Friday Financial Five–October 4th, 2013

Friday, October 04, 2013

Dan Forbes, GoLocalWorcester Financial Expert

Yes, there’s a government shutdown taking place, but that didn’t stop the October 1st rollout of the Affordable Care Act. Here are some of the highlights that consumers should be aware of:

Get coverage or pay a penalty

It’s the law of the land that citizens and legal residents must have health insurance coverage in 2014. For persons that don’t have coverage through an employer, it will have to be purchased through a private insurer or government program. Next year, uninsured adults and children will be assessed a penalty equal to one percent of household income or $285 per household. These penalties will grow significantly as time goes on, but there are also some exemptions.

Effects on Medicare

The ACA was focused on closing Medicare’s “doughnut hole”, a coverage gap in the cost of prescription drugs. This will lead to an increase in drug costs for higher income Medicare beneficiaries, but on a whole, prescription costs are expected to go down. The gap is expected to be fully closed by 2020.

Tax credits are available

For those that meet certain income criteria, there will also be tax credits available. Checking the government health website, a family of four may be eligible for credits if making up to roughly $94,500. This might present an incentive for small business owners to compare having coverage through a business versus the use of the exchange and available tax credits. It might also lead to business owners reducing income in order to qualify for credits. Ironically, that would in turn reduce tax revenue that was meant to pay for the credits.

Exchanges are open for business

Exchanges are now up and running for the most part. As with any new venture, October 1st saw plenty of glitches for people trying to look at options or obtain coverage. Individuals and small businesses that have health plans renewing in January can start to look at the exchange for pricing on comparable coverage. For uninsured individuals, there’s no pressure to get coverage until January 1st, so that might slow demand. This should also give the exchanges some time to iron out inefficiencies.

Minimizing the financial effect of a catastrophic event

The overall cost and efficiency due to the implementation of the ACA won’t be known for some time. However, certain provisions of the law will definitively assist those in the position of possibly losing life’s health lottery. There will no longer be exclusions of pre-existing conditions or limits on coverage. This is meant to prevent families from being wiped out from unforeseen or unpreventable health catastrophes.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected].

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