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The Nuts and Bolts of Obamacare

09.05.2012 by Kevin Mercadante //

The Patient Protection and Affordable Care Act (PPACA) – known as “Obamacare” – was passed into law on March 23, 2010, and its main provisions were recently upheld by the Supreme Court.

The act is the largest and most sweeping healthcare reform ever enacted in the United States and will affect almost every aspect of the industry.

The act contains thousands of provisions that began to be implemented when the bill was passed and will continue to come into law between now and 2020. There are more provisions than can be covered in one article, but here is a summary of the most significant ones, and only those that relate directly to the general public. These provisions are complicated so the descriptions below will be brief.

Healthcare Coverage Provisions

These changes have the most effect on benefits, beneficiaries, exclusions and limitations as they exist in typical modern health plans.

Lifetime benefits. Effective this year, and applying only to new policies, insurance companies can no longer impose lifetime limits on “essential benefits”, like hospital stays.

Dependent coverage. Your children can stay on your health insurance plan up until they turn 26, even if they don’t live with you, aren’t in school, or might be married. This provision is in effect right now.

Dropping coverage. Insurance companies can no longer terminate coverage on patients when they get sick. This is also already in effect.

Preventative care services. Beginning August 1, 2012, all new plans are required to cover certain preventive services like mammograms and colonoscopies that won’t be subject to co-payments, deductibles and co-insurance provisions. Beginning in 2018 this requirement will extend to all existing insurance plans, and will also require check-ups without co-payments.

Pre-existing conditions. As of January 1, 2014, insurance companies will not only be prohibited from turning down customers with pre-existing medical conditions, but they won’t be able to charge higher premiums either. Gender based premium differences will also disappear. The only listed exception to the rule are smokers.

Deductibles. Beginning January 1, 2014, and only on employer sponsored plans, there will be a maximum deductible of $2,000 for single coverage, and $4,000 for other plans.

Subsidies

There are actually several subsidy provisions, but this one is the most sweeping.

Health insurance exchanges. As of January 1, 2014, health insurance exchanges will be set up by the individual states to subsidize insurance premiums for millions of people based on household income as a percentage of the federal poverty level. Insurance premiums will be capped at certain levels based on income relative to the poverty level, with the highest subsidies going to those households earning less than 133% of the poverty level, and the lowest going to those earning up to 400% of it. This is a complex provision, but it appears that the subsidy will come in the form of a refundable tax credit, which means the recipient will get the credit even if they pay no income taxes.

New Taxes

There are many tax changes pursuant to the act, but here are the ones that are most relevant to the largest number of people.

Payroll reporting. For 2012 and beyond, employers must report on your W2 the value of health insurance benefits they provided during the year. There are no apparent tax consequences to this – yet!

Medical deductions for income tax purposes. Currently, there’s a limitation applied to the deductibility of medical costs for income taxes; you must first reduce the amount of your medical expenses by 7.5% of your adjusted gross income and deduct the difference. Beginning January 1, 2014 the 7.5% reduction will rise to 10% of adjusted gross income.

Translation: fewer people will be able to deduct medical expenses in the near future.

Direct taxes. As of January 1, 2013 there will be an additional tax of .9% on earned incomes above $250,000 for married couples filing joint, and $200,000 for singles. The Medicare tax is also being increased. An additional 3.8% Medicare tax will apply on “unearned income, specifically the lesser of net investment income or the amount by which adjusted gross income exceeds $250,000 for married filing joint, or $200,000 for singles.”

“Cadillac insurance plans”. High cost insurance plans—defined as those costing in excess of $27,500 for families and $10,200 for individuals—will have an excise tax imposed on them beginning in 2018. The tax rate: 40%.

Penalties

In addition to new taxes, the bill imposes penalties.

Penalty for non-coverage. As of January 1, 2014 the act will impose an annual penalty on those who don’t have health insurance plans. The penalty will start out as the higher of $95 or 1% of gross income, but rising in 2016 to a minimum of $695 for indivduals and $2,085 for married filing joint, or 2.5% of income. This penalty was a major part of the recent Supreme Court case on the act, and was upheld with the logic that Congress has the authority to “levy the penalty as a tax”, rather than an attempt to force people to get insurance coverage.

Employer penalties. Beginning January 1, 2014, employers with more than 50 employees will be subject to a penalty of $2,000 per employee if the employer does not provide health insurance coverage for full-time employees.

