It passes, What Now?

[Leonidas]

How will they track, fine and collect these penalties?

Someone here posted an article from the Christian Science Monitor that gave the highlights on what to expect from the new bill. It was there, I believe, where I read that the G estimates it will need thousands (17,000 I think) new IRS agents to enforce the income tax provisions for health care reform.

 

[donheff]

How will they track, fine and collect on these penalties?

IRS, seriously.

 

[donheff]

Another feature that comes in this year is that all insurers must post their balance sheets on the Internet and fully disclose administrative costs, executive compensation packages, and benefit payments. This is preparing for the point later on when exchanges come in - insurers have to spend at least 80%? on health care. But the early transparency will be nice.

 

[audreyh1]

We have a high risk pool already - you just have to be denied coverage (I think by 2 commercial insurers, can't remember). It costs a fortune and will keep me from bankruptcy if something happens - but they can't refuse me.

That 6 months without coverage thing seems insane - I noticed that.

Up until today, to qualify for a state's risk pool and have pre-existing conditions covered, you had to have already been covered by a group health plan for 18 months. I think this is another reason people with pre-existing conditions have had difficulty getting insurance - they weren't covered by an employer group plan or not for long enough.

Audrey

 

[audreyh1]

Most risk pools have a six month wait, certainly at least before covering preexisting conditions. There is a HIPAA exception in most cases where if you are coming off of a group plan you can get on the risk pool. There isn't such an exception on the bill that was passed.

Oops!

Audrey

 

[Rustic23]

A friend of my adopted their granddaughter. They are both on Medicare. So who insures the child? Is she eligible for her 'parents' insurance?

Ok, I know she will not be covered, but, just how does she get her coverage?

 

[FUEGO]

Someone here posted an article from the Christian Science Monitor that gave the highlights on what to expect from the new bill. It was there, I believe, where I read that the G estimates it will need thousands (17,000 I think) new IRS agents to enforce the income tax provisions for health care reform.

Well, there's the new job creation we were looking for, right?

 

[TromboneAl]

I had always considered an annual physical preventive, but when you turn 65, the government does not.

As a practical matter, if you go into the doctor and say "Sometimes I feel tired," won't you pretty much get a physical?

 

[Nords]

Another feature that comes in this year is that all insurers must post their balance sheets on the Internet and fully disclose administrative costs, executive compensation packages, and benefit payments. This is preparing for the point later on when exchanges come in - insurers have to spend at least 80%? on health care. But the early transparency will be nice.

Having read a few insurance company's annual reports, I rarely find the words "insurer's balance sheet" and "transparency" in conjunction...

 

[samclem]

Another feature that comes in this year is that all insurers must post their balance sheets on the Internet and fully disclose administrative costs, executive compensation packages, and benefit payments. This is preparing for the point later on when exchanges come in - insurers have to spend at least 80%? on health care. But the early transparency will be nice.

I think we're getting off the practical, "what does it mean to my health care" angle and diverging into the macro machinations of the law. I'll avoid following up here and post a new thread on "How to Take Advantage of the New Law".

 

[oliverdickens]

I think there is a loop hole in this new law that will affect us on RE and are able to pay of insurance now, even if our incomes fall within the subsidy rules.

It seems that you will only get the subsidy IF you do not have insurance when it is mandated that you must, and you fall within the income guidelines.

If you already have insurance, ie gov't deems you can afford it, no matter your income level, you will not be eligible.

So we might have to go naked for awhile prior to the mandate, ok not until 2014, in order to qualify.

Anyone else read this into the various summaries out there?

Here is the recap from USA Today. Note it is for the uninsured only, says nothing if you already have insurance.

