Category: Insurance

Identity Theft Monitoring and Insurance Plans

In my last post I discussed identity theft – what it is and how to prevent it.

What about identity theft monitoring or insurance? Does it make sense to purchase it?

An important note up front – no product or company can protect you from having your information stolen. The most common way your data is stolen is through data breaches. If you have a Yahoo account, for example, some of your data has already been stolen and, as we have learned recently, it has probably been sold several times over.

That doesn’t mean there aren’t steps you can take to secure your information better (see last post for ideas), but having identity theft “insurance” doesn’t prevent your data from being stolen any more than having auto insurance keeps you from being involved in an accident.

Let’s take a look at each of the various types of identity theft protection – monitoring, insurance and recovery.

MONITORING SERVICES

Monitoring services alert you when someone else might be using your information. Services generally include:

  • Tracking activity on your credit report
  • Sending you an alert when your personal information (bank account, Social Security number, driver’s license number, passport or medical ID) is being used
  • Access to credit reports and/or scores

No company or service can monitor all activity on all websites and merchants, but most of these companies do their best to monitor your personal information at as many places as possible.

IDENTITY THEFT INSURANCE

Identity theft insurance pays for out-of-pocket expenses incurred for recovery, which may include:

  • Postage, copying and notary fees
  • Less often, lost wages and legal fees

A few important notes about identity theft insurance:

  • This type of insurance almost never covers stolen money or other financial losses
  • There is generally a deductible
  • There is no payout if the loss is covered by any other types of insurance, such as homeowner’s or renter’s insurance
  • The majority of people who are involved in identity theft have almost no out-of-pocket losses. Most people pay little to nothing to copy or print things at home, postage is cheap and notary services are usually free at your bank. By the time your deductible kicks in you are unlikely to gain anything.

RECOVERY SERVICES

Recovery services help you deal with the effects of identity theft after it happens. Services generally include:

  • Assigning a case manager to help you work through the process
    • With some plans you actually grant authority for the case manager to act in your name, with others they guide you through the process
  • Placing a fraud alert on your credit file
  • Placing a security freeze on your credit file
  • Helping you prepare letters to send to collectors
  • Closing any tampered or fake accounts and opening new ones

Let’s take a look at two specific companies – LifeLock and Zander Insurance.

LifeLock[i]

Standard protection is $10 a month or $109 annually. Prices go up to $29.95 a month for premium services.

Basic services include:

  • Website surveillance
  • Cancel credit cards if stolen
  • Send alerts when your information is being used
  • Replace stolen funds up to $250,000 (only what the bank won’t replace)
  • Spend up to $1,000,000 on lawyers, accountants or others to restore your previous status

Zander Insurance

Zander is $75 year ($6.76 a month) for an individual or $145 a year ($13 a month) for family protection.

Zander operates their protection plan on the premise that financial identity theft is only one of more than 15 types of identity theft. There is also Social Security, criminal, employment, medical, tax refund and other types of fraud, many of which won’t be discovered by monitoring. In many cases you won’t know you have been a victim until you get a letter from the IRS or a doctor bill or even a warrant for your arrest.

Their focus is on identity theft recovery. Services provided include:

  • Up to $1,000,000 reimbursement for any stolen bank funds or unauthorized electronic funds transfer (only what the bank won’t replace)
  • Unlimited legal fees if needed
  • $0 deductible
  • Contact banks, bureaus, insurance companies and doctors for you

What I Recommend

No strategy is perfect, but this is my plan:

  • Use CreditKarma.com for monitoring (they send me an e-mail anytime something changes on my credit report)
  • Use YNAB (youneedabudget.com) to review my bank and credit card transactions daily
  • Shred any documents with financial or personal information
  • Use https://www.optoutprescreen.com/ to stop receiving most pre-screened credit card offers
  • Put a security freeze on my credit bureau reports
  • Check one credit report every 4 months on annualcreditreport.com
  • Copy the front and back of all cards in my wallet
  • Use a service such as LastPass.com to manage and use different, secure passwords on each website
  • If my wallet is stolen or I am a victim of a breach place a 90-day fraud alert on my credit bureau accounts
  • Sign up for Zander’s plan for recovery services (I believe it is worth the $145 a year for the services they will provide)

If you have taken all of these steps but choose not to sign up for recovery services, the FTC has created a new website that will help you recover. It generates pre-filled letters and walks you through exactly what you need to do to recover. You can find the website at http://www.identitytheft.gov.

