Finding time to plan for your financial future is a sure way to protect the assets you have today. Additionally, having a sound financial plan in place can significantly increase your wealth in the future. Thus, with the passage of the Patient Protection and Affordable Care Act (PPACA), it makes sense to examine your options for access to health insurance. You will most certainly want to go for a coverage option that matches your plans for career growth, retirement, and income generation. Also referred to as Obamacare, the PPACA will have far-reaching ramifications on your financial planning with regard to healthcare access.
If you are an employer, the new employer mandate tax, which comes with the PPACA, will most certainly dictate your hiring plans. Under the new PPACA requirements that will come into effect in 2014, an employer will have two main options: pay for employee insurance coverage or pay tax (Tacchino, 2013, para. 4.). Thus, an employer will be facing employee insurance coverage options that have distinct financial implications and call for a thorough evaluation before deciding on the way forward. For instance, deciding to pay taxes instead of offering your employees affordable health coverage may prove appreciably cost-effective. However, can your firm sustain a heavy tax bill, especially if taxes increase with time?
Similarly, if your financial planning is partly dependent on the size of your workforce, you will have to include the employer mandate tax in your considerations. For instance, the PPACA requires an employer with 50 or more full-time employees to offer affordable health insurance coverage (Sound Financial Planning, 2013, para 4). Thus, if you plan to increase the size of your workforce, the PPACA might prevent the number of your employees from exceeding 49, especially if you do not desire to offer health insurance coverage. In addition, the law has financial implications based on the number of part-time employees you hire.
The PPACA also affects employees and their financial plans, especially with regard to their health needs. If you are an employee, the PPACA offers you the choice of not taking health insurance coverage. However, you will have to part with a $95 fine for opting out (McKeown, 2013, para. 2). On the other hand, choosing a coverage plan might cost you about $3, 900 as applicable in 2014. Thus, employees who feel young and healthy might decide to limit their spending on healthcare by opting out of the available health insurance coverage plans. However, the PPACA offers practical financing options for patients who have to see a medical specialist on a regular basis.
Equally significant, the PPACA gets rid of the financial planning nightmare that many employees have to go through when considering early retirement on medical grounds. With the passage of the PPACA, you do not have to worry about health insurance coverage once you retire before you are 65 years old. The PPACA makes it possible to access health insurance coverage through state exchanges. Thus, once you are out of your employer’s health plan, you may purchase an affordable plan via a state exchange.
You can use one of the several plans to finance your health needs as provided for by the PPACA. Your options include bronze (60%), silver (70%), gold (80%) and platinum (90%) (Kamenetz, 2013, para. 9). The percentage represents the average fraction of your annual healthcare costs that a specific plan covers. Apparently, the more you pay in monthly insurance premiums, the less you will pay later. Thus, you will have to take into consideration your family’s health needs before picking a specific health insurance plan.
For instance, if you or a member of your family suffers from a chronic condition that may necessitate high spending on medication, it makes perfect sense to go for a plan such as platinum, which covers 90% of the costs of such medication. Thus, you may feel the pinch of higher premiums today, but tomorrow you will be relieved to have a lighter financial burden to carry for your family’s healthcare needs. On the other hand, it makes perfect sense to pay less in insurance premiums if no member of your family has a serious medical condition.
In the same vein, PPACA permits you to switch plans depending on your health-financing needs. For instance, if the percentage coverage, monthly premiums, and deductibles associated with a specific plan prove unbearable on analysis, it makes perfect sense to switch plans. Thus, your own experience with a specific plan as well as annual healthcare costs will help determine how much you are willing to pay for a practical health insurance cover.
In addition, you are at liberty to shop for the most attractive PPACA discounts depending on your income range. Firstly, you may benefit from substantial tax credit if you buy a plan through your state’s insurance exchange. Secondly, if your income range falls below the 250% federal poverty level, your out-of-pocket expenditure goes down. Similarly, persons who earn between 250% and 400% poverty levels may pay lower healthcare insurance premiums. To determine your eligibility for the above discounts, it will be important that you have an accurate estimate of your own annual income. Thus, arming yourself with accurate information regarding tax credits for which you are eligible can help you secure the cheapest health insurance cover in the long run.
How about taxes for high-income individuals or businesses? The PPACA imposes a 3.8% Medicare surtax on individuals earning more than $200,000 and married persons earning more than $250, 000. Thus, individuals who want to pay less Medicare surtax may have to go to the drawing board and come up with a good plan. If you are a high-income earner, you may consider converting some of your assets into products that are exempt from the 3.8% Medicare surtax (Cordell & Langdon, 2013, para. 9).
For instance, you may wish to convert income into salary but also consider the risk of exposing it to heavier taxation. Similarly, you may choose to receive payments for a specific sale in installments as opposed to a single annual capital gain. Thus, under certain conditions, it is possible to expose sales proceeds to lesser surtax in the long run. Moreover, since the 3.8 surtax is applicable on passive income, it makes perfect sense to get more involved and active in certain business activities to avoid the tax (U.S. Trust, 2012, p. 6).
Well, the PPACA of 2010 has far-reaching implications on an individual’s and business’ financial planning. If you are employed, the law significantly affects how you plan to finance your healthcare needs through insurance. It determines what insurance coverage options you can buy and even penalizes you for opting out. On the other hand, the PPACA determines the size of the workforce an employer can have an overall costs of human capital. Similarly, high-income individuals and couples have to face certain taxation realities that the Medicare surtax presents. The good thing is that there is a wide array of financial planning options that individuals and businesses can consider to make the best out of the PPACA.
References
Cordell, D.M., & Langdon, T.P. (2013). Financial Planning Under the Affordable Care Act. Journal of Financial Planning. Web.
Kamenetz, A. (2013). Making Smart Financial Choices with the Affordable Care Act. Web.
McKeown, R. (2013). Affordable Care Act: How it How it May Impact Your Financial Plan. Web.
Sound Financial Planning (2013). The Affordable Care Act Goes into Action. Web.
Tacchino, A. (2013). The Affordable Care Act’s ‘Play or Pay’ Tax: Determining Coverage Alternatives. Journal of Financial Planning. Web.
U.S. Trust. (2012). The 3.8% Medicare Surtax on Investment Income. Web.