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Truth & Consequences

Health-Care Reform

Putting Benefits and Costs Under the Microscope

There’s no question that revamping the nation’s health-care system really is a big deal for consumers. If everything works as planned, more Americans will get better access to health insurance and better care. But the benefits of reform will come with high price tags that might not be obvious to some.

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Chances are good that you already have made up your mind about President Barack Obama’s sweeping overhaul of the nation’s health-care system. Depending on your political perspective, the changes are either long overdue or a catastrophe waiting to happen. Now that the partisan dust has settled in Washington (at least over the health-care issue), we ask you to reconsider your point of view, regardless of where you stood before. A little more than 3 months after Obama signed the historic reform into law, it’s pretty clear that most—though not all—Americans will have access to health insurance and medical care.  However, aspects of the new law are littered with flaws and unintended consequences that won’t be evident for years to come, in part because most of the new health-care reform measures aren’t scheduled to start until 2014.

We scrutinized the 2,000-page law, sifted through reams of think-tank reports and evaluations, and interviewed 20 health, insurance and economic experts in an attempt to demystify this dizzying topic for consumers. What follows is Consumers Digest’s report on eight major components of health-care reform that are designed to help consumers but could be undermined by powerful special interests.

EXPANDED COVERAGE

Aim: To provide access to health insurance for uninsured Americans.
Outcome: The plan significantly decreases the number of uninsured Americans, but taxpayers—including some who are in the middle class—will pick up nearly half of the cost.

The biggest benefit of the law is that an estimated 32 million Americans who lack coverage now will get health insurance. But how those consumers get their coverage is fraught with potential hazards. Half of the newly insured will be covered through an expansion of Medicaid. That expansion is a boon to the working poor—who earn up to 133 percent of poverty wages ($29,327 a year for a family of four in 2010)—but states will have to raise taxes (and you’ll have to pay them) to cover the 10 percent share of the Medicaid expansion tab that is not covered by the federal government.

The other half of those who are newly insured will buy coverage through new state-based insurance exchanges, which will serve as clearinghouses for highly regulated plans that are sold by the insurance industry to individuals of any income level who don’t have insurance and small businesses. Households that earn less than 400 percent of poverty wages ($88,200 a year for a family of four in 2010) will be subsidized by using a sliding scale of taxpayer-financed tax credits. Small businesses that buy coverage for their employees through the exchanges also will get tax credits of up to half of their contribution for an employee’s health insurance. Although that will give $4 billion a year in tax credits to small business by 2019, according to Congressional Budget Office (CBO), an individual firm can take the credits only for 2 years, and the credits will cover only up to half of the cost of the policies. The bottom line: A decade after Obama signed the bill, an estimated 6 percent to 7 percent of Americans still will lack coverage.

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INSURANCE MANDATES

Aim: To make everyone contribute to paying the nation’s health-care tab by forcing uninsured consumers and small businesses to purchase health insurance.
Outcome: It’s uncertain whether penalties for not buying coverage will provide motivation for these two groups to comply with the mandates.

Because insurance companies no longer will be able to deny coverage to people who have pre-existing medical conditions, the architects of reform had to come up with a way to prevent consumers from waiting until they get sick before they buy a policy. The solution—pushed hard by the insurance industry—is to impose an individual mandate. Any family who fails to buy insurance must pay a tax penalty of $2,085 or 2.5 percent of household income, whichever is higher. Employers that have more than 50 employees also will face a pay-or-play mandate: Companies that don’t provide coverage for their workers must pay a $2,000 fine for every employee who receives subsidized insurance on the exchange.

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