 

 

Identity Theft Protection

[i] For both LifeLock and Zander be sure to review their services before signing up. Services may have changed since this article was written.

Basics of Renters Insurance

apartment fireIf you live in an apartment and a candle tips over and starts a fire, who is responsible for the damage? What if a thief breaks in and steals your TV and other electronics? Is your landlord responsible to replace those items?

In both scenarios YOU, as the renter, are responsible for the damage or loss.

In the last two posts I have covered auto and homeowners insurance. These week I will conclude this series with a post about renters insurance.

Renters insurance typically covers theft, vandalism and fire (or smoke) damage. Some policies also cover water damage. Pipers bursting, sewage backup, earthquakes, floods and other “Acts of God” are typically not covered.

The three main parts to a renter’s policy are:

  • Contents
  • Loss of use
  • Liability

Contents

You may not think you have much of value, but the average renter has about $30,000 worth of “stuff”, from furniture to clothes to electronics.

Renters insurance will replace items stolen or damaged by a covered event.

You can get Replacement Cost coverage or Actual Cash Value coverage.

Actual cash value takes into account depreciation. For example, let’s say you own a $5,000 TV that typically lasts for 10 years. If that TV is stolen after 5 years you will get $2,500 for it from the insurance company.

With Replacement Cost coverage you will typically get a check for the actual cash value (in our example above you would get $2,500), then when you submit a receipt you will get a check for the remainder, up to a set dollar amount.

You should always get Replacement Cost coverage if it is available.

Most policies cover your items while you are travelling and some will cover items in your vehicle as well.

Before the insurance company will pay anything you have to pay your deducible. The higher your deductible, the lower the premiums will be. Be sure you have a deductible you can afford, though.

To prove what you own you should have pictures or a video of your contents. You may also want to have a list of what you own and how much you paid for it.

Contents coverage will typically only cover a limited dollar amount, so if you have an expensive or valuable item make sure your insurance agent knows about it and you can get additional coverage for it.

Loss of Use

If you have water, fire or smoke damage your apartment will typically be uninhabitable for some period of time while it is being repaired.

Loss of use will cover your rent in a similar apartment or hotel for a limited period of time.

Liability

Liability coverage will typically cover legal costs, bodily injury and property damage caused by your actions or negligence. It will also often pay a set amount for medical payments for your guests who are injured.

Cost

You will pay a monthly or annual premium for your coverage. Average policies cost between $15 – $30 per month.

For those that live in Utah, get in touch and I would be happy to get you a quote for renters, auto or homeowners insurance.

An Overview of Homeowners Insurance

homeowners-insuranceOne of the easiest ways to save some money is to do an occasional review of auto and homeowners insurance. Last week I wrote about auto insurance (https://ryanhlaw.com/an-overview-of-auto-insurance/) and today I will discuss homeowners insurance in more detail.

The majority of homeowners insurance policies will pay for most losses unless the loss is caused by something excluded. Things that usually aren’t covered by any insurance includes routine maintenance, damage from flooding[1] or landslides, damage from earthquakes, sewer backup and acts of terrorism.

PROPERTY PROTECTION

Four specific things are covered by the property protection portion of your insurance:

Part A: Dwelling and attached structures

This covers damage to your home and any attached structures (an attached garage, for example). For example, if your roof is damaged in a hail storm and you need a new roof Part A would pay for a new roof. If your stove catches on fire and your kitchen is destroyed, Part A will pay to repair the damage.

Part B: Detached structures

This covers any structures that aren’t attached to your main home – a detached garage, a storage shed, etc. Coverage is usually 10% of Part A. If, for example, you have $200,000 worth of insurance in Part A you would have $20,000 worth of insurance on Part B.

