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Published July 06, 2012, 11:29 PM

What the health care ruling means for consumers

Law’s provisions ‘new factor in health care marketplace’
SAN FRANCISCO – The Supreme Court’s recent decision to uphold the bulk of the landmark health care overhaul will leave intact some popular provisions, such as requiring insurers to accept people with pre-existing conditions and to cover children up to age 26 on parents’ plans, but it may mean higher health costs ahead.

By: Andrea Coombes and Kristen Gerench, MarketWatch, INFORUM

SAN FRANCISCO – The Supreme Court’s recent decision to uphold the bulk of the landmark health care overhaul will leave intact some popular provisions, such as requiring insurers to accept people with pre-existing conditions and to cover children up to age 26 on parents’ plans, but it may mean higher health costs ahead.

The ruling delivers a huge victory to President Barack Obama on the signature law of his presidency – a law that promises to make insurance available to a good number of the 49 million Americans who are currently uninsured.

Some observers predict the law will lead to higher costs. “The end result is everybody’s happy because everybody can get health insurance, (but) who’s going to pay for it? That’s the big question,” said Keith McMurdy, a New York-based partner with law firm Fox Rothschild, which works with employers on their benefits plans.

“In the past year, insurance premiums went up to begin covering some of the requirements of health care reform. As more of those requirements develop, the cost of insurance will continue to go up,” he said.

Karen Pollitz, a senior fellow at the nonpartisan Kaiser Family Foundation, said the law’s measures aimed at curbing costs have yet to take effect. For instance, insurance companies currently compete “on the basis of their ability to select out the healthiest customers and profit off them as much as possible,” she said.

But the law will force them to compete on value, Pollitz said, helping to bring costs down. How will the law do that? In part, by requiring insurers to cover people regardless of pre-existing conditions and requiring minimum standards for what policies cover, plus much greater disclosure to consumers about what they’re paying for.

The law’s provisions are “a new factor in the health care marketplace that we don’t have today that will curb health care costs,” she said.

But some people will face penalties, starting in 2014, if they don’t buy insurance. In 2014, the penalty, unless you qualify for an exemption, is 1 percent of family income or $95 per adult ($47.50 for a child), whichever is greater.

For example, for a person with annual income of $50,000, that’s $500.

In 2015, the penalty rises to 2 percent of family income or $325 per adult, whichever is greater, and in 2016 and beyond, it’s 2.5 percent of family income or $695 per adult, according to the Kaiser Family Foundation.

Still, the law “frees many Americans from simply having employer-provided coverage as their only choice,” said Randall Abbott, senior consulting leader at Towers Watson, a benefits-consulting firm.

The insurance exchanges coming in 2014, combined with the law’s requirement that consumers can’t be denied coverage, is good news for people who retire before being eligible for Medicare, among others who currently don’t have insurance, according to Abbott. The exchanges are essentially a new marketplace where consumers can shop and compare standardized plans.

But he added that “the economic considerations of whether the nation can afford it over the long term is something we now need to grapple with from a budget perspective.”

Part of those costs will be paid through higher Medicare tax rates, slated to start in 2013, for some high-income people, including a 3.8 percent tax on some investment income, as well as raising from 1.45 percent to 2.35 percent the payroll tax rate for single filers with income of more than $200,000 and married couples earning more than $250,000.

Keep in mind that Republicans have vowed to repeal the entire law, though their ability to do so may depend on the outcome of the coming presidential election and whether they gain seats in the Senate. What’s more, tax laws are always up for debate in Congress.

Here are a few of the other changes that result from the law:

• The $1.3 billion in rebates to consumers as a result of a provision in the health law also appear likely to move forward as expected.

• Medicare beneficiaries who fall into the coverage gap known as the doughnut hole will continue to receive discounts on prescription and generic drugs as part of the law’s move to close the entire coverage gap by 2020.

• Insurers will no longer be allowed to charge women higher premiums than they do for men. There are tighter restrictions on how much premiums can vary based on age.

• Insurers will no longer be able to impose lifetime dollar limits on coverage.

• Small-business owners will continue to get access to the tax credit aimed at helping to subsidize the cost of health insurance for their employees.


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