The uninsured
The Congressional Budget Office projects that 32 million Americans will gain health insurance under the law, beginning in 2014.
The poorest adults — those below 133% of the federal poverty level, or about $29,327 for a family of four — will qualify for Medicaid, the federal-state program for the poor and people with disabilities. Children already qualify at that income level.
Currently, only seven states offer Medicaid to adults without children, says Ron Pollack of Families USA, a consumer advocacy group. The median income eligibility level for that group is 69% of poverty — less than $7,500 for a single person and about $15,200 for a family of four. Many states are significantly lower than that.
Lower-income people who don't qualify for Medicaid will get federal subsidies to help them buy coverage from new state insurance exchanges — organized marketplaces that encourage competition.
Those eligible for the subsidies could have income up to 400% of the poverty level, or $88,200 for a family of four. Those at 133% of poverty will get the most assistance, those at 400% the least, both for premium assistance and benefits.
The premiums will range from 2% to 9.5% of family income, and the poorest families will pay the least. Those families also will have the smallest co-payments — 6%, ranging up to 30% for the top of the income bracket, Pollack says.
"For a lot of people, this bill is going to give them the ability to purchase health insurance, where today they can't afford it," says Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University in Virginia. "Like Forrest Gump said, 'That's one less thing.' "

Thoughts?

 

[cardude]

Is the Plan not going to be means tested for net worth?

I'm retired and we are a family of four with a pretty high net worth, and with my big capital loss "bank" I think I can manipulate our income to be in the "subsidy level" for quite a few years.

I guess that means we need to:

1. pay off the house before 2014 to decrease our need for income and decrease the income that would have been produced by that cash as interest? I guess it depends if the mortgage interest deduction is more than the insurance subsidy.

2. postpone using any of our capital loss offsets until the bill kicks in in 2014-- basically don't sell any stock that have capital gains until the subsidy comes into effect. Just live off the cash for the next few years.

3. Get DW to quit her job low-paying teacher's job before 2014 (probably will anyway) and purchase insurance plans for the family so we are not covered under an employer's plan and so we will be elligible for the gummit plan.

4. What else?

 

[cardude]

I think there is a loop hole in this new law that will affect us on RE and are able to pay of insurance now, even if our incomes fall within the subsidy rules.

It seems that you will only get the subsidy IF you do not have insurance when it is mandated that you must, and you fall within the income guidelines.

If you already have insurance, ie gov't deems you can afford it, no matter your income level, you will not be eligible.

So we might have to go naked for awhile prior to the mandate, ok not until 2014, in order to qualify.

Anyone else read this into the various summaries out there?

If this is the case then it looks like we will not be elligible for the subsidy since I currently pay for my own plan out of my pocket. Unless, as you say, I cancel that plan and have no insurance for me and the family for awhile. That seems way too risky, unless I'm guaranteed to be able to get into a plan. I guess I could cancel for like one month or something?

 

[samclem]

2. postpone using any of our capital loss offsets until the bill kicks in in 2014-- basically don't sell any stock that have capital gains until the subsidy comes into effect. Just live off the cash for the next few years.

A related note: This might not affect you, but 2010 is the last year for a 0% cap gains rate for taxpayers up to the top of the 15% rate ( $68,000 for married filing jointly, $34,000 for singles). Folks under that level with CGs to take might want to take them (up to the top of the 15% rate) in 2010, and continue to save any carryover CG losses for future years in order to drive down their taxable income and qualify for more of the "free" subsidies from Uncle Sam.

 

[ziggy29]

I guess that means we need to:

1. pay off the house before 2014 to decrease our need for income and decrease the income that would have been produced by that cash as interest? I guess it depends if the mortgage interest deduction is more than the insurance subsidy.

2. postpone using any of our capital loss offsets until the bill kicks in in 2014-- basically don't sell any stock that have capital gains until the subsidy comes into effect. Just live off the cash for the next few years.

3. Get DW to quit her job low-paying teacher's job before 2014 (probably will anyway) and purchase insurance plans for the family so we are not covered under an employer's plan and so we will be elligible for the gummit plan.

4. What else?

I think #1 is logical. As we increasingly create new means-tested goodies with higher taxes and reduced subsidies based on higher income, and income (not assets) are the only test for eligibility, it makes sense to plan for retirement not only with generating sufficient income, but also with configuring your lives to need as little income as reasonably possible. I've been doing that for a few years now, having seen the writing on the wall.

#3 makes little to no sense, IMO, unless she is only working for the health insurance. The lost income and reduced pension benefits don't seem to make it worthwhile financially.

