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With Congress fighting so hard to derail the Affordable Care Act, also known as Obamacare, you might think it was really something to fight against. In fact, since they’re willing to shut down the government and trash our nation’s credit standing in the world, just to get the President to agree to a delay in the implementation of the health-care act, you would think that Congress is fighting against a huge tax increase on the part of the struggling middle class.
If you’ve been listening to all the media, on both the left and the right sides of the political turmoil, you are probably confused, and frightened. After all, the Republicans say this is going to cost an astronomical amount of money, and that money must come from SOMEWHERE, right? Politicians have insinuated as much. It’s reasonable that you, as a middle-class American taxpayer, think that somehow, you’re going to be the one who is stuck paying that tax.
Guess what? It’s probably not going to be you. If you’re among the ordinary wage-earners in the country, if your household makes less than $200,000 (individual) or $250,000 (married filing jointly), then you will not really see any effect on your taxes at all.
A 3.8% surcharge on investment income for high-earning households. This will be on top of the 15% ordinary tax charged on dividends, capital gains, rent, interest, etc.
A 0.9% increase in the Medicare tax on earnings over $200,000. Wage earners already pay 1.45% in this payroll tax – high earners will pay 2.35% on the incremental money.
Flexible Spending Accounts (FSAs) will be capped at $2,500 per year. Formerly there was no limit to the amount of money that you could set aside tax-free to pay for out-of-pocket medical costs.
The minimum threshold for deducting medical expenses when you itemize will increase from $7,500 to $10,000.
The penalty for non-medical withdrawals from a Health Savings Account (HSA) will increase from 10% to 20%. This is to discourage people from using the HSA as a savings account rather than as an account for medical expenses.
There will be a new, steep 40% tax on health plans that are known as “Cadillac Plans.” These are extremely high premium plans for which employers pay the majority of the premium. Employees would pay a 40% tax on the portion of the premium that the employer funds. The start-date on this penalty has been delayed until 2018.
And the last cost, the one that is infuriating people, is the “mandate” penalty. This is the penalty that will be assessed if you choose not to purchase health insurance. It begins in 2014 at $95 per adult, $47.50 per child, or 1% of income, whichever is greater. The penalty then increases over the years, until it hits $695 per adult in 2016.
Many people resent the fact that the government is “forcing” them to purchase insurance. However, the government also forces you to have car insurance. And your mortgage lender forces you to have homeowners insurance. It really is not all that different. If you are a smart consumer, you know the value of health insurance.
But here are some specific questions and answers about the plan.
You probably wont see too many changes in your choices when your company offers Open Enrollment. Premiums may be a bit higher than last year, but they would probably be higher no matter what. And you actually will see some improvements thanks to the law, like no more lifetime cap on benefits, no exclusions for pre-existing conditions, and mandated caps on out-of-pocket expenses.
If you have stayed with your company because of your need for employer-provided health insurance, perhaps because of a pre-existing condition, you will no longer have to suffer a job you despise. Your health insurance can be completely uncoupled from your employer, so you can take it with you no matter where you choose to work. This is possibly the greatest freedom offered by the plan – people will no longer be trapped because of their health conditions.
The ACA is your dream-come-true. Policies will be offered on state-run exchanges, and they will be comparable and transparent. Government subsidies based on your income will make them affordable. You cannot be refused nor charged more for a pre-existing condition.
Many households that have gone without health insurance, that have essentially crossed their fingers and prayed for no accidents or illnesses over the years, will be able to afford it now, and will be able to stop living in fear of the catastrophic medical situation that will wipe the out financially.
If you have a business with fewer than 50 employees, the ACA does not require you to offer coverage to your employees. And if you do currently offer health coverage to your employees, you are grandfathered in and are permitted to keep a plan even if it does not meet all of the ACA requirements.
However, if you do not currently offer a plan, the ACA does provide some incentives to do so. You will have a marketplace, similar to the exchanges that are opening for individuals, where you can shop plans and providers, to locate one that works for your business. And a good health insurance plan is always something that will help attract employees.
For even smaller businesses, those with 25 employees or fewer and whose average salary is under $50,000, there are tax credits available to help with the employer-provided part of the premium.
Unfortunately, even a week before the exchanges open, most of Americans still do not know what the law means for them. 34% admit that they don’t understand it at all, and another 35% said they only understand “some.” With these kinds of numbers, of course people are open to the fear and confusion that is being generated by politicians.
If you don’t understand something, it is up to you to get information. Seek out the truth. Ask the questions. Be sure you understand, before you blindly condemn or support.