Monday, March 29, 2010

In the year 2011...

This is Part II...

Let's take a look at the provisions of Obama-care that take effect in 2011...

Medicare will provide free annual wellness visits and personalized prevention plans. New plans will be required to cover preventive services with no co-pay. In the simplest of economic times this provision will drive up demand on physician services. Economics 101 tells you that if you increase demand while keeping supply static you will increase cost. In 2006, the United States Department of Health and Human Services published a study projecting physician supply and demand through the year 2020. Their findings? "The growth and aging of the United States population will cause a surge in demand for physician services..." while supply will remain relatively static. Proponents of this provision say that these preventative measures will yield a long-term decrease in other, move involved, more expensive forms of care. I would be inclined to beleive them (to a point) were it not for the the litigious nature of healthcare. One of the provisions Republicans pressed hardest for was tort reform to address these ballooning costs which, according to one University of Connecticut study costs $1.4 billion per year... in Massachusetts.


This bill increases the Medicare payroll tax on individuals earning more than $200,000 and married couples earning more than $250,000. Two years later this segment of the population gets hit with an increase in the hospital insurance tax that accounts for a total tax hike of 3.8%. Soak the rich... except that most small business owners file through individual tax returns, so they will get hit with this even though that $250,000 return they filed may be getting pumped right back into the business they are trying to get off the ground or represent the first profitable year a business has had in several. Make no mistake - this is a job killer that will have a disproportionately negative impact on small business owners.


New taxes on Healthcare Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) take effect. This one gets a bit complicated so stick with me.

HSAs are a relatively new form of Health Insurance featuring very high deductibles (over $1,500 per person). The benefit is that it works on a fee for service basis. You can put money, as much as you want, into a tax-free account and withdraw those funds, again tax free, to pay for medical services and medications, including over the counter (OTC) medications. If you spend the money on unqualified expenses they are subject to a 10% tax... until 2011, when that tax goes up to 20% and the OTC benefit goes away. These provisions are expected to bring in at least $5 billion in revenue.

Now FSAs allow you to deposit pre-tax dollars into an account. These funds may then be spent, tax free, throughout the year on qualified medical expenses; things like co-pays, prescription contacts & eyeglasses and certain over the counter drugs. Anything left in the account at the end of the year you lose and contributions are unlimited... until 2011. When this portion of the bill takes effect annual FSA contributions will be limited to $2,500 and over the counter (OTC) medications will no longer be considered as qualified expenses. This second part is important because if you overbudget your FSA at the end of the year you can always use the money for OTC medications to avoid losing the money. But no big deal right, people will just get smarter about how they manage their FSAs right? Well Congress hopes not - they are counting on these two provisions raising more than $11 billion in revenue... That seems like a really sleazy way to steal people's money.

Thursday, March 25, 2010

"What does Obama-care mean for me?"

Like it or not, health insurance reform as envisioned by the Democrat party is the law of the land.

But the fact remains that this is a remarkably unpopular bill. Democrats hoping that it would gain in popularity after passage have seen few rays of light in otherwise cloudy forecast. There are a smattering of polls that show the bill gaining in popularity, but no credible poll I have seen shows a majority of the American people supporting this legislation. Even those that draw the numbers closer to equal show disturbing trends in their underlying metrics - Democrats overwhelmingly support the change, Republicans overwhelmingly hate it and the ever elusive yet incredibly important Independents trend much closer to Republicans than Democrats.

What we can expect to follow is a lengthening of the conversation. President Obama and his allies will try to sell what is now the law of the land Republicans will try to pin what they see as a terrible piece of legislation to the Democrats any way they can and make it stick until November.
But while the politicians continue to pay politics, you may find yourself saying, "What does Obama-care mean for me?" Well I'm glad you asked because in this space over the next few days we are going to take a look at the key provisions of this bill as they will take effect in the coming months and years... We'll start with what we can expect to take place immediately:

Beginning in March, 2010...

Adults will be able to stay on their parent's insurance plans until they are 27 years old. Great news for kids living in their parents' basements still trying to "find themselves," not the best thing for those of us who think they would be better served simply getting a job.

Insurers will no longer be able to deny coverage to children with pre-existing conditions. This is a good provision - you could argue against it but you would lose. There should be little argument that this part of the legislation should stand… that is if the Democrats can get it right. Turns out there is a loophole in the bill that means this provision doesn’t kick in until 2014. The President, as recently as last Friday in a speech at George Mason, said it would take effect immediately.

Insurers will not be able to rescind policies to avoid paying medical bills when a person gets sick. I have to check the language on this. It's my understanding that "rescission" mostly takes place if your insurance company finds out that you lied on your application to get insurance. For example, if you are getting treated for kidney failure and your insurance company learns that you "forgot" to tell them about your fifteen-year meth addiction - they can drop your coverage. If the bill prevents companies from dropping coverage in this case then I am against the provision. However, there have been cases where insurance companies have dropped sick patients using loopholes in policies they wrote to avoid paying for expensive treatments. If the bill protects consumers solely in this type of situation then I am all for it. Again, I have to read that section more closely.

Lifetime limits on coverage are now illegal. I think this is a dumb provision that will increase the cost of insurance. If I want to buy an insurance policy that limits the lifetime out-of-pocket expense of my insurer to, let's say, $100,000 in exchange for a dirt cheep policy I should be allowed to do so. If I get some catastrophic disease - well, that's my problem. I shouldn't have gone with the SafeAuto of health insurance. The government can and should only do so much to protect people from themselves.

New plans must provide coverage for preventive services without co-pays and all plans must be brought into compliance by 2018. Again, dumb. Co-Pays can bring down the cost of insurance considerably the same way that deductibles bring down home and auto-insurance. This will undoubtedly cause premiums to rise. The President says otherwise, but some of those in his own party, including Sen. Dick Durbin (D -IL), state that anyone who tells you insurance premiums will go down is not telling the truth.

A 10 percent tax will be imposed on amounts paid for indoor tanning services on or after July 1. Somewhere, the cast of Jersey Shore is taking a meeting with their financial planner to see how this will affect their bottom line. Does anyone want to argue against this one? I didn’t think so. I have no problem with a tax on tanning.

Businesses with fewer than 50 employees will get tax credits covering 35 percent of their health care premiums, increasing to 50 percent by 2014. This is a good thing. We should be encouraging businesses to provide insurance for their employees (note I said "encouraging" not "mandating"). We should also be working to get more people gainfully employed, that way they can get health insurance without the government's help. The best way to do both is by cutting taxes.

Next time, we'll deal with 2011...