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Health Reform: What to Expect When

The health reform bill passed by the House Sunday night sets a timeline for phasing in reform that’s several years long. Some provisions will take effect quickly, many will be phased in over the next four years and one major item won’t kick in until 2018.

So for those of you asking the question “What does this mean for me?” here are a few specifics.

This year:

Assuming that this week the Senate passes the reconciliation bill that the House approved Sunday night, six months from now insurance companies will no longer be able to impose lifetime caps on the amount of money they spend on a customer. That means that if you have a serious illness, the insurance company cannot stop paying for your care when you reach a certain dollar amount or threshold.

Insurance companies will also be banned from looking for reasons to drop customers after they become sick, a custom known as “rescission.”

Also this year: Insurers will no longer be able to deny coverage to children based on pre-existing conditions. And young adults — even those who aren’t full-time students — will be allowed to stay on their parents’ insurance until they turn 26.

If you work for a small business with fewer than 25 employees, beginning in tax year 2010 your employer will be eligible for tax credits to encourage them to provide you insurance — up to 35 percent of what they contribute to your premium.

If you’re a senior citizen on Medicare you will get some help with that no man’s land known as the Medicare prescription drug donut hole. In 2010, you will get $250 rebate on money you’ve spent on your prescriptions in the donut hole. Then in 2011 drug companies will begin to discount brand name drugs for seniors by 50 percent. By 2020 the discount will be applied to 75 % of all brand name drugs. Supporters of the bill say that will effectively close the donut hole for millions of seniors.

And finally, if you have a pre-existing condition that has made you uninsurable, you may be eligible to participate in a new national high-risk insurance pool. The bill sets aside $5 billion for a new pool that will begin in 2010 and last until 2014.

Long-term changes:

2014 is when the lion’s share of the changes kick in. Beginning then, insurance companies will have to accept anyone who applies for coverage. No one, regardless of medical history, will be allowed to be denied insurance. Insurance companies will also no longer be allowed to set annual caps on benefits.

Also by 2014, the new state-run health care exchanges are supposed to be up and running. The Obama Administration says these exchanges will offer affordable plans to small businesses and to Americans who don’t receive insurance through an employer. There will be government subsidies to help low and middle-income families afford the coverage, for those who earn up to 400 percent of the federal poverty level (about $88,000 for a family of four).

At the same time, Medicaid will be expanded to include millions of uninsured people who earn up to 133 percent of the federal poverty level which is about $29,327 for a family of four.

With all these changes, beginning in 2014 most Americans will be required to buy health insurance. If you refuse and cannot justify an economic hardship, you will have to pay a fine or a percentage of your income, depending on which is greater. The fines begin at $95 in 2014 but go up by 2016 to a maximum of $695.00 a year or 2.5 percent of income.

Taxes timing:

One of the ways this bill pays for itself is by taxing the wealthy. If you make more than $200,000 a year or you are a couple earning more than $250,000, then beginning in 2013 your Medicare payroll tax will go up — from 1.45 to 2.35 percent. You’ll also have to start paying a new Medicare tax of 3.8 percent on any investment income.

Another major tax, however, won’t go into effect until 2018 — the so-called “Cadillac” tax on high-cost insurance plans. Beginning that year, if your plan costs more than $10,200 per year (or $27,500 for a family plan), the insurer will have to pay a tax of 40 percent of the annual cost of the plan above that limit — a cost that would likely be passed on to consumers.