Obamacare: A Brief Overview

August 13, 2013

Please know that information regarding Obamacare changes all the time and it is very difficult to get a handle on what the actual effect will be on us all. As my insurance broker told me: “None of us really know how the new health insurance laws will affect us until 2014”.  This article will be helpful, we believe, but make sure that you do your own research.

The Patient Protection and Affordable Care Act (PPACA), more commonly referred to as Obamacare, was signed into law on March 23, 2013, and upheld by the Supreme Court on June 28, 2012. Obamacare has and will continue to change the way individuals, families and employees are provided and protected by their health insurance plans.

healthcare

THE CHANGES

It is important to note, before we begin listing the changes, that coverage will more than likely not change, nor will rates increase, for individuals, families or employees who are already covered under an existing health insurance plan.   Obamacare speaks more to new plans and requires that, as of September, 2013, all insurance companies begin using the same form and format to help prospective applicants compare coverage plans. Further, plans that existed before March 23, 2010 are not required to comply with the rules put in place by the PPACA (they are “grandfathered” in), with exceptions.

All plans, including those that have been grandfathered in, are prohibited from applying lifetime dollar limits to key health benefits such as preventative care, treatment for allergies, and visits to physicians’ offices for sickness or injury.  They can, however, still limit health care services that are not considered essential (both new plans and plans established pre-March 23, 2010). An example of a non-essential service would be hospice care or infertility treatments.  Also, all healthcare plans, including grandfathered plans, are required to extend coverage to children who are on their parents’ plans until the child is 26 years old (whether or not the child is married, living outside of the family home, or is eligible for his or her own health insurance through an employer).  Perhaps most important is the fact that new plans are not permitted to exclude applicants on the basis of preexisting conditions. This already applies to children and, beginning January 2014, will also apply to adults. Grandfathered plans, on the other hand, are permitted to make exclusions on the basis of preexisting conditions for both children and adults. Currently, PPACA guarantees healthcare coverage for all children, under the age of 19, regardless of preexisting conditions.

MANDATORY INSURANCE OR PAY A TAX

Plans covered under the PPACA are available through an exchange, often also referred to as a marketplace.  Beginning in October 2013, US citizens and legal residents will have the opportunity to compare healthcare plans to decide which is most affordable and protective for their families. Obamacare mandates that all individuals not covered by an employer sponsored plan, Medicare, Medicaid, or other public program, secure an approved private insurance policy or pay a penalty (which is in the form of a tax).  Individuals can also opt to stick with their current insurance plan, so long as the plan has been grandfathered in by PPACA. Should a person choose to opt out, and have no coverage at all, the tax penalty is 2.5% in 2014 (unless an individual makes over $200,000 a year, in which case it is the cost of the “bronze insurance plan,” about $5,000 per year) and will rise in the following years.

There are some exemptions to that penalty: Individuals who make under $9,500 per year, or are facing “financial hardship, and certain other individuals who are members of IRS designated groups (American Indians, certain religious groups etc.). The coverage for plans purchased through the exchange begins January 1, 2014. To help individuals learn how to sign up for insurance under the Affordable Care Act, the US Department of Health and Human Services has compiled a list of resources you can find here. (This hyperlink should take you to http://cciio.cms.gov/resources/other/index.html#hie) You can also view the form you will need to fill out here. (This one should take you to http://www.takepart.com/sites/default/files/ObamacareIndividualForm.pdf)

PREEXISTING CONDITIONS

Under the PPACA, insurers are required to offer the same premium to applicants of the same age and geographic location regardless of most preexisting conditions (currently excluding tobacco use). Gender, too, is not a factor to be considered in establishing premium price. PPACA already disallows exclusions for preexisting conditions pertaining to children, under age 19, and that same rule will follow as concerns adults beginning in January 2014. Preexisting conditions are covered under the PPACA as long as you are a US citizen or legal resident, have previously been denied insurance because of your condition and if you have been uninsured for at least six months.

CHOICE OF HEALTH CARE PLAN, PREVENTATIVE CARE & COUNSELING:

Healthcare plans established after March 2010 must protect an individual’s choice of healthcare providers and the participants’ access to emergency care. They also must cover certain preventative care absolutely free of cost (no co-payment, co-insurance or deductible). Preventative care may include: blood pressure, diabetes and cholesterol tests, many cancer screenings (including mammograms and colonoscopies), baby and child check-ups (until age 21), counseling, screening and vaccinations during pregnancy, vaccines against measles, polio and meningitis.

MENTAL HEALTH

Obamacare requires full coverage for counseling services on topics such as tobacco addiction, weight loss, substance abuse, and depression. Furthermore, insurers can no longer deny coverage based on a patient’s mental status.  Instead, they will be required to cover mental health patients at parity with medical and surgical benefits. Beginning in January 2014 mental health will be part of the essential benefits package.

NO CAPS ON ANNUAL OR LIFETIME LIMITS

Under the PPACA, insurers cannot put a cap on annual or lifetime limits for essential services. This means services required to keep a patient alive and in good health must be covered; this is everything from lab, x-ray and diagnostic services to emergency room services to rehabilitation services to pregnancy and preventive care.  Furthermore, healthcare plans are not allowed to drop members because they become sick. Some plans will, however, be permitted to put a cap on spending that is not considered “essential” (just like grandfathered plans).  Know that, even if you stay with a plan that has been grandfathered in, as long as you have changed or renewed a policy after March 2010, your insurer cannot put a cap on essential services. Grandfathered plans may, however, continue to enforce annual caps until 2016.

