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As Promised – Some “negatives” Of Health Insurance Reform

Some of the arguments against health insurance reform

The landmark health insurance legislation signed into law by President Obama at the end of March, like any bill has its detractors and naysayers. While the new law is expected to bring approximately 32 million Americans onto the rolls of the insured (which is a good thing), there are costs associated with the effort to bring health coverage to all.

  • Paying for the reforms will be accomplished through a combination of measures: by payroll tax hikes on high-income earners, by forcing healthier people to pay more for insurance in certain circumstances, by squeezing the income of health care providers.
  • If you don't eventually purchase health coverage, you may face a fine. The fines start in 2014. By 2016 the fines reach $695 a year or 2.5% of your income, whichever is higher, if you don't have health insurance. This is to prevent healthy people from opting out – a problem in a system where insurers have to take all comers. If healthy people drop out, the pool of people paying in will typically be sicker and more expensive to treat. That causes premiums to rise, which causes more healthy people to drop out, which means higher premiums, and so on. To prevent this, the law pushes people to buy.
  • You will pay more tax if you earn over $250,000. Starting in 2013, couples will pay additional taxes on earnings above $250,000 ($200,000, if you're single) -- 0.9% on earned income and 3.8% on investment income. For a household earning $300,000 in salary, that adds up to about $450 more a year.
  • You could get less generous coverage at work. By 2018, a so-called Cadillac-plan tax slaps employer insurance plans that cost more than $27,500 a year for family coverage. For every dollar above that limit, the insurer has to pay a 40% tax; since the plan would no doubt pass that cost on to enrollees, it's basically a tax on people with very generous health benefits ($27,500 is more than twice the average for employer plans).
  • If you are young and healthy, your premium could go up. Today insurers that sell policies to individuals generally set their price based on risk, the same way an auto insurer does. That can mean higher prices for people who are sicker, while healthy people pay less. By leveling out the premiums -- as well as mandating benefits that a healthy person might choose to forgo -- the new law could result in higher prices in the individual market for those who rarely go to the doctor.
  • The new law makes other big cuts in the Medicare system that will save an estimated $400 billion over 10 years. (That's out of $7 trillion in total spending.) For example, it slows the rate of growth in fees to hospitals, on the assumption they can become more productive along with the rest of the economy.
Published May 12 2010, 02:41 AM by moneycoach
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