 

[donheff]

Some pretty extreme machinations here just to get a little piece of a subsidy on health care premiums. Many here may just slip into the top subsidy earnings bracket so will likely get a fractional subsidy. You need to evaluate the real impact before rearranging your lives

 

[samclem]

You need to evaluate the real impact before rearranging your lives

True enough, but the subsidies can be a big deal. For example, for a family of four, each dollar earned above 40K per year up to 50K results in about 18 cents in higher medical insurance costs. Add that to all the other taxes, and it makes sense to get that income down as low as possible.

But it will probably pay to wait and see how employers handle the legislation. If they drop family coverage as prices climb then non-working spouses won't have to do anything for the "privilege" of joining the exchanges.

 

[ziggy29]

True enough, but the subsidies can be a big deal. For example, for a family of four, each dollar earned above 40K per year up to 50K results in about 18 cents in higher medical insurance costs. Add that to all the other taxes...

True enough, especially if one is self-employed and pays the 15.3% self-employment taxes all themselves. (Okay, after deducting half of it in the 15% bracket it's more like 14%, but still...) You have 15% marginal federal income tax, effectively 14% in self employment taxes and 18% in lost health insurance subsidies. Add in (say) 5% for state income tax and someone self-employed and earning as little as 50K winds up losing around half of each extra dollar earned to taxes and reduced health insurance subsidies.

To quote from The Princess Bride, that is what "to the pain" means. And at some point, beyond what you need to live comfortably, it makes the extra work required to get the extra dollars a lot less compelling and it makes the "stuff" that a more affluent income brings a lot less attractive.

 

[cardude]

#3 makes little to no sense, IMO, unless she is only working for the health insurance. The lost income and reduced pension benefits don't seem to make it worthwhile financially.

It really doesn't make financial sense, but she has been wanting to quit in a couple of years anyway and this makes it easier. She contributes $1200K per month to the budget, but her job could cause us to lose a possible 9K in subsidy money, so the net effect of her quitting is about a $450 per month.

However, if she quits then she will end up shopping a lot more with all the extra time on her hands, so that could end up costing way more than $450 per month.

 

[samclem]

. . . it makes the extra work required to get the extra dollars a lot less compelling and it makes the "stuff" that a more affluent income brings a lot less attractive.

It also makes off the books work for "cash" a lot more rewarding than working in a job/business with documented compensation. Go off the books and double your (effective) pay. At a time when businesses will be asked to pay higher costs for health care and probably higher taxes, they'll be up against more and more "grey market" competitors in a bigger underground economy. This can't be good for civil society, respect for government authority and the rule of law. Other illicit activity will be expected to thrive in that unregulated environment.

Some folks argue that a 27% National Retail Sales Tax would foster black market activity. That might prove to be nothing in comparison to this. The 16,000-17,000 new IRS hires and the government snitch-net for tips might not be nearly enough to allow the feds to have sufficient control over the public to make it work.

 

[FUEGO]

Some pretty extreme machinations here just to get a little piece of a subsidy on health care premiums. Many here may just slip into the top subsidy earnings bracket so will likely get a fractional subsidy. You need to evaluate the real impact before rearranging your lives

Receiving a subsidy between a few thousand dollars and over $10,000 is worth juggling some numbers around in my opinion. Particularly if you are really close to receiving the subsidy but earn $1 too much, and subsequently lose out on $10,000+ in subsidy because of that $1 in earnings.

"Rearranging our lives" may not be required. Diligent tax loss selling and other simple tax efficiency may be all that is required to get one's income below the magic thresholds to be deemed worthy of a subsidy. It's certainly worth my while.

 

[ziggy29]

Receiving a subsidy between a few thousand dollars and over $10,000 is worth juggling some numbers around in my opinion. Particularly if you are really close to receiving the subsidy but earn $1 too much, and subsequently lose out on $10,000+ in subsidy because of that $1 in earnings.