Part C: Personal property

This includes all the property in your home – your TV, computer, clothing, etc. It is important that you have a record of what you have in your home so you could prove what you owned if it was stolen or destroyed.

Coverage is limited for many items, so you may need a rider if you have a collection or expensive pieces of jewelry, furs, stamps, firearms, antiques, tools, memorabilia or other similar items.

You will have a deductible for the property protection portions of your insurance – standard is $1,000, but if you have the cash you can raise your deductible which will lower your premium.

You want to look carefully to see if you have replacement cost or actual cash value. Replacement cost will pay for a replacement (i.e. if you have a 25-inch flatscreen TV that is stolen you will get a new 25-inch flatscreen TV). With actual cash value depreciation is taken into account. If your 25-inch flatscreeen is 5 years old and the insurance company figures that TVs last for 10 years you will only get about half the cost of a new TV.

Part D: Living Expenses

If you can’t live in your home while repairs are being made or while it is rebuilt this portion will help pay for similar living expenses.

LIABILITY COVERAGE

The other part of homeowners insurance is liability coverage – which provides coverage for personal injuries or property damage that you or others living in your home may be responsible for.

This portion covers the cost of your defense regardless of whether or not you are found liable. If you are found liable your insurer will cover damages up to the total of your liability coverage.This can be on or off your property and it does not cover intentional acts.

Included as part of liability insurance is medical payments to others that will help pay the doctor’s bills for people injured by you, a family member or your pets.

Other standard coverage includes:

  • Fire Department Service Charge, which will pay the cost of a fire department run
  • Debris Removal coverage, which pays for the cost of removing damaged property

As a reminder, for those that live in Utah, I am happy to review your homeowner’s insurance coverage and run a quote against a number of the nation’s highest rated companies to see if I can save you some money.

[1] Flood Insurance is provided by the federal government – you can access that at www.floodsmart.gov

An Overview of Auto Insurance

auto accidentAuto insurance is one item that we buy hoping that we will never have to use it. While I don’t know anyone who enjoys paying for it each month, we understand it is important (and it is required by law if you own a vehicle!) so we go ahead and keep paying for it.

However, just because you have to pay for it doesn’t mean you should be overpaying for it. When was the last time you reviewed your coverage? While this may not be the most fun you will have in an afternoon, if you haven’t reviewed your insurance documents recently, you may be missing out on some cash that you can apply to some of your other financial goals.

Today I am going to briefly review auto insurance and give you a few tips for how you may be able to save some money on it.

Your auto insurance has several different types of coverages:

  • Bodily Injury Liability per person
  • Bodily Injury Liability per occurrence
  • Property Damage
  • Uninsured/underinsured coverage
  • Comprehensive
  • Collision

Bodily Injury Liability per person

If you cause an accident, this coverage covers people outside of your vehicle who sustain injuries. Whatever the amount is in this section (i.e. $30,000) is the maximum your insurance will pay for each person who is injured.

Bodily Injury Liability per occurrence

This is the same as the bodily injury per person, but it is the maximum your insurance will pay per occurrence. For example, if you have $30,000 in coverage per person, and $60,000 per occurrence and two people are injured by you and have bills of $35,000 each, your insurance will only pay $30,000 for each one because they reach both the limit per person and maximum per occurrence.

Imagine that there were four people injured and each had $30,000 worth of medical bills. How much does each person get then? $15,000 (maximum of $60,000 per accident – $60,000 divided by four people gives you $15,000).

Property Damage

If you cause an accident this covers property that is damaged – whether it is a mailbox or other vehicles.

For bodily injury and property damage state minimums are usually fairly low. For example, in Missouri it is $25,000 per person, $50,000 per occurrence and $10,000 in property damage. In Utah it is $25,000 per person, $60,000 per occurrence and $15,00 in property damage. Hopefully you can see how quickly you can surpass these limits. You can cause more than $10,000-$15,000 in damage in even a fairly minor accident.

I strongly suggest you purchase the highest Liability (Bodily Injury and Property Damage) that you can afford. Increasing these will give you peace of mind that if you cause an accident you won’t personally be liable for medical bills and property damage up to a high limit. I actually don’t sell any policies that are less than $100,000 per person, $300,000 per occurrence and $100,000 in property damage (or 100/300/100).

