How does the Affordable Care Act affect me? You may be impacted even if you have employer health insurance.

KJ: With this year bringing a lot of healthcare changes we wanted to dedicate a post to some of the changes that have occurred and what you may be going through (or will go through).

We stumbled across a nice little decision site where partnered with TurboTax to help you understand your options when it comes to healthcare coverage this year. Check out the site at: TurboTax and health care considerations.

Heap Of Dollars With Stethoscope

So, what has changed? Well the most obvious change is that (generally speaking) you are now required to get health insurance, otherwise you could face some stiff penalties. See the below excerpt directly from the website:

    The penalty in 2014 is calculated one of 2 ways. If you or your dependents don’t have insurance that qualifies as minimum essential coverage you’ll pay whichever of these amounts is higher:

      1% of your yearly household income. (Only the amount of income above the tax filing threshold, $10,150 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
      $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.

    The way the penalty is calculated, a single adult with household income below $19,650 would pay the $95 flat rate. A single adult with household income above $19,650 would pay an amount based on the 1% rate. (If income is below $10,150, no penalty is owed.)

    The penalty increases every year. In 2015 it’s 2% of income or $325 per person. In 2016 and later years it’s 2.5% of income or $695 per person. After that it’s adjusted for inflation.

    If you’re uninsured for just part of the year, 1/12 of the yearly penalty applies to each month you’re uninsured. If you’re uninsured for less than 3 months, you don’t have to make a payment.

    You’ll pay the fee on your 2014 federal income tax return. Most people will file this return in 2015.

Current coverage can still mean changes coming
However, just because you have coverage through your employer doesn’t mean you won’t be experiencing any changes! I didn’t see a whole lot of changes with my employment (other than more behind-the-scenes changes to deductibles, calculation of out of pocket maximums, premium costs to the employer, etc.), but it really means there was an increased cost for the employer. And, we should all know what that means – a cost that would ultimately impact the employees over time.

Expanded options in many cases
More options are always better, right? Well, it can be. But it seems like sometimes we have decision overload with so many options. Think of the last time you went to the grocery store and were selecting cereal. There are literally hundreds of options, so sometimes the choice is a no-brainer while at other times you are balancing budget/taste/craving/amount-before-it-expires/health.

For Angela’s changes at work, she had quite a drastic change in her health insurance options that were available. They took the approach of how the public health insurance exchanges work. The end result – SIGNIFICANTLY more options for coverage. Not only did we have to decide about the particular insurance type to analyze (bronze, silver, and gold level plans), but we then had to select the individual carrier too within that framework! Some insurance providers were a clear winner (or loser) while others were very close. How then did we decide how to proceed?

As with everything else that applies to personal finances, you have to run the numbers and calculate the differences. It required quite a bit more work in terms of analyzing what the potential out-of-pocket costs would run under a normal year, taking into account how it would be different if there were a catastrophe or significant medical costs. The key with this calculation is to also evaluate what the monthly premium costs are too that come out of your paycheck. If you know you have certain prescription costs, regular doctors visits, or an upcoming surgery, be sure to include those as well. So, it should look like:

    Monthly Premiums
    + Estimated Doctors Visits Costs (noting generally preventive and annual visits would be excluded)
    + Surgery Costs
    + Copays
    + Prescription costs
    = Total Estimated Out of Pocket for the Year

In some cases, you may notice a significant rise in costs over the prior year depending on your situation, but you may also be able to identify ways to reduce your out-of-pocket costs.

Be sure to balance the impact to your bottom-line
Whichever option you chose, take into consideration your cash flow needs and emergency fund available. If you select the lower out-of-pocket health insurance costs that is coupled with a higher deductible, be sure you have the cash and emergency fund to handle that increase! If not, work to make it your goal for this year to build that up even greater, so you can take advantage of the lower premium options in future years.

It’s all a balancing act, and one you can only truly know with 20/20 hindsight, but that doesn’t mean you should just keep everything the same year-after-year. Take a look at what the numbers would end up being. It isn’t going to be perfect, but the more you project, the more you learn how to project, so use each projection as a learning experience of how you can improve your analyses!

    Have you had any changes to your health insurance coverage?
    How did you decide which option to select?
    Hopefully the TurboTax tool will help you with your decisions!

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