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Health-Care Reform: Replacing Myths with Facts

September 10, 2013

The Patient Protection and Affordable Care Act (ACA)passed in 2010 is incredibly broad in scope, so it'sprobably not surprising that there's a good deal ofconfusion about it, and a number of inaccurate andmisleading claims that have been circulated. Here'ssome information to help separate fact from fiction.

Myth: The health-care law cuts basicMedicare benefits and servicesFact : Just the opposite is true. The ACA mandatesthat no guaranteed Medicare benefits are cut. In fact,the ACA expands Medicare benefits to include a freeannual wellness assessment. Many importantpreventive screenings and vaccines are now offeredfree of charge, including screenings for colorectalcancer, cholesterol, and diabetes; mammograms, fluand pneumonia vaccines; and counseling for smokingcessation and nutrition therapy.

The ACA also attempts to slow the increasing cost ofMedicare premiums and ensure that Medicare will notrun out of funds. To help achieve these goals, thehealth-care reform law specifically targets Medicarefraud and wasteful overpayments to insurancecompanies, coupled with some cuts in Medicarespending.

If you're a participant in the Medicare Part D(prescription drug) plan, the ACA attempts to closethe "donut hole" in which plan beneficiaries pay fullprice for prescription drugs after exceeding a gap inthe annual coverage. The ACA provides a $250rebate and offers a variety of discounts and federalsubsidies through 2020, at which time participants willpay no more than 25% out of pocket for mostprescriptions.

Myth: You'll have to give up yourcurrent health insuranceFact: If you have health insurance through youremployer, or you have private insurance, you'll mostlikely be able to keep your present coverage. In fact,plans in existence on March 23, 2010, that haven't

changed significantly are considered "grandfathered,"meaning that those plans are treated as qualifyinghealth insurance. But even if your plan isgrandfathered, you'll benefit from some of theprovisions of the health-care law. For instance, allplans, including grandfathered plans, must allowcoverage for adult dependents to age 26 and removeany lifetime dollar cost limits. Moreover, yourinsurance can't be cancelled if you become sick, andyour plan cannot refuse to insure you if you have apre-existing medical condition.

Myth: All small businesses have toprovide insurance to their employeesFact: If you are a small business owner (meaning youemploy fewer than 50 full-time equivalent employees),you are not required to provide health insurance toyour employees. The "insurance mandate" appliesonly to large employers having at least 50 full-timeemployees.

On the other hand, if you're a small employer and youdo offer health insurance coverage to youremployees, you may be eligible for a tax credit. Thecredit is available to employers that have 25 or fewerfull-time equivalent employees with annual wagesaveraging less than $50,000 per employee, and thatpay at least 50% of the health plan costs.

Myth: The ACA provides subsidies toillegal immigrantsFact: The ACA specifically defines who is eligible forfederal payments, credits, and subsidies. Only U.S.citizens or nationals, and aliens lawfully present in theUnited States may receive federal payments, credits,or cost-sharing reductions applicable toward thepurchase of health insurance. Undocumentedimmigrants in the United States may not acquireinsurance through a state-based Exchange orMedicaid, nor are they eligible for federal subsidiesfor health insurance.

Does the ACA create anew "government-run"insurance plan as analternative to privateinsurance? No, there isno provision in the lawthat creates a healthinsurance plan run bythe government.However, the ACA doesexpand Medicaid toinclude more low-incomeindividuals, and the lawadds free services toMedicare participants.

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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for anyindividual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performancereferenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with aqualified tax advisor.

Securities offered through LPL Financial, Member FINRA/SIPC

Myth: Individuals have to pay taxeson their health benefitsFact: Nothing in the health-care law requiresindividuals to pay income taxes on their health-carebenefits. Starting in 2018, an excise tax is assessedto insurers of high-cost, employer-sponsored healthplans with aggregate expenses exceeding $10,200for individual coverage and $27,500 for familycoverage. The tax does not apply to insured planparticipants.

Other taxes that are part of the ACA include:

• A tax of 10% on the amount paid for indoor tanningservices

• A 20% tax (increased from 10%) on distributionsfrom a health savings account or an Archermedical savings account that are not used forqualified medical expenses

• An increase in the Medicare Part A tax rate onwages by 0.9% (from 1.45% to 2.35%) onhigh-income individuals

• An excise tax of 2.3% on the sale of certainmedical devices

• A tax on large employers (more than 50 full-timeequivalent employees) that do not offer affordablehealth insurance to employees, and

• A tax on individuals who do not have qualifyinghealth insurance (many exceptions apply)

Myth: The ACA promotes end-of-lifedecisions for seniorsFact: While early drafts of the law allowed Medicareto reimburse doctors for talking to older patients aboutadvance-care planning, no such provisions made itinto the final version of the law. Nothing in the ACAforces seniors to have consultations about end-of-lifechoices. On the other hand, the MedicareModernization Act of 2003 allows Medicare to pay fordoctor's visits with seniors in the first year of joiningthe program, during which time patients mayvoluntarily discuss end-of-life planning as part of theirvisit. The ACA does provide Medicare participantswith free annual wellness visits and personalizedprevention plan services. These provisions affordMedicare participants an opportunity to discussimportant issues such as hospice, home care, andadditional services available to seniors. However, theACA does not mandate these discussions, nor does ittell doctors what options to discuss with their patients.

Myth: The ACA taxes all real estatesalesFact: This misstatement is somewhat understandablebased on the applicable part of the law. Beginning in2013, the ACA imposes a tax of 3.8% on certain netinvestment income of individuals, estates, and truststhat have income above the statutory amounts. As itrelates specifically to home sales, the tax applies onlyif you have modified adjusted gross income over$200,000 (individual), or $250,000 (married filingjointly), or $125,000 (married filing separately), and itwould apply only to any taxable gain that results fromthe sale of your home. Since most people are able toexclude $250,000 ($500,000 in the case of a marriedcouple) in gain from the sale of a personal residence,the application of the tax is limited.

Myth: The health-care law will lead togovernment takeover of health careFact: While provisions of the health-care law placesome responsibility on the government to ensure thatqualified insurance is available to most individuals,there is nothing in the law that directly promotesgovernment takeover of our health-care system. Forinstance, many mistakenly believe that state-basedhealth insurance Exchanges sponsor onlygovernment-provided health insurance. In fact, theseExchanges are intended to provide a marketplacethat brings together consumers looking to buy healthinsurance with insurance companies looking to sellhealth insurance.

Beware of health-care scamsProbably due to the complexity of the law, manyunscrupulous individuals are trying to scam peoplebased on the uncertainty of some of the law'sprovisions. For instance, you may get a call, e-mail, orvisit from someone claiming that if you don't havehealth insurance, you'll go to jail. These samescammers may claim to be government officials andoffer to sell you qualifying health insurance. Their goalis to get unsuspecting and frightened individuals,particularly seniors, to divulge personal information.To protect yourself, never buy insurance withoutchecking with your state insurance department to besure the seller is licensed and the policy is legitimate.Don't give out your credit card or bank cardinformation, and don't give your Social Securitynumber to anyone you don't know.

Another myth suggeststhat Medicare Advantageplans will be eliminatedby the health-care law.The ACA does not get ridof these plans, but itdoes attempt to bringdown the taxpayer costto maintain MedicareAdvantage plans to be inline with basic Medicare.

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