Money-saving steps to take now

The new federal law overhauling the US health-care system will have far-reaching financial effects for millions of consumers and taxpayers. Bottom Line/Personal asked two top experts to describe what the new law means for you — and how you can best prepare for the dramatic changes to insurance coverage and taxes over the coming months and years…

Maura Carley, MPH, CIC

  • If you have a preexisting health condition that has made it difficult to obtain comprehensive coverage at a reasonable price, the new federal insurance pool for high-risk individuals might offer a solution. But the pool, slated to start in late 2010, is not necessarily your best solution. More than 30 states already offer some form of high-risk insurance for people with preexisting conditions. Compare the coverage and costs of your state’s options (if there are any) and the new pool after details become available. The Web site of the Department of Health and Human Services ( will provide details about the new pool in the coming months.
  • Not every consumer with a preexisting medical condition will qualify for the new pool. Applicants must have been without insurance for at least six months. If you have managed to hang onto coverage, perhaps by paying for a high-cost, high-deductible plan, it might be safer to remain with this plan or sign up for a state high-risk pool, if available, rather than go for months without insurance to qualify for the new pool.

    If your family cannot obtain affordable health insurance because one of your children has a preexisting condition, shop around for coverage again, starting September 23. Beginning that day, the new law stops insurers from denying coverage to children under age 19 with preexisting illnesses, even if the children never had health insurance before. Starting in 2014, insurers won’t be allowed to turn down any applicants because of preexisting conditions.

  • If the Medicare “doughnut hole” has kept you from buying some prescribed drugs, relief is on the way. Previously, Medicare recipients with more than $2,830 in annual drug costs had to pay 100% of drug costs out of pocket up to $4,550. The law provides a $250 rebate to those who reach the coverage gap this year. A 50% discount on purchases of prescription drugs that fall into the gap takes effect in 2011. This discount increases until it reaches 75% in 2020.
  • If you have a Medicare Advantage Plan, consider whether to switch to a Medicare Supplemental Plan during the next open-enrollment period later this year. The new health-care law is likely to lead to premium increases and/or benefit reductions for Medicare Advantage Plans, which are offered by private insurers and serve as alternatives to standard Medicare coverage. Medicare Supplemental Plans, or “Medigap policies,” also are sold by private insurers, but they supplement standard Medicare rather than replace it. New Supplemental Plans M and N, available through private insurers starting June 1, are worth a look.
  • If you have a long-term-care insurance policy, keep it. The health-care law includes an optional long-term-care insurance program, starting in 2011, but the benefits offered by this program are capped at $50 per day — not nearly enough to pay what might cost several hundred dollars a day for long-term care if you are disabled. If you’re considering obtaining a new long-term-care policy, don’t assume that the best option is to wait until 2011 for this federal plan.
  • If you have an adult child younger than 26, you can provide coverage for that child under your group or family health policy starting in late September, but explore other options first if your adult child is not already covered.
  • Currently, each state has its own rules for how long children can remain on their parents’ policies. Some force children off the policies when they graduate college… others allow children to remain on their parents’ health insurance policies well into their 20s — but only if the children remain unmarried and often only if they are in college or living under the qualifying parent’s roof. The new rules will not have these restrictions — though remaining on the parents’ plan will not be an option if the adult child is eligible for a group plan through his/her own employer or spouse’s employer.

    In many states, healthy people in their 20s can obtain private health insurance on the open market for as little as $150 per month, less than it might cost to keep these young people on family policies. However, these inexpensive individual policies often have high deductibles, no coverage for maternity care and other restrictions.

    Helpful: Starting in 2014, those in their 20s can buy “catastrophic” coverage with lower premiums and very high deductibles.

  • If you have put off going to a doctor for fear that having any major health problems on your record would make it difficult to obtain insurance in the future, it may be time to make the appointment. Between the high-risk pool that will be created later this year and the rules prohibiting insurers from turning down applicants because of preexisting conditions, which go into effect in 2014, the new law greatly increases the odds that acceptable coverage will be available to you even if there are health problems on your record.
    Thomas P. Ochsenschlager, CPA, JD

    The changes in the Tax Code contained in the health-care law are meant to raise more revenue from high-income people to help subsidize coverage for middle- and low-income people. Here’s what you can do to minimize your taxes and/or boost your benefits…

  • If your annual adjusted gross income could be above $200,000 ($250,000 if married and filing jointly) in coming years, sell highly appreciated investments in 2010 to lock in capital gains at today’s tax rates (15% for most people… 0% for those in the 10% and 15% tax brackets). Starting in 2013, these high-income households will face a new 3.8% Medicare tax on investment income, including capital gains, interest, dividends and annuities. As temporary tax breaks expire, their capital gains tax rate is due to be increased as well, from 15% to 20%, starting in 2011.
  • Strategy: If you sell appreciated securities, such as stocks, you can immediately rebuy the same securities if you like — “wash sale” rules that take away a tax advantage when you quickly rebuy an investment apply only when realizing losses, not gains.

  • If you’re in a cash crunch and need to withdraw money from your health savings account (HSA) to pay non-health-related bills, do so by the end of 2010. The penalty for nonqualified HSA withdrawals doubles from 10% to 20% in 2011.
  • If you fund a flexible spending account (FSA) to pay out-of-pocket health costs, rethink how much you should contribute for 2011. Starting next year, most over-the-counter drugs and certain nonprescription health-related items, such as bandages, will no longer qualify as FSA (or HSA) expenses. Also, FSA annual contributions will be capped at $2,500 starting in 2013.
  • If you are a small-business owner considering offering health benefits to your employees, tread with extreme caution. True, the health-care bill offers tax credits to small businesses that provide health insurance for employees from 2011 through 2014 — particularly businesses with 10 or fewer employees who earn modest wages, on average. Unfortunately, those tax credits do not last forever, and there’s no guarantee that the “insurance exchanges” (insurance marketplaces meant to allow small businesses to pool together with others to reduce costs) will be affordable for small-business owners. Cautious small-business owners might hold off on providing insurance to employees at least until it becomes clear how much it will cost to provide insurance through these exchanges. Companies with 50 or fewer employees face no penalty for not offering health coverage.
  • If you frequent tanning salons, get tanned by the end of June. A 10% tanning bed tax takes effect in July.
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