Affordable Care Act: Do You Need to Change Your Medical Plan?

I already have health insurance. Will I have to change my plan because of the new health-care reform law?
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Your present insurance plan may be considered a grandfathered plan under the ACA if your plan has been continually in existence since March 23, 2010 (the date of enactment of the ACA), and has not significantly cut or reduced benefits, raised co-insurance charges, significantly raised co-payments or deductibles, and your employer contribution toward the cost of the plan hasn’t significantly decreased.

However, if a grandfathered plan significantly reduces your benefits, decreases the annual dollar limit of coverage, or increases your out-of-pocket spending above what it was on March 23, 2010, then the plan will lose its grandfathered status.

Some provisions of the ACA apply to all plans, including grandfathered plans. These provisions include:

  • No lifetime limits on the dollar cost of coverage provided by the plan
  • Coverage can’t be rescinded or cancelled due to illness or medical condition
  • Coverage must be extended to adult dependents up to age 26

The ACA doesn’t apply to all types of insurance. For example, the law doesn’t apply to property and casualty insurance such as automobile insurance, homeowners insurance, and umbrella liability coverage. The ACA also doesn’t affect life, accident, disability, and workers’ compensation insurance. Nor does the law apply to long-term care insurance, nursing home insurance, and home health-care plans, as long as they’re sold as stand-alone plans and are not part of a health plan. Medicare supplement insurance (Medigap) is generally not covered by the ACA if it’s sold as a separate plan and not as part of a health insurance policy.

healthcare-exchangeExchanges
A health insurance Exchange is essentially a one-stop health insurance marketplace. Exchanges are not issuers of health insurance. Rather, they contract with insurance companies who then make their insurance coverage available for examination and purchase through the Exchange. In essence, Exchanges are designed to bring buyers and sellers of health insurance together, with the goal of increasing access to affordable coverage.

The Patient Protection and Affordable Care Act does not require that anyone buy coverage through an Exchange. However, beginning in 2014, each state will have one Exchange for individuals and one for small businesses (or they may combine them). States have the option of running their own state-based Exchange or partnering with the federal government to operate a federally facilitated Exchange. States not making a choice default to a federally run Exchange.

Through an Exchange, you can compare private health plans based on coverage options, deductibles, and cost; get direct answers to questions about coverage options and eligibility for tax credits, cost-sharing reductions, or subsidies; and obtain information on a provider’s claims payment policies and practices, denied claims history, and payment policy for out-of-network benefits.

Policies sold through an Exchange must meet certain requirements. Exchange policies can’t impose lifetime limits on the dollar value of coverage, nor may plans place annual limits on the dollar value of coverage. Insurance must also be “guaranteed renewable” and can only be cancelled in cases of fraud. And Exchanges can only offer qualified health plans that cover essential benefits.

In order to be eligible to participate in an individual Exchange:

    • You must be a U.S. citizen, national, or noncitizen lawfully present in the United States
    • You cannot be incarcerated
    • You must meet applicable state residency standards

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with a qualified tax advisor.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

Happy Healthday! HSAs Turn 10

Created 10 years ago as part of the Medicare Prescription Drug and Modernization Act of 2003, health savings accounts (HSAs) have gained in popularity over the past decade. According to the Employee Benefit Research Institute (EBRI), more employers and employees have been contributing to HSAs in recent years, and the amount contributed to HSAs has generally been on the rise.

For example, the percentage of individuals in employee-only HSAs contributing $1,500 or more rose from 21% in 2006 to 42% in 2012, while the percentage of employees contributing nothing decreased from 28% to 15% over that same period. (Sources: “HRA/HSA Health Plan Contributions Continue to Grow,” EBRI, February 20, 2013, and EBRI Notes, February 2013.) If you are eligible to contribute to an HSA, you may want to take another look at these savings plans, which could benefit your financial situation both now and in the future.

HSAs explained
Health savings accounts help individuals and families set aside money on a tax-advantaged basis to pay for health-care costs. HSAs are typically offered by employers along with what’s known as “high-deductible health plans,” or HDHPs–health insurance plans that generally offer lower premium payments in exchange for high annual deductibles (at least $1,250 for individuals and $2,500 for families in 2013).* You must be enrolled in an HDHP in order to participate in an HSA. If your employer provides an HDHP but does not offer an HSA, you may be able to establish an account on your own through a financial institution. Self-employed individuals can also use HSAs.

