It doesn’t matter if you’re rich or poor, we all carry tales and nightmares of our experiences with healthcare. And whether we avoid it at all costs or pay through the nose for premiums, everything is poised to change forever.
It’s hard to avoid this week’s biggest headline—the Supreme Court upholds President Obama’s healthcare reform law, the Patient Protection and Affordable Care Act (PPACA). Nicknamed ObamaCare, it’s become the rope in a political tug of war between Republicans and Democrats. The law’s individual mandate boils down to this: get healthcare coverage or pay extra taxes.
But for millions of Americans with strained bank accounts, it comes down to sorting through the court’s rhetoric to find the dollars and cents.
Issues that fall under the umbrella of healthcare are sticky financial subjects for potential payday borrowers. A study by Northwestern University’s Kellogg School of Management revealed that low to middle income households with access to payday loans were 25 percent more likely to delay medical care. The Center for Responsible Lending asserts that payday borrowers are also more likely to have unpaid medical bills.
Only time will tell if President Obama’s plan will shift those statistics. However based on the law’s provisions, we can start to gather how it might help and hurt individuals who tend to rely on alternative financial solutions to foot their medical expenses.
How the Affordable Care Act Might Help
According to the Center for Disease Control (CDC), approximately 50 million Americans lack health insurance. The terms outlined in PPACA try to close that gap.
In order to give people a fighting financial chance to afford the mandated healthcare, the law details a system of tax subsidies. The Health Reform Subsidy Calculator on the Kaiser Foundation website is an excellent resource demonstrating how much money Uncle Sam could give you to obtain insurance.
For example, a family of four with a 35-year-old breadwinner that makes $40,000 per year could get a $9,122 tax credit to cover 82 percent of the overall insurance premium. This may ease a huge burden for families who wanted insurance, but had it out of reach financially because an employer couldn’t provide it.
More Medicaid to Go Around
Americans under 65 that have incomes up to 1.33 times the poverty level may now qualify for this federal and state partnership program. This means that coverage could expand to a family of four with a $30,000 income. With an increased chance for Medicaid eligibility, you may no longer have to worry about scrambling for the funds to cover an unexpected trip to the ER.
While not every state has to comply with the expansion, the federal government can withhold new funds for states that don’t have it. As a result, this broader Medicaid will likely come to most states.
No More Pre-Existing Conditions Plague
Asthma, diabetes, cancer. You and your family often live with conditions like these and your insurance demands waiting periods before a health plan can kick in. What’s worse is that they have sometimes been able to deny coverage or charge through-the-roof premiums. Starting in 2014 under ObamaCare, you’re no longer penalized for your chronic condition.
For people who are concerned about job security or looking for new employment, this provision can give an extra dose of financial flexibility. A super-high premium can be converted into a manageable one that allows you to pocket savings where you need them.
Lifetime Coverage Caps Eliminated