Uninsured/Under-insured motorist coverage

If someone who is uninsured or under-insured hits you and you are hurt, this clause of your insurance will help pay your medical bills. Some states require you to have some uninsured motorist coverage.

Comprehensive

This coverage pays out when your vehicle has been damaged in some way (except in a collision). For example, if your vehicle sustains storm damage or a vandal keys your car this coverage will help pay to fix the damage.

Collision

If you hit something (car, tree, pole, etc.) this coverage will help pay to fix the damage.

Both comprehensive and collision have a deductible that you will have to pay before the insurance company kicks in any money.

Money Saving Tips

My first tip to help save you money is to review your deductible for comprehensive and collision. If you can afford to increase your deductible I would encourage you to consider it. You would be responsible for meeting the full deductible before any damage is paid out, so you would need cash set aside in your emergency fund to help pay this, but increasing your deductible will save you money on your monthly bill.

If you drive a very old, essentially worthless car that is paid for consider whether it is worth keeping comprehensive and collision. If your car was totaled and the insurance company would only pay you $200 because that is all it’s worth then you are probably better off dropping this coverage. Keep in mind that if your car is damaged (other than in an accident that someone else causes) you would then be liable, in full, for any damages to your vehicle.

Finally – shop around for quotes occasionally. Have you been with the same insurance company for ten years because you saw an ad that said they can save you 10% on your car insurance? It never hurts to check around to see if you can get the same or better coverage for less money. You can usually get a few quotes online fairly easily. You can also check with an independent insurance agent who can shop a number of different companies and find you the best deal.

For those in Utah, I sell auto and home insurance and actually take care of the shopping part for you. My company rate-shops 10-15 companies to find you the best deal. Contact me if you would like more details.

The Importance of Personal Financial Planning for College Graduates

by Ryan H. Law

Over the past 6 weeks I saw more than 500 graduating seniors come through my office to receive student loan exit counseling. Exit counseling is required for all graduating students with federal student loans.

Seeing all these seniors come through our doors has caused me to reflect on my own graduation and some things I did well as well as some things I wish I had known or done upon graduation.

Today’s post will focus on some specific steps that I think all graduating seniors should take (but don’t worry – it’s good advice for everyone – even if you haven’t graduated yet or graduated years ago).

Become financially literate

Financial literacy in the United States is, unfortunately, not widespread. Most high school students fail a personal finance exam (less than 50% of questions answered correctly) and college students score just 62%[1]. One of the best things you can do for your future is to become financially literate. If you can take a college course in personal finance I highly recommend it. In a 3-credit personal finance class you will learn about everything on this list and you will be more financially literate by the end of the course than most people in America. If you don’t have the option to take one on campus look into one of the many excellent Open Courseware classes – you won’t get any college credit for it, but you can’t beat the price tag – free![2]

As a part of becoming financially literate I recommend you learn the fundamentals of how the U.S. economy works. Learn about the business cycle, unemployment rates, inflation and interest rates. All of these things affect your personal finances, so a basic understanding of them is helpful.

Don’t get your financial advice from amateurs

Financial advice can be found almost anywhere – it is prolific on the internet and on the bookshelves at libraries and bookstores. However, I would caution you to be careful that you are not getting your financial advice from amateurs. For example, a few years back there was a taxi driver who “figured out the system to wealth” – day-trading stocks. A lot of people lost a lot of money following his advice. Be careful of advice received from friends or family about the latest “hot tip” on a stock.

Establish financial goals and take action to achieve them

You need to start thinking about some short and long-term financial goals. How soon do you want to pay off your consumer debt? How much money do you need at retirement? Do you plan to buy a home eventually? Do you plan to have children and send them to college? What are your plans for increasing your earning potential? I recommend you take some time to sit down and make some decisions about where you are financially, where you want to be, and how you plan to get there.