As I understand it the subsidies are phased out over an income range; they aren't all or nothing because of earning one dollar too many. In that phase-out range, if you buy individual insurance you do lose more than 15 cents of every marginal dollar earned -- but you don't effectively have a situation where you lose $10,000 because you earned that extra dollar.

Still, given that the subsidy loss can "feel" like an extra 15-18% tax on the lower middle and middle classes, it's pretty punitive. I really can't believe they chose this method and this income bracket to really stick it to.

 

[FUEGO]

As I understand it the subsidies are phased out over an income range; they aren't all or nothing because of earning one dollar too many. In that phase-out range, if you buy individual insurance you do lose more than 15 cents of every marginal dollar earned -- but you don't effectively have a situation where you lose $10,000 because you earned that extra dollar.

Still, given that the subsidy loss can "feel" like an extra 15-18% tax on the lower middle and middle classes, it's pretty punitive. I really can't believe they chose this method and this income bracket to really stick it to.

I thought this plan provides a subsidy up to 400% of federal poverty level. Presumably at 401% of FPL you lose the subsidy. Take, for example, a 60 year old head of a 4 person household. The subsidy amounts to $8,200 a year at $88,200 income. The subsidy is zero at $88,201. If this is how it will work in practice, that is an 820,000% marginal tax rate on that dollar.

Obviously they could remedy this to a certain extent by making the phase-out of subsidy extend over a wide enough income range so that the total marginal tax rates don't exceed 100%. For example, with a family of four, you could phase out the subsidy for incomes of 400% to 425% FPL and have a marginal effective tax rate of 37% (at age 60). But add that to federal, state, and payroll taxes and you may end up with a total marginal rate of 60-75%.

 

[ziggy29]

I thought this plan provides a subsidy up to 400% of federal poverty level. Presumably at 401% of FPL you lose the subsidy. Take, for example, a 60 year old head of a 4 person household. The subsidy amounts to $8,200 a year at $88,200 income. The subsidy is zero at $88,201. If this is how it will work in practice, that is an 820,000% marginal tax rate on that dollar.

I don't believe this is the case.

My understanding is that you get the full subsidy up to 133% of the poverty level, and the subsidy phases out to zero at 400%. Over the course of earning in the 267% in between you lose that 15-18 cents on every dollar as a result of the extra premiums you have to pay.

Basing eligibility for goodies on income also adds more incentive to retire to low-cost areas. There are places where $40K can go a long way for people with a paid-off home and no debts, and there are other places where it would be a real struggle.

 

[FUEGO]

I don't believe this is the case.

My understanding is that you get the full subsidy up to 133% of the poverty level, and the subsidy phases out to zero at 400%. Over the course of earning in the 267% in between you lose that 15-18 cents on every dollar as a result of the extra premiums you have to pay.

Basing eligibility for goodies on income also adds more incentive to retire to low-cost areas. There are places where $40K can go a long way for people with a paid-off home and no debts, and there are other places where it would be a real struggle.

It seems our understanding of the way the program is structured is very different. I'm not finding a summary that I am 100% sure is the one passed and signed into law, but here is one from the House bill that passed on Mar 21.

http://docs.house.gov/energycommerce/AFFORDABILITY.pdf

I'm reading that at tax credits will be available that limit the total percentage of income that one will pay for health insurance premiums, up to incomes of 400% FPL. At 400% FPL, one would pay up to 9.5% of their income for health insurance premiums. This is where the huge step function occurs. At 401% FPL, I don't believe there are any tax credits available to keep health insurance costs to 9.5% of income, hence you are paying the full premium out of pocket.

In other words, the subsidy at 400% FPL income is (Total HI Premium) - (9.5% of 400% FPL income). The subsidy at 401% FPL income is zero.

I also noticed that there are maximum out of pocket caps on all insurance plans of $6,200 for individuals and $12,300 for family coverage. These max out of pocket caps are lower for the lowest income individuals - $2,066 for individuals and $4,100 for families. Presumably individuals and families at 200% FPL income would fall somewhere in between these max out of pocket limits.

Agreed on the incentive this gives to relatively lower cost areas. $40,000 goes a lot further in flyover country (or Texas) than it would in, say, SF or NYC.