What Does Health Reform Mean for You? A Consumer's Guide

What Are the Facts?

During the nine-month period leading up to the passage of the Patient Protection and Affordable Care Act, Americans were subjected to more than $200 million worth of TV, radio, newsprint and Internet ads. Almost all of these – pro and the con – were pure propaganda.

Even today, the White House and leaders of both political parties offer us little more than sound bites crafted for the evening news. A taxpayer-funded mailing to Medicare enrollees has been accused of selling more than informing. The government’s own Web site, while containing much valuable information, touts only the benefits of reform and ignores the costs. It focuses on what might go right and ignores what might go wrong.

As a result, many people are rightly confused about what to expect and why. We hope this publication will clear the air. Its goal is a balanced overview, with all important content sourced from government reports and other reputable documents.

Overview: A Better Health Care System?

Recently enacted legislation will radically transform the U.S. health care system. These changes will occur over time, however. The most significant changes (e.g., a requirement that most people obtain health insurance) will not become law until 2014.  A tax on employee “Cadillac” health plans does not take effect until 2019. This means there will be many elections and many opportunities for voters to express their will before most provisions become law. In the meantime, here is a brief summary.

Structural Features of Reform

  • Beginning in 2014, you will be required by law to have health insurance and to attach proof of insurance to your tax return.
  • If you fail to insure, you will be fined – with the penalty rising to $695 ($2,085 per family) in 2016 or 2.5% of your adjusted gross income, whichever is greater.
  • If your employer fails to offer you health insurance, your employer can be fined as much as $2,000 per employee per year.
  • The type of insurance you must have – including copays, deductibles and the employee’s share of the premium – will all be determined by federal regulations, rather than by you and your employer.
  • If you are not covered by an employer plan, Medicare, Medicaid or other government plan, you will be required to buy insurance in a government-regulated health insurance exchange, where competing insurers will offer the government-mandated health insurance benefit package.
  • How your doctor practices medicine and how you obtain care are likely to substantially change.

Some Major Benefits of the Reform. Some of the touted benefits of reform are not new. For example, since 1996 federal law has barred insurers from dropping your coverage just because you get sick. However, the following changes are new:

  • You may be able to buy insurance you cannot now afford. Beginning in 2014, for example, a couple with an income of twice the poverty level (currently $29,000) will be able to buy insurance for an annual premium no higher than 6.3% of their income ($1,827).
  • If you have a pre-existing condition, you will be able to buy insurance for the same premium as that paid by people in good health.
  • Over the next four years, newly created risk pools will offer subsidized insurance to some of the people who have been turned down by health insurers because of a pre-existing condition.
  • If you have a very expensive and continuing health problem, there will be no lifetime limits on your health insurance coverage.
  • Overall, the Congressional Budget Office (CBO) expects 32 million otherwise uninsured people (about 60% of the total) to obtain health insurance. Medicare’s chief actuary puts the estimate at 34 million.

Some Major Costs of the Reform. In general, for every benefit there is an offsetting cost. More than half the costs of this reform, for example, will be borne by the elderly and disabled on Medicare:

  • $523 billion of health reform’s first 10-year cost will be paid for by cuts in spending on Medicare enrollees, according to Congressional Budget Office.
  • In addition, there are new taxes on drugs and on such medical devices as wheelchairs, crutches, pacemakers, artificial joints, etc. – items disproportionately used by Medicare enrollees.

Reduced spending and reduced subsidies will have an especially big impact on seniors:

  • Of the 15 million people expected to enroll in Medicare Advantage programs, 7½ million will lose their plans entirely, according to Medicare’s chief actuary, and the remainder will face higher premiums and lower benefits.
  • Nearly 6 million retired employees will lose their employer drug coverage, according to the most recent Medicare Trustees report.

There are other measures that will affect the more general population:

  • A new tax on health insurance is likely to cost the families of employees of small businesses more than $500 a year in higher premiums.
  • A 40% tax on the extra coverage provided by expensive “Cadillac” plans will apply to about one-third of all private health insurance in 2019; and because the tax threshold is not indexed to medical inflation, over time the tax will eventually reach every health plan.
  • Scores of other items will be taxed, ranging from tanning salons to the sale of your home, in some cases.

There are also hidden costs of certain benefits:

  • Health insurers will have to raise premiums for everyone in order to charge people with pre-existing conditions less than the expected cost of their care. Young people, for example, could see a doubling or tripling of their premiums, according to industry estimates.
  • In order for employers to provide health insurance (or more generous insurance) to their employees, they will have to reduce what they pay in wages and in other benefits.
  • The extra burden on employers could cost as many as 700,000 jobs by 2019.

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