The Affordable Care Act or Obamacare, had two main goals in its conception. The primary goal was to get more Americans insured and have access to affordable health care. Presently, about 16% of the U.S. population doesn’t have insurance. Obamacare will provide health insurance for many of these uninsured Americans through either Medicaid or through the state insurance exchanges with tax credits or subsidies.
Another noble goal of Obamacare was to bring down the costs of health care in our nation. The President promised that health insurance premiums for a family would be $2500 lower by the end of his first term. Instead premiums are about $3000 higher. What happened?
What happens when the Affordable Care Act takes full effect in 2014?
According to a recent report from the Society of Actuaries, our health care costs will rise 32% by 2017. Actuaries measure and manage financial risk for insurance companies. The Actuaries report estimates that 42 states could see double digit percentage increases in health care costs.
Secretary of Health and Human Services Secretary, Kathleen Sebelius, explained that cost increases were due to better insurance being offered as compared to catastrophic policies. The actuaries report also didn’t factor in tax credits and Medicaid that will reduce premium costs for many people.
The driving forces behind these projected increases are two key elements of Obamacare. The first regulation requires insurance companies to provide coverage to anyone who applies; in other words, no one can be turned down regardless of pre-existing conditions. The other regulation prohibits insurance companies from charging individuals more due to their poor health status.
Cost of Obamacare
Obamacare is estimated to cost more than $1 trillion in the next decade. How are we going to pay for this? The Obama administration began by making cuts to Medicare, a program that helps our elderly. Premiums will increase and some of us will pay more for insurance. Also, Americans purchasing individual health insurance will be paying more than their fair share of the costs of this new health care law.
New Taxes with Obamacare
Another way to pay for this health care law is by taxing the American public. A whole new set of proposed taxes have been conceived to finance this new health care program. Here is the list:
1. Hospital Insurance tax has increased from 2.90% to 3.80% on high income earners. Employers contribute 1.45% and employees contribute 1.45% unless you are a high income earner. If you make $200,000 as an individual or $250,000 as a couple, you will pay 2.35% of this tax equaling to a 3.80% increase.
2. Medicare contribution tax of 3.8% for investment income for individuals making more than $200,000 a year and couples earning at least $250,000 a year. Investments will include capital gains, interest, dividends, annuities, royalties and rents.
Most people will not be affected by this if selling their homes. The surtax only applies to $500,000 (couples) and $250,000 (individuals) profit levels they gain from selling their homes. This has to do with the capital gains exemption that President Clinton signed into law back in the 1990’s.
3. Pharmaceutical and health insurance industries will be paying new fees to fund ObamaCare over the next decade.
4. Individuals who do not get the mandated health insurance will have to pay financial penalties. Employers with over 50 employees, who do not offer health insurance, will face financial penalties.
5. Beginning in 2018 an excise tax will be imposed on “Cadillac” health plans. What is a “Cadillac” plan? A plan that exceeds more than $10,200 in premiums for an individual and $27,500 in premiums for a family will be taxed at a rate of 40% above a threshold.
6. There will be a tax penalty increase for non-allowable purchases made using tax deductible funds for HSA’s and FSA’s. This penalty will go from 10% to 20%.
7. Employers will be limited in making a tax-free contribution to an employee’s FSA. In the past employers could make unlimited contributions to their flexible savings account. Now employers can only contribute up to $2500 a year.
8. There is a new 2.3% excise tax on medical devices manufacturers or importers.
9. Medical expense deductions on your taxes will increase from a 7.5% level to 10% level.
10. Tanning salons will have to pay a 10% tax on services rendered.