Learn to budget

No company would go one day without a good, solid budget. They understand how much is coming in, how much is going out and exactly where those dollars are going. Just like a business, you should also have a budget. A budget is not a record of where your money went (though that is important as well); it is a plan for where you want your money to go. Learn the process for budgeting then discipline yourself to take action and stick to your budget[3]. A key component of your budget should be to spend less than you earn and to pay yourself first. As part of your budget you should work diligently to build up a 3-6 month emergency fund. Click here for more information about budgeting, particularly budgeting software.

Develop a net worth statement and update it annually

A net worth statement is a snapshot of a particular moment in time. It should list all of your assets (everything you own that is worth money) and all of your liabilities (debts). Subtract your liabilities from your assets and you will come up with your net worth. You should update this annually to see how you are doing. Over time this number should increase.

Care about your credit

You should know what your credit report contains[4], what your credit score is and what steps you can take to improve that score[5]. Your credit score determines what interest rate you pay on loans, what your auto insurance will cost, if you can rent certain apartments, and in some cases if you can even get a particular job. Click here for more information about credit scores.

Pay off consumer debt as quickly as possible

Carrying consumer debt, especially credit card debt, is toxic to your financial goals. Pay it off as quickly as possible by paying more than the minimum and refusing to take on additional unnecessary debt[6]. Click here for more information about creating a debt-elimination plan.

Start saving now for retirement and take advantage of employer-sponsored retirement plans such as a 401(k) or 403(b)

If your employer offers a tax-advantaged retirement savings plan, such as a 401(k) or 403(b), take advantage of it! You will save on taxes now and can often get free money through a company “match” of your savings.

Time is your best friend when it comes to saving for retirement. If a 23-year old saves $3000 a year at 8% interest until he or she is age 65 they will have about $912,000 in the bank. If a 33-year old does the same thing they will have about $402,000. That is the power of compound interest!

Understand taxes, insurance and basic estate planning

Even if you pay someone else to prepare your tax return for you, you need to understand your own taxes. You should know your average tax rate, your marginal tax rate, and some steps you can take to reduce your tax burden. You should understand the difference between taking the standard deduction and itemizing deductions.

You also need to understand your insurance products. We spend a lot of money on disability insurance, life insurance, auto insurance, renter’s or homeowner’s insurance and other types of insurance. You should understand what your policy covers, what it doesn’t cover and how much you are paying for each one. You should occasionally check around to see if you can get lower cost insurance.

Everyone needs to do some basic estate planning. Even if you are single with no dependents you at least need a basic will, healthcare directives and a power of attorney. As your situation changes you should review these documents and update them and add other important estate planning documents as necessary.

Start an uncomplicated financial record-keeping system

You and your loved ones should know where important financial documents are and what each one is for. For example, if I were to pass away today I would want my wife to know exactly where my life insurance policies are and how to begin the process of collecting that money. The system I use is a fireproof file box with the HomeFile Organizer system[7]. With this low-cost system I can file and find auto titles, insurance policies, medical records, warranties and any other financial documents. Click here for more information about my financial record-keeping system.

Give yourself an annual financial checkup

I recommend that you set aside a day each year to give yourself a financial checkup. Review your goals, your budget, your net worth, your insurance and estate policies, your savings and your debt level and determine some steps you can take to improve in each area. As part of the review I recommend you choose a new personal finance book to read over the next year. Take this opportunity to reassess where you are and determine a plan for how to get to the next level.

Conclusion

Hopefully you got some good ideas about improving your financial situation from this list. I recommend you choose just one or two things from this list that you can take action on today. As that becomes a habit you can incorporate another item until you have implemented all of them that fit your situation.

[2] If you are looking for an excellent course I recommend Alena Johnson’s Family Finance course from Utah State Open Courseware: http://ocw.usu.edu/Family__Consumer____Human_Development/Family_Finance/index.html. This is the course I took that convinced me to change my major and helped determine my life’s work.
[3] www.Mint.com is a great, free resource for budgeting. The software I personally use can be found at www.YNAB.com. It isn’t free, but I highly recommend it.
[4] www.AnnualCreditReport.com is the only place to get a free copy of all three of your credit reports annually
[5] www.MyFico.com has a great explanation of credit scores and is the most reliable place to purchase your score.
[6] www.PowerPay.org is a great free resource to figure out how you can pay your debt off quickly

The Affordable Care Act in Plain English

by Ryan Law

At the end of the day, what everyone wants is a way to make sure we’re taken care
of when we’re sick, and that it doesn’t ruin us financially to get that care
.”
– Jonathan Gruber, architect of the Affordable Care Act

There is a lot of controversy, confusion, misunderstanding and unfortunately, even blatant lies in the media about what the Affordable Care Act (ACA or Obamacare) is and how it will affect you, your insurance coverage, and the amount you pay for insurance.

