What Your Health Care Will Look Like Under Obamacare
Obamacare's provisions promise that everyone will have individual health insurance, and the individual mandate within the legislation requires everyone to have that coverage or face potential penalties. Yet millions of Americans are worried about what their insurance policies will look like after Obamacare fully takes effect and whether the coverage those policies will provide will be better than what many of them already have.Not all of the details have been fleshed out yet. But early signs point to a few likely things you'll see from your health insurance when Obamacare's provisions take full effect.
1. Those without employer-based group coverage now will likely get better benefits.
One likely outcome of the Affordable Care Act is that the vast majority of individual health insurance plans — as opposed to group plans that employers provide — will have to provide more comprehensive coverage than they do currently. A 2012 study from researchers at The University of Chicago found that among the roughly 14 million Americans who have individual health coverage rather than group coverage through an employer or other organization, more than half of those plans didn't provide enough benefits to qualify under Obamacare's standards.Under Obamacare, those substandard plans will be replaced by newer coverage. Some preliminary figures from state health insurance exchanges show that in many states, that new coverage is coming with higher premiums, especially for those plans that provided much more limited benefits than will be required under the new law. Whether better benefits will provide enough of an offset to result in lower overall costs will vary from person to person and across different policies. People who have minimal health expenses will likely end up paying more overall, while those who use their health benefits more often could see cost savings under Obamacare plans.
2. Those covered under employer-provided plans already have generally strong coverage.
The same study also examined people covered under group plans, typically through their employer. The differences in quality were staggering. The study authors divided different insurance policies into tiers based on how much of a patient's medical bills each policy would cover. In group plans, almost two-thirds of members had policies that covered 80% or more of their costs, compared to just 2% of those who had to get their coverage individually. Moreover, thanks to employer contributions, those in group plans paid less than half what individual-plan members paid in out-of-pocket costs.As a result, most people covered by their employers would probably prefer to keep their existing coverage. But many workers are afraid that employers might choose to discontinue offering health insurance of their own, deciding instead to let Obamacare's other provisions take care of their workers.
3. Whether employers will continue providing coverage will depend greatly on how health insurance exchanges look.
Despite fears of widespread employer abandonment of group health-insurance coverage, the 2012 National Survey of Employer-Sponsored Health Plans from HR consulting firm Mercer found that very few employers plan to cancel their health insurance benefits after Obamacare takes full effect. But smaller employers were much more likely to say they would cut coverage — with 16% of employers with fewer than 500 employees planning health plan cuts compared to just 6% of employers with 500 or more workers.For many, the decision may well hinge on what the individual and small-business health insurance exchanges under Obamacare end up looking like. States have the choice to run their own exchanges, but if they don't, the federal government will have exchanges to cover their residents. Many states have already released some details about their exchanges, although others are still pending. With open enrollment in the exchanges still scheduled for Oct. 1, 2013, it should be much clearer soon whether it will make sense for employers to drop coverage even in the face of penalties for some businesses that drop their plans, as well as the loss of tax credits that some eligible businesses will get for providing coverage.
Waiting for the details
Unfortunately, there's still a lot up in the air about how Obamacare will work, especially as some states are still figuring out what they will offer their citizens under the law. Clearly, some people will get far better health insurance coverage under Obamacare than they do now. But some people will also end up paying more than they do now for coverage they'd be just as happy to keep if they could.How Obamacare Changed Your Taxes
As much as Obamacare will affect your medical care and your health insurance coverage, the effects don't stop there. The legislation also made major changes to the tax laws — with ramifications not just for this year but extending well into the future.Lawmakers embedded several different tax provisions into the broader Obamacare legislation. Those changes will have an impact on taxpayers at all income levels.
Perhaps the biggest change in the law expanded the tax that workers currently pay for Medicare to cover both higher amounts and different types of income. Until this year, workers paid 1.45% of their wages in Medicare withholding taxes, with employers paying another 1.45% out of their own pockets. Self-employed individuals paid the combined 2.9% on their own. Although the amount of wages subject to Medicare tax used to be limited in the same way as Social Security withholding, that changed in 1991, and by 1994, the limits on wages subject to Medicare taxation were removed entirely.
Going forward, though, Obamacare imposes additional Medicare taxes on certain individuals. In particular, two groups will be affected:
- Joint filers with wages or other work-related earnings greater than $250,000 and singles earning more than $200,000 will have to pay an additional 0.9 percentage points in Medicare tax, bringing their total to 2.35% for employees or 3.8% for self-employed workers. Employers are supposed to handle this requirement in their withholding, but for two-earner couples, that may prove impossible, as your employer will have no knowledge of what your spouse earns.
- Those with total adjusted gross incomes of more than $250,000 for joint filers or $200,000 for singles will have Medicare taxes imposed on their investment income as well. On whatever amount of investments exceeds the $250,000 gross-income level, you'll have to pay the full 3.8% surtax yourself.
Hitting lower-income workers
Those who earn less than these $200,000 and $250,000 thresholds shouldn't assume that their taxes will be unaffected by Obamacare. New limitations on flexible spending arrangements have hit taxpayers of all income levels, limiting the amount you can set aside tax-free in a flex plan to $2,500 per year. Previously, there was no technical upper limit, although most employers imposed a $5,000 maximum. But for those who have high levels of predictable medical expenses, the forced reduction in flex-plan use could cost you hundreds of dollars in extra income, Social Security withholding, and Medicare withholding taxes.Moreover, those who rely on deducting medical expenses won't be able to get as big a tax benefit from them. Obamacare raised the floor on itemized medical expenses from 7.5% of gross income to 10%. That may not sound like much, but it could reduce your deduction by thousands of dollars and thereby increase your tax bill substantially.
Will you get any benefit?
The question, of course, is whether Obamacare's benefit will exceed the extra taxes you'll pay. The jury's still out on that question, but some have watched the way that health insurance and hospital stocks have reacted to Obamacare and have concluded that much of the benefit will go to industry players rather than to individuals. For newly covered individuals, the fact that they'll have coverage at all may be the only benefit they'll get from Obamacare, with higher taxes simply being part of the price we all pay for it.Regardless, as you consider your taxes this year, don't forget about the new Obamacare provisions. Planning for them now could save you from a big headache down the road.
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