitutional under the commerce clause, but survived as a tax.
That means healthcare reform will continue moving ahead full-speed, although numerous questions remain - many of which will not be answered until after the election this November.
Until then, the insurance industry must continue to prepare for changes and new requirements.
To help you serve your clients and speak intelligently about healthcare reform, here's a summary of changes that will take effect in 2013 and beyond.
Changes Coming in 2013 · Individuals earning $200,000 a year, or couples making $250,000, will pay a higher Medicare payroll tax of 2.
35 percent on earned income, up from the current 1.
45 percent.
This will be of special interest to your self-employed clients, as they pay 100 percent of the payroll tax, rather than splitting it with an employer.
Also, a separate tax of 3.
8 percent on unearned income, such as dividends interest, will be added in 2013.
· Medical expense contributions to flexible spending accounts (FSAs) will be limited to $2,500 annually.
Currently there is no limit on these accounts, which are used to purchase everything from contact lenses to children's braces.
Given the high cost of braces, for example, this tax provision will be an unwelcome surprise to many families.
The FSA cap will also impact special-needs children, whose tuition has been covered using FSA funds.
· The threshold for claiming itemized medical expense deductions will be increased to 10 percent of income, from the current 7.
5 percent.
This will impact clients who have the highest medical bills, including, potentially, those on high-deductible insurance plans.
Changes for 2014 and Beyond · Medicaid participation will be expanded to cover low-income individuals under age 65, up to 133 percent of the federal poverty level, or approximately $28,300 for a family of four.
While insuring more Americans is a goal of any reform effort, there are concerns about whether the nation's primary care physicians can handle this influx of new patients.
· Employers begin paying penalties if they do not provide qualified health care coverage to employees.
· Individual mandates begin, with penalties for individuals and families who don't participate.
Subsidies will be available to those who live at or below 400 percent of the federal poverty level.
· Guaranteed issuance, guaranteed renewability, modified community rating and minimum benefit standards become effective.
This has already triggered premium increases from insurers.
· State individual and small group health insurance exchanges become operational.
· Independent Payment Advisory board will begin its work overseeing Medicare payments to providers, drug and medical device companies and insurance plans.
· Pre-existing condition exclusions are prohibited.
· Additional new taxes take effect on health insurers.
Again, likely to trigger premium increases.
· Minimum medical loss ratio of 85 percent required for Medicare Advantage plans.
As with the small and large group medical ratio requirements that are already in effect, insurers are likely to respond by reducing agent commissions.
· In 2017, businesses with more than 100 employees can purchase insurance through exchanges.
· In 2018, the Cadillac Tax will be imposed on employer-sponsored health insurance plans that offer policies with generous levels of coverage.
· In 2020, the Medicare Donut Hole coverage gap will be closed.
Seniors will continue to pay the standard 25 percent of drug costs until the threshold for Medicare catastrophic coverage is reached.
As for exactly how these changes will play out...
well, I wish I had a crystal ball.
One side says these reforms will cure what ails the healthcare system, lowering premiums and expanding access to care for millions of Americans.
The other side says these measures will accelerate health insurance premium increases and that access to care will be restricted, due to demand outstripping the number of healthcare providers and, eventually, the systematic rationing of care.
While the debate rages on, at least you have the facts about provisions of the Affordable Care Act that take effect next year and beyond.
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