Other provisions

Health insurance for Congress. Beginning in 2014, not only members of Congress but also their employees will be moved out of the Federal Employees Health Benefits Program, and into a plan provided under the act. In effect, Congress will be subject to the same health care plans the rest of us are.

Medicare Part D. By 2020 Medicare Part D for prescription drug coverage will be ended.

There are numerous other provisions that will affect both Medicare and Medicaid that are too complex to discuss here. Due to their complex nature, these provisions has been simplified – this is a summary presentation of the act, not a line-by-line breakdown.

Also keep in mind that the bill is still moving through the system and will be amended as it does. Any of these provisions could be modified, reduced, expanded or even canceled before, during or after implementation.

What are your thoughts about Obamacare?

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Categories // Insurance, Taxes Tags // healthcare

Proverb About Saving For a Rainy Day

08.24.2012 by Kevin Mercadante //

Proverb About Saving For A Rainy DayWhen it comes to money, as Christians we might be tempted to write it all off to that saying, “money is the root of all evil”. After all, that saying itself comes from the Bible (1 Timothy) and warns us against the obsession with money. But even within the Bible, money has it’s proper uses, and one of them is saving it.

This is not the wanton saving of money in order to build an ever larger pile for its own sake, nor is it an attempt to build treasures here on Earth. But the Bible teaches us to be ready for what ever happens, and a big part of that preparation is with savings.

What does the Bible teach about saving for a rainy day?

”Go to the ant, thou sluggard; consider her ways, and be wise: Which having no guide, overseer, or ruler, Provideth her meat in the summer, and gathereth her food in the harvest.” – Proverbs 6:-6-8

This verse is both powerful and effective in convincing us of the need to save money, but like all Bible verses there are several things happening at once.

Saving involves sacrifice

Notice the passage uses the term “sluggard?” Maybe that’s a bit of a harsh word, but then again maybe it isn’t.

Sluggard means “lazy” or “inactive”, and the verse implies that such an attitude might exist when it comes to saving money. The implication is that we may need to do something more, something beyond ordinary if we are to save—the business-as-usual attitude won’t cut it. Translation: saving money requires active participation. It’s not something carried out by sluggards!

To put that into practical perspective it means:

  • We may have to work a little bit harder in order to have money to save
  • We may have to reduce current consumption to free up money to save
  • We need to have a plan of action to save and a willingness to carry it through
  • We need to accept that life today may not be as pleasant while we prepare for an uncertain future

Saving is a natural process

The same verse that uses sluggard also recommends looking to the ant for direction. Ants, as we know, are constantly moving, constantly working, constantly storing up. It’s that storing up process—or saving in our world—that enables the ant to survive. Ants are not alone in storing either. Most animals that have the capacity to save do. Rodents do it (think “squirreling away”), as do many birds. We can even say that many mammals “save” by overeating in summer in order to build up fat storage for the winter months when food is scarce.

Saving then is a part of the natural process. In reality, certainly in the human realm, it’s very much a survival skill. Ever notice how people who have relatively little income or unstable occupations are able to survive all the uncertainty? It’s possible if you’re a devoted saver.

There’s a need to save “in season”

The passage specifically references ”stores its provisions in summer and gathers its food at harvest”, and I think this may be the most relevant part of the passage.

As human beings, we’re not nearly as dependent on the seasons as animals are, yet we have “seasons” of life, that are longer and often deeper in scope than seasonal weather shifts. Ecclesiastes 3:1-8 outlines this clearly, as do so many other passages and verses throughout the Bible.

Good times turn to bad, and bad times turn to good, but the takeaway is acknowledging the changes and preparing for them. In the human world, we do this by saving money. The time to do this is “in-season”, when our incomes are strong and our obligations are low, that way when “winter” comes—when life isn’t so good—we’ll have the benefit of all that we stored up from a better season.

We can think of this as playing out over various season cycles. In the near term, the cycle might include saving money in season against the possibility of a job loss—like building up an emergency fund. Over the long-term, this would involve saving money in season (during our working years) for the “winter of life”—old age and retirement.

The Bible teaches us about such seasons and tells us to prepare for them. We can think of that as scripture telling us to save for a rainy day.

How your savings can be a blessing

Moving beyond Proverbs 6, your savings can be a blessing in so many ways.

