Employee Health Care

Health Care: 10 Frequently
Asked Questions

The new law will mean huge changes for businesses, insurers and individuals.

By Martha Lynn Craver, Associate Editor, The Kiplinger Letter

March 23, 2010

The health care bill is more than two thousand pages long -- with hundreds more to come from regulators filling in the details. It will literally take years before all the details are set and everyone can see how the plan will affect their particular situation. But here are 10 commonly asked questions that can be answered now:

• I own a business with 35 employees. I don’t provide health care insurance, but I’m hoping to soon. How will this bill affect me? Because you have more than 25 workers, you won’t get the employer tax credits that start right away. Instead, you’ll have to wait until 2014, which is when states start operating the Small Business Health Options Program, or SHOP Exchanges, where small businesses will be able to pool together to buy insurance. The Congressional Budget Office forecasts that the exchanges would bring premiums down as much as 4% while still adding more people to the rolls of insured.

• What if my business grows to more than 50 workers? Starting in 2014, firms with 50 or more workers will be required to offer either health care insurance or pay a fee of up to $2,000 per full-time employee if any of their workers gets government subsidized insurance coverage in the exchanges. The first 30 workers would be excluded from the assessment.

• I’m self-employed and buy insurance on my own. Last year, it went up $200 a month, and I’m worried it will go up more in the future because of this bill. Will it? That is hard to predict. The legislation does immediately create a process for reviewing increases in health plan premiums and requires plans to justify any increases. And once the state-based American Health Benefit Exchanges are up and running in 2014, you will be able to shop for health insurance among competing carriers.

• My employer has a good health plan. Will I have to pay more? Not as a result of the legislation. Your costs may go up in the next few years, but rising medical costs are mostly to blame for what’s driving up premiums now. The health reform law does contain cost control provisions, but they won’t have much of an effect on medical costs for at least five years.

• I’m a Medicare beneficiary. Should I expect to pay more? That’s certainly possible later on, but in the short term, you’ll pay less for preventive services and for prescription drugs. Starting in 2011, those in Medicare will receive free preventive care services, such as screenings for colon, prostate and breast cancer. Plus the threshold for income related Medicare Part B premiums for 2011 through 2019 will be frozen.

At the same time, those beneficiaries who have high drug costs and fall into the “doughnut hole” coverage gap will get a $250 rebate this year. In 2011, beneficiaries in the gap will be able to get a 50% discount on brand-name drugs. By 2020, the gap would be eliminated. That means that seniors, who now pay 100% of their drug costs once they’re in the doughnut hole, will pay 25%.

But, Medicare Part D premium costs would be higher for high-income beneficiaries -- individuals with incomes above $85,000 and couples with more than $170,000.

• My Medicare is supplemented by my former employer. Is that in danger? If your former employer offers prescription drug coverage to Medicare eligible retirees, that benefit may be in danger. Starting in 2013, the tax break employers get for providing that benefit to retirees will be eliminated, increasing the likelihood that employers will drop it.

You may have to pay more if your supplemental coverage is through Medicare Advantage, since government payments to those plans will be decreased over the next three years, to bring payments on a par with traditional Medicare. You could lose extra benefits such as free eyeglasses and hearing aids.

• I make $300,000 a year and have a very generous employer paid health plan. How much more will I have to pay? You do face higher taxes. Starting in 2013, individuals will pay a higher Medicare payroll tax of 2.35% on earnings of more than $200,000 a year and couples earning more than $250,000, up from the current 1.45%. You’ll also face an additional 3.8% tax on unearned income such as dividends and interest over the threshold. Furthermore, starting in 2018, the law also will impose a 40% excise tax on the portion of most employer sponsored health coverage that exceeds $10,200 a year for individuals and $27,500 for families.

• I just graduated from college. I don’t have a job and can’t afford insurance. Will I be affected? You will be eligible for coverage under your parents’ health care plan as long as you are single, under age 26 and are not eligible for other employer provided health coverage. This will be available for plan years beginning six months from now or later.

• My family has income of about $60,000, but we haven’t been able to afford health insurance. Can we get it now? You might be eligible for government subsidies to help you pay for private insurance that will be sold in the new health exchanges that will begin operation in 2014. Premium subsidies will be available for families with incomes from $29,327 to $88,000. But there’s no help until then.

• My insurance coverage was canceled last year when I exceeded the lifetime cap. Can I get back on it now? You probably would qualify for the new high-risk pools, which will be effective within 90 days of the bill’s enactment. A participant will pay the full cost, but the premiums will be set as if the person does not have a preexisting condition.

How will Obama’s heath care bill affect YOUR small business? Find out by clicking here.

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