It No Longer Pays to Have Money
Who would ever think there would come a time when people don’t want to have a lot of money? Well, that time is coming soon. The new Patient Protection and Affordable Care Act (PPACA), passed earlier this year, notably increases access to health care coverage for many Americans. High-risk state insurance pools are being rolled-out; children under 19 – and even all adults come 2014 – cannot be denied health care coverage due to pre-existing conditions; and tax credits will be given to small businesses offering health insurance to their employees.
On top of that, the large post-World War II generation called the baby boomers is just entering retirement. This means that the largest generation of Americans in history is starting to collect social security and enroll into the Medicare program. Where is the money going to come from for all this?
If you guessed taxes, you’re right! Taxes are being raised, particularly for “rich” people. This does not mean that Bill Gates and his elite friends are going to give the government billions extra; rather, in a society where the average income of a four-person family is only $59,894, the “rich” are considered to be individuals with income over $200,000 or couples with joint income over $250,000. For these rich people, the Medicare payroll tax will increase by .9% beginning in 2013. Also, a new 3.8% tax is to be imposed on unearned income from interest, dividends, annuities, royalties and rents. And many states are increasing tax rates too.
The rates are rising for state income taxes.
Yet what does this mean for insurance costs? Medicare Part B premiums are steadily increasing, more so for those with higher incomes. There are levels through which premium payments are determined, dependent upon income. Only if the prior year individual income was less than $85,000 (or less than $170,000 if filing a joint return) will there be no income-related addition to the monthly Part B premium paid.
Under PPACA, businesses also will shoulder the burden of increasing health care costs. Small businesses received some benefit with potential tax credits, but larger businesses are coerced to provide coverage or pay a penalty. As of 2014, businesses of at least 50 full-time-equivalent employees will have to pay the government $2,000 per employee (excluding the first 30 employees) if it does not offer health insurance. If the business DOES offer health coverage, and employees decide to purchase insurance through an exchange and receive a subsidy, the business must pay the government $3,000 per employee. Many businesses may elect to pay these fines in lieu of offering group health plans, which generally are pricey and will only become more expensive as a consequence of all of the mandates in PPACA.
What advice could we possibly provide to you? It’s very simple, be more careful than ever with your expenditures. Since there’s not much any of us can do individually to hold the line on insurance premiums or taxes, budget wisely as the going is getting tough. And if you still want to have a lot of money in the future that’s OK, but be prepared to share.
Until next time,
AH Insurance Services
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