  1. By enabling you to take care of yourself in a time of trouble you’re not being a burden to others
  2. Having savings enables you to help others who are in a difficult time
  3. When you have savings you aren’t living paycheck-to-paycheck and will find it easier to be more generous
  4. Savings are a tangible way to reduce worry—and worry is one of our biggest false idols
  5. Having extra money saved can enable and embolden you to do more mission work, knowing that you’ll be in good shape even if the mission work costs you some time, money and income
  6. It’s always easier to be a good steward of your money when you have at least a little more of it than you need

Money itself isn’t the root of all evil—it’s the love of money that is. We can have it and use as long as we see it as a tool and not as something to be worshipped. Properly used, such as when we save for a rainy day, is just such a tool as well as a blessing. At a minimum, we can save for a rainy day and know that we’re doing the right thing.

After all—that’s what the Bible teaches us.

Have you ever had any sense of a conflict between your faith and saving money?

*******

Categories // Savings, Spirituality Tags // Savings, spiritual

Reasons To Pay Off Your Car

07.12.2012 by Kevin Mercadante //

It’s better to be debt free than owe money.

I’m talking everything: your credit cards, student loans – even on your home.

It can be done – if – we make the right choices.

Regarding auto loans: if you have a choice, pay it off ASAP!

Here’s why.

Owning a car is expensive enough without a loan

Owning a car comes with many expenses: gas, insurance, registration, taxes, maintenance, care, and repair. Together these can total several thousand dollars per year. But throw a monthly car loan on top, and you have thousands more.

The secret to success? Pay cash for cars and save money for their regular care. If you take care of them they’ll take care of you.

If you lose your job, it’s one less payment

Living light never feels better than when you lose your job. Suddenly income evaporates (or is lowered to the level of an unemployment check) and one of your primary new tasks is to cut spending. If you own your car, one major expense is already out of the way.

In today’s unstable job market, this is a goal worth making reality!

The RISK of not making your payments

Most of us take the risk of auto loans a bit too lightly. After all, stop paying your credit cards and you may get nasty phone calls and a series of threatening letters, but nothing will be taken from you, at least not for a while. Stop paying on your mortgage and you’ll get to stay in the house for as long as the slow wheels of the foreclosure process will allow.

But – stop making payments on your car, and you’ll lose it, and quick!

If you lose your car you’re probably not able to earn a living. Do you see the vicious cycle here?

Never take this risk of borrowing money lightly.

Own important things free and clear, whenever possible

Call it peace of mind or whatever you want but owning things without debt is as a sanity issue.

If everything you own has a loan attached to it, life can be maddening. Debt is everywhere you look—even when you’re out driving your car.

A debt free car is like a mental and emotional oasis, it’s one very important asset you can own free and clear, and we all need as many of these victories as we can get.

Keep your options open

Few things in life are constant.

As we go through life, our circumstances change,  our directions change, and even we change. Even if you have no intention of it, your future can hold an unexpected life change.

If change does come – trust me – you’ll be better served by having all of your financial ducks in a row. And owning your car free and clear is one great way to prepare.

Benefits of owning your vehicle

Owning your vehicle free and clear benefits you in several ways, including but not limited to:

Sell your car. A car loan is a limiting factor if you should decide to sell. Auto loans reduce the amount of money you’ll clear on the sale ,and (if the loan is large enough) could even render the sale impossible.

Buy your next car. A loan means less money from a sale or trade-in, and that means a lower down payment on your next car.

A lower down payment means an even larger loan on the new car, and the cycle of ever higher car debt to continue. By being debt free on your car, the cycle is broken.

Start a new business. If you want to start a new business, being debt free on your car makes it easier. It’s not just one less bill to pay, it’s also one less obligation to worry about. If you start your own business you’ll want the fewest obligations possible.

Accept a lower paying job. There are at least two reasons this could happen, 1) you’re laid off and forced to take a pay cut, or 2) you move into a job that you really like but it pays less. The car loan, so easy to handle at your current pay level, may be impossible to manage in a lower paying job. By owing your car you’re in a position to move when you need or want.

Raise children at home. How much easier would this be to do if you owned your car debt free?

Just to take some time off. Each of us need to do this from time to time, especially between jobs or before starting a new career or business venture. It’s a way of clearing our heads before the next big move. Whatever the reason, it’s easier to do with no car loan to worry about.

We should work to be debt free in as many areas of our lives that we can – but – your car is one asset to be especially motivated to pay off.

Once you do, many risks and burdens go away, trust me!

Can you see why being debt free on your car is so important? Do you see why it should be one of the first debts to pay off?

Categories // Debt, Money Management Tags // auto loan, borrow, own

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