Here’s how an HSA works:
— You can contribute up to $3,250 for individual coverage or $6,450 for family coverage to an HSA in 2013. If you are age 55 or older, you may also make “catch-up” contributions of up to $1,000.
— Your employer may also make contributions on your behalf.
— You can contribute in one lump sum or in periodic (e.g., monthly) amounts.
— You can make contributions for the current year up until your tax-filing deadline (generally, April 15 of the year following the year of coverage).

One of the key advantages of an HSA is that your contributions are tax deductible. If your plan is offered through your employer, you may be able to make automatic contributions on a pretax basis (similar to a work-based retirement savings plan) and any employer contributions are generally excluded from your gross taxable income as well. Moreover, you can typically select from a variety of savings and investment vehicles for your contribution dollars, and the earnings grow tax deferred until you withdraw them. Withdrawals then used for qualified medical expenses are tax free.

Permitted expenses
You can withdraw money from your HSA to pay for qualified expenses for yourself, your spouse, or your dependents. Permitted expenses include:
— Health insurance deductibles and co-payments
— Prescription drugs
— Vision care and eyeglasses
— Dental care
— Laboratory fees
— Hearing aids and more
For a complete list of eligible expenses, please see IRS Publication 502.

On the other hand, HSA distributions that you use for nonqualified expenses are subject to income taxes and a 20% penalty tax.

Eligibility rules
In order to be eligible for an HSA, you must have qualifying HDHP coverage. You won’t be eligible if you’re covered by another health plan (e.g., your spouse’s nonqualified health plan), if you’re 65 and enrolled in Medicare, or if someone else can claim you as a dependent. In addition, you may be ineligible if you’re covered under a flexible spending account or health reimbursement arrangement that offers coverage similar to the HSA’s.

Plans that won’t affect your eligibility include dental and vision care insurance, long-term care insurance, and disability and accident insurance.

Rollovers
Unlike flexible spending accounts, where you have to use up all the funds you set aside for a plan year by a certain date or forfeit the money, HSA funds are yours to keep. If you leave your current employer and would like to roll your HSA money into another HSA, you are typically permitted to do so. And provided you are still eligible, you can continue to save in your account on a tax-deferred basis until you enroll in Medicare.

*Total out-of-pocket costs for HDHPs cannot exceed $6,250 for individuals and $12,500 for families.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with a qualified tax advisor.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

Now That’s Inflation!

I don’t know about you, but I have become increasingly concerned about inflation over the past few years. And I make that statement not only as a financial advisor, but as a consumer who goes the supermarket, to the gas station and plenty of other stores. I have personally experienced the sting of higher prices on many items, especially those that seem essential for day-to-day living!

And though inflation since 2009, according to official government statistics, has been very tame, that might change in the years ahead. I was reminded of this possibility recently when I saw a press release announcing the results of a survey that found dramatically higher medical insurance premiums in the state during the past decade.

The cost of health insurance for California families rose 153% since 2002, more than five times the 29% increase in the rate of inflation, according to the study which was conducted by the California HealthCare Foundation and announced by Consumer Watchdog, a non-profit organization.

Those dramatic numbers reminded me that everyone should review their healthcare premiums and expenses from time to time and determine if there is a more cost effective way to take care of this important part of your life.

It may not be important to review your plan if you have medical coverage through an employer which subsidizes some of the cost. However, if you are self-employed (as I am) or if your employer does not offer such a subsidized plan, the search for quality coverage at an attractive price never stops!

One option is to consider a High Deductible Health Plan (“HDHP” as they are sometimes called). These plans often feature premiums that are lower – sometimes significantly so – than traditional health insurance plans. Of course, the trade-off with the lower premium is that you could incur much higher out-of-pocket expenses before you reach the higher deductible that is a part of such plans.

But sometimes these “HDHP” plans can make a great deal of sense, especially if you are in good health and are self-employed. You may also augment an “HDHP” with a Health Savings Account (“HSA”), which is a tax-advantaged savings account.

The money you put in tax-deductible, and withdrawals are tax free when used to pay for qualified medical expenses. Some of these tax benefits are more generous than a 401(k) plan which requires you to pay taxes on all distributions. If you are interested in this account, remember that you can only get the tax advantages of an HSA by enrolling in a “High Deductible Health Plan (“HDHP”).

So, if you think your healthcare expenses are too high, contact your financial advisor or go on the internet and seek out options! It could be a great step in beating the unrelenting inflation demon and stretching out your hard earned dollars!