RATE CHANGES

Insurance companies are required to notify the public if they are going to increase their rates (this is called a rate review) and they must abide by the 80/20 rule. This rule mandates that insurers who sell policies to individuals or small groups must spend at least 80 percent of the premiums received directly on medical care and efforts to improve care. They cannot spend more than 20 percent on administrative costs. Insurers selling to large groups (usually 50 or more employees) must spend at least 85 percent directly on care and efforts to improve care. If insurers fail to do so, they must provide a rebate of the portion of the premium that exceeds the limit. 

TAX EFFECT

If you make between 100% and 400% of the poverty line (about $88,000 per year for a family of four) you are eligible for a tax credit to help offset the cost of insurance. Individuals who make over $200,000 a year, or families who make over $250,000 per year, will pay a tax of .09%, beginning in 2014, to help offset the cost of Obamacare.  Under plans covered by the PPACA children are covered from birth for just about everything imaginable.

PRESCRIPTION MEDIATION

The cost of most prescription drugs are covered or reimbursed beginning in 2016. Prescriptions written for non-essential services are not mandated to be covered.

Sources and helpful links

http://housedocs.house.gov/energycommerce/ppacacon.pdf

http://www.healthcare.gov/law/features/rights/bill-of-rights/index.html

http://obamacarefacts.com/healthcareforamerica-facts.php

http://aspe.hhs.gov/health/reports/2013/mental/rb_mental.cfm

http://forecast.diabetes.org/magazine/features/health-care-reform

http://www.creators.com/opinion/mona-charen/obamacare-hits-the-most-vulnerable.html

http://www.takepart.com/sites/default/files/ObamacareIndividualForm.pdf

http://cciio.cms.gov/resources/other/index.html#hie

Posted by Zia Meyer, Mediation Assistant

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Dumping the “Underwater” Mortgage

July 30, 2013

You need to sell your house, but you’ve discovered you won’t be able to sell it for enough to cover the mortgage, much less walk away with a profit.  Should you chase the dream of a “short sale?”

Know the truth first!

money-house

You can short sell your home (that is, sell it for less than the value of the mortgage) if your bank agrees.  A short sale, it is said, will preserve your credit score and allow you to avoid bankruptcy.  But be warned:  The short sale has many pitfalls:

  • How good is your relationship with your bank?  Short sales would seem to be a good deal for everyone; the bank recovers at least some of their mortgage as opposed to losing all of it as they would if you were forced into bankruptcy… but in keeping with the unhelpful trends in banking, approvals for a short sale are few and far between.  And because so many banks move at a glacial pace when it comes to helping their customers, you might find a potential buyer for your house, submit the bank paperwork for a short sale, and not find out that you were denied for months – by which point your buyer has long since moved on.
  • Will the bank verify that the short sale will entirely clear your debt?  Make sure of this point; former homeowners have been astonished to discover that even though their bank approved a short sale, they were then sued anyway for the balance, via a “deficiency judgment.”  This nightmare is even more likely to occur if you had a home equity line (HELOC) in addition to your mortgage.  You can find a more complete explanation on the CNN Money website; click here: You Lost Your House But You Still Have to Pay.
  • What is the actual effect of a short sale on your credit rating?  We know that declaring bankruptcy is brutal to the credit score – so arranging a short sale (and thereby recovering at least a portion of the money you owe through your mortgage) ought to earn you a little respect from credit institutions.  Alas, your honorable efforts at not abandoning the obligation of your mortgage might just count for nothing.  The Washington Post ran a good article on this; read this link for more:  Short Sellers May Take a Big Hit On Their Credit Scores .

The myth of the short sale is tempting; the truth is much more ugly – as many an unhappy former homeowner has discovered.  Learn from what they went through, avoid the traps… and consider the bankruptcy alternative:

  • A bankruptcy isn’t as hard on your credit score long-term. Startling but true:  Nothing will get you to a good credit score faster than a bankruptcy discharge.  You can have a solid rating within three years… and because your score is determined by your debt-to-income ratio, having no debt at all during those three years sure doesn’t hurt.  Keep in mind that by the time you get to the point of considering a short sale, your credit rating probably isn’t very good anyway – so the bankruptcy can provide you with a surprisingly clean re-boot.
  • A bankruptcy happens once; the pain of a short sale can go on and on.  Remember that glacial pace the banks move at; they might not decide to sue you for the balance on a short sale until long after you assumed your mortgage debt was settled.  Their suit will once again devastate your credit score.
  • Out-of-pocket expenses for a bankruptcy are cheaper.  If your bank sues you for a deficiency judgment on a short sale, there isn’t much any attorney can do for you; you’re going to end up owing the balance of your mortgage on a house you no longer own and pay that same lawyer to take you through a bankruptcy.  It’s far less costly.
  • Filing for bankruptcy now, while you are in financial trouble, often provides benefits you might not qualify for later.  When you’re dealing with a tough situation – a job loss, a divorce, or an equivalent upheaval in your life – you can often qualify for a chapter 7 discharge on a bankruptcy, which provides you with useful benefits.  But because banks can decide to sue you years after you short sell your house, they may go after you when your finances have recovered.  At that time, a chapter 7 discharge may no longer be an option for you and the results will be much more severe.

The very idea of bankruptcy sounds like failure, emotionally – and the concept of a short sale seems honorable.  But don’t be the sucker that falls for it.  (And if you’re determined, make sure you hire a lawyer; your realtor is not equipped to protect you.)  We don’t write the rules; we just make sure you know how the rules are stacked against you.  Arm yourself with the truth:  Short sales are trouble.

For excellent advice on this topic, Graine Mediation refers clients to: http://www.brandtlawfirm.com, a law firm that focuses on bankruptcy work.

Posted by Prudence Bovee, Guest Writer and Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.


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