Paying for Healthcare, One Way or Another

Despite a rough start, enrollment in private health plans through The Patient Protection and Affordable Care Act (commonly referred to as “Obamacare”) was at three million by the end of January. Some five million are expected to sign up by the March deadline — a considerable improvement from its inauspicious beginnings, but still about two million shy of the White House’s projected goal.

One of the key tenets of the mandated insurance provision is for plenty of healthy young adults to enroll to help offset the costs of those who are older and presumably run up more healthcare costs. The numbers were actually skewed the other way as of mid-January — 55 percent of enrollees were age 45 and above while 45 percent of enrollees were age 44 and younger.

[CLICK HERE to read the article, “Obamacare Private Plan Enrollment Reaches 3 Million,” at Bloomberg Businessweek, Jan. 24, 2014.]

[CLICK HERE to read the article, “States make more progress in Obamacare enrollment,” at CNBC.com, Jan. 29, 2014.]

[CLICK HERE to read the article, “Who’s Buying Obamacare, in Three Charts,” at Bloomberg Businessweek, Jan. 13, 2014.]

Medicare Expansion, or Lack Thereof

A 2012 Supreme Court decision held that Medicaid eligibility expansion would be left up to individual states. However, if employer-offered health plans are deemed too expensive (if plans cost workers more than 9.5 percent of their family income or pay less than 60 percent of their medical costs) and workers then buy subsidized Obamacare insurance, businesses may face a tax penalty of up to $3,000 per worker who purchase private health insurance from an exchange.

This Medicaid expansion-related tax will impact employers with more than 50 full-time workers starting in 2015. Presently, there are 25 states that chose not to expand Medicaid coverage, and the collective tax hit to their employers could be substantial: In Texas, as much as $400 million; Florida, as much as $253 million, and North Carolina, as much as $120 million.

[CLICK HERE to read the article, “Employers face tax hit in states with no Medicaid expansion,” at CNBC.com, Jan. 22, 2014.]

Mind the (Income) Gap

According to a recent survey by the National Center for Health Statistics at the CDC, one in four U.S. families struggled to pay medical expenses in 2012, and one in 10 said they couldn’t pay some bills at all. In fact, unpaid medical bills are the foremost reason why households are forced to declare personal bankruptcy — including those that have health insurance coverage.

However, another study from the Brookings Institution indicates that the Affordable Care Act (ACA) will help improve the well-being and incomes of Americans in the bottom fifth of the income distribution by increasing their income by as much as 6 percent. The study uses an expansive definition of income to include part of the value of insurance.

ACA employs certain wealth redistribution provisions such as Medicaid expansion, subsidies, higher Medicare premiums, Medicare payroll tax contributions, and a new investment tax on high-income taxpayers. As a result of these redistribution provisions, “the gains and losses cause small proportional drops in income for Americans in the top three-quarters of the income distribution.”

[CLICK HERE to read the article, “One in four U.S. families struggles to pay medical bills,” at Employee Benefit News, Jan. 28, 2014.]

[CLICK HERE to read the article, “Potential Effects of the Affordable Care Act on Income Inequality,” at The Brookings Institute, Jan. 27, 2014.]

Meanwhile, Republican Congressmen have proposed an alternative healthcare plan to replace Obamacare, with similar-yet-different provisions that also serve to redistribute wealth via tax credits and expanded Medicaid eligibility. According to one health policy academic, “There’s no way a Republican can run for president in 2016 without having a major health-care plan.”

[CLICK HERE to read the article, “Republican Senators Pitch Obamacare Replacement for 2017,” at Bloomberg, Jan. 27, 2014.]

If you’re concerned about how healthcare expenses could impact your overall financial picture, please feel free to contact us for an evaluation.

By contacting us, you may be provided with information regarding the purchase of insurance products.

These articles are being provided to for informational purposes only and should not be used as the basis for any financial decisions.  While we believe this information to be correct, we do not guarantee the accuracy or completeness of the information included. All clients are encouraged to consult qualified tax and legal professionals before making any decisions about your personal situation.

AE02140116