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The Unseen Costs of Obamacare
By Richard S. Bernstein
Chief Executive Officer,
Richard S. Bernstein & Associates Inc.
Last week, I received two visits from employees, both with the same question: “You mean I’m going to have to pay income tax next year on the health insurance benefits you give me?”
The only answer I was able to give them was: Not yet.
It has been six months since Congress passed the Patient Protection and Affordable Care Act, yet still, we continue to find and learn new things about how the “Obamacare” health care bill will affect the average American.
What my two employees recently learned was that, beginning in January 2011, every American who receives health insurance through his or her employer will see that insurance benefits show up in his or her W-2 form. For the time being, that doesn’t mean they are paying taxes on this benefit – only that they are disclosing the value of that benefit to the government.
Raise your hand if you believe this won’t lead to a new tax? After the midterm election, of course.
Meanwhile, many of the Americans who can least afford a new expense arelikely to see one, unless Congress repeals another facet of Obamacare. McDonald’s Corp. this week announced plans to drop the low-cost, effective health care plan it offers to nearly 30,000 hourly restaurant workers if that clause – which mandates that a certain percentage of revenue has to go to claims rather than administrative costs – is waived. If that happens, those hourly workers – all of whom likely fall into the group of Americans that Obama promised not to raise taxes on, as they make less than $250,000 a year – will find themselves paying significantly more for health insurance.
While this isn’t precisely a tax increase, it creates the same effect: it takes money from Americans’ pockets, many of whom are living paycheck-to-paycheck.
This is a real effect of Obamacare that will affect their quality of life; even more than that, it is a real effect of Obamacare that will decrease Americans’ spendable income – and that will be felt throughout our economy.
I say this as a person who works in the insurance industry, and who strongly believes that our nation’s health care system rode off the tracks many years ago. In some places, Obamacare will help put us back on track: that the bill has removed lifetime limits on insurance coverage; that it has prohibited insurance companies from rescinding coverage, or from discriminating against Americans with pre-existing conditions – these are good things that have been a long time coming.
But, like a young woman preparing for the prom, the cost of changing our health care system isn’t as simple as paying for the ticket. That young woman needs
a dress, shoes, accessories – all things that come with an extra cost. The same is true of our health care bill – everything comes with an extra cost.
And before Americans go to the polls this November – where most will, without a doubt, have health care on the brain – they should understand those costs.
They should understand that employers like McDonald’s Corp could drop their affordable health care plans.
They should understand that the cost of both drugs and hospital visits have gone up since Obamacare’s passage, at least partially because drug companies and hospitals don’t know what the future holds, and want to ensure a cash reserve if their finances take a dive under the new health care laws.
They should understand that, if they currently use a Health Savings Account (HSA) to purchase over-the-counter drugs, allowing them to write off those medications on their taxes, that practice will end under Obamacare.
They should understand that taking money from their HSA for non-medical purposes will no longer come with a 10 percent penalty; now, that penalty will be 20 percent. And they should understand that their Flexible Spending Accounts (FSA) will be capped at $2,500. So the payroll deductions that currently go into Flexible Spending Accounts tax-free will become capped under Obamacare. And in today’s medical world, $2,500 doesn’t go very far.
In all, there are more than 20 examples like this – new, higher taxes that will go into effect under Obamacare, some as soon as January 1, 2011.
And that’s only what we’ve found so far.
Richard S. Bernstein is one of the nation’s top insurance advisors to high net worth individuals, businesses, and charitable organizations. He’s been featured in many national publications and has joined The Mangru Report on Fox Business as a featured panelist. You can find out more about Mr. Bernstein by visting his corporate website www.rbernstein.com