Whether you like it or not the ACA is the law and it is important you understand what it is and how it relates to you and your family. After all, your health is one of your most important assets! I won’t go into a lot of detail and I won’t cover all parts of the law – if you want a lot of detail I recommend you visit http://www.healthcare.gov/index.html.

My attempt with this article will be to describe, non-politically, what the ACA is in plain English. If you want to hear a partisan description of the law you can tune in to your favorite Liberal or Conservative commentator. Trust me; they have plenty to say about it!

Jonathan Gruber, Mr. Mandate

The ACA was put together by Jonathan Gruber, an MIT Economist who has studied and analyzed the effects of health-care reform extensively. When Mitt Romney was governor of Massachusetts he called Gruber in to help design a health-care law for Massachusetts, which has become known as Romneycare.

As a side note – Romneycare was seen as a “Republican ideal” because it required individuals to take responsibility for having insurance and didn’t give anyone a free-ride. Liberals actually hated the law because they wanted national health care such as the one in Canada. Romney said that this law was his “singular policy achievement” and that it could be applied nationally. Interesting how an election can change things. Romney became Obamacare’s harshest critic, vowing to repeal it if elected and even calling it an “unconscionable abuse of power” by Obama. After studying both laws I’m not sure how anyone can say there is much of a difference, though.[1].

In 2008 Obama called on Gruber to help him design the ACA. Gruber has written extensively about the law. He says it is the opposite of public health care and that insurance companies like the law because they get more customers, especially young, healthy ones that will pay insurance but not need as much healthcare. He says that the most important provision of the ACA is the individual mandate – without requiring people to get insurance it doesn’t work. There will be more on the mandate later.

In 2011 Gruber wrote a book titled Health Care Reform: What It Is, Why It’s Necessary, How It Works. This is actually a good book for understanding the ACA, and best of all, it is written in comic-book format. (I think more books should be written this way! After all, a picture is worth 1000 words. Maybe I need to find an illustrator for my blog..) It’s obviously slanted as he is the architect of the law, but it’s worth checking out from your local library.

Goals of the ACA

  • Decrease the number of uninsured Americans. There are currently 44 million uninsured Americans[2], most of which are either young and they don’t think they need insurance, or they are poor and cannot afford insurance. The ACA should reduce this by 30 million.
  • Reduce health care costs

Important Provisions of the ACA

  • Pre-existing conditions: Requires insurance companies to cover all applicants of the same age at the same rate, regardless of pre-existing conditions or gender. This provision is something that will be extremely beneficial to millions of people who were denied coverage due to a pre-existing condition.
  • Coverage up to age 26: If you are under the age of 26 you can stay on your parent’s plan, regardless of whether you live at home or on your own, or are single or married.
  • Individual mandate:  This is one part of the law that the government was sued over and that went all the way to the Supreme Court[3]. Because the Supreme Court upheld the Constitutionality of the individual mandate it will go into effect in 2014. Essentially it says that if you don’t buy insurance you will be charged a $95 penalty or 1% of income (whichever is greater) in 2014. That amount will increase until it reaches $695 per person or 2.5% of income in 2016. Regardless of your family size you will never pay more than three times the penalty amount if all your family members are without insurance. However, if health care coverage would cost you more than 8% of your income you don’t have to pay the tax.
  • Health Insurance Exchanges: By 2014 each state is required to set up a health insurance exchange (states that don’t set one up will use the national one) where consumers can compare health insurance policies and premiums.
  • Elimination of lifetime coverage caps: In the past health insurance plans typically had a maximum you would be covered for over your lifetime. It was often as low as $1,000,000. With the ACA coverage caps were eliminated.
  • Businesses must offer insurance: Businesses with 50 or more employees must offer health insurance or they will pay a $2000 fine per employee. They don’t have to provide it for employees working less than 30 hours a week. Businesses with less than 25 employees could qualify for a subsidy to offset the costs of insurance.
    NOTE: Some companies have said they may have to lay off employees or reduce employee’s hours due to this portion of the law, the most famous of which was Papa John’s CEO John Schnatter. Schnatter later said he was taken out of context and plans to comply with the law and that his company is still doing analysis on how it will affect the company.
  • Deductibles and out-of-pocket maximums: Employer plans have a maximum annual deductible of $2000 per person, or $4000 for a family. By 2014 the out-of-pocket maximum per person is $6000 per person per-year (out-of-pocket includes your deductible and co-pays).
  • Preventive Care: There will be no co-pay, co-insurance or deductibles for preventive care.
    NOTE: This portion is sometimes referred to as the Contraceptive Mandate because under this portion of the law contraceptives and the “morning-after” pill must be free to people with insurance. Some groups, including the Catholic Church, have sued the government over this as they are religiously opposed to contraceptives. Other groups (Hobby Lobby being the largest) have sued the government because they are opposed to providing the morning-after pill to employees. There are currently 28 separate lawsuits about this provision. Under current rulings churches are exempt from providing contraceptives or morning-after pills, but church-run hospitals and schools are not exempt, and they were given until August 1, 2013 to comply. Hobby Lobby and others opposed to offering the morning-after pills were given until January 1, 2013 to comply or they will pay $1.3 million per day in penalties. Hobby Lobby has chosen to stand by its principles and pay the fine rather than offer the pill.
  • Insurance subsidies/tax credits: The Central Budget Office has predicted that insurance premiums may go up 10-13% due to the ACA. To offset this, low-income Americans will not pay anything for health insurance, and many in the middle-class will get some form of tax credits. Individuals making between $14,400 and $43,320 and couples filing taxes jointly making between $29,330 and $88,200 will receive some tax credits.
  • Insurance company profits: Insurance companies must pay out 80-85% of insurance premiums received in medical costs and can use 15-20% for administrative needs and profits.

Costs of the ACA

  • Jonathan Gruber claims that by his analysis the ACA should reduce the federal deficit by $143 billion by 2019 and by $1 trillion within 20 years.[4]
    NOTE: Niall Ferguson in the August 19, 2012 Newsweek cover article[5] claimed that the CBO (Central Budget Office) and Joint Committee on Taxation have said net federal spending will be $1.2 trillion by 2022 even after all taxes and penalties have been collected. However, the CBO has actually said that it will decrease the deficit by more than they originally thought.[6][7] I believe the jury is still out on this one – in 2022 we will know for sure, but I struggle to see how it will actually reduce the deficit. I hope I am wrong, though!

Paying for the ACA

The following taxes, fees and penalties have been put into place to help pay for the ACA:

  • .9% tax on incomes over $200,000 (individual) or $250,000 (family).
  • 3.8% tax on unearned income over $200,000 (individual) or $250,000 (family).
  • Insurance providers will pay an annual fee.
  • Pharmaceutical companies and other companies that manufacture medical devices will pay taxes and fees.
  • The 7.5% AGI floor for itemized deductions is being raised to 10% (You can deduct your medical expenses if they exceed 7.5% of your Adjusted Gross Income and itemize deductions – that is being changed to more than 10% of your Adjusted Gross Income).

I hope this article has helped you understand the law better and how it will affect your family and your insurance. I believe there are both good and bad portions of the law and I’m sure we will see more lawsuits and attempts to change portions of the law through legislation. As major changes come about I will continue to post them on my blog.

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[1] Among other similarities, Romneycare requires individuals to have insurance (individual mandate), gives free health insurance to the poorest citizens, penalizes employers not offering insurance and sets up a health care exchange. The only real difference is that Romneycare is administered on a state level and Obamacare on a national level.

[4] Gruber, J., Health Care Reform: What It Is, Why It’s Necessary, How It Works, 2011 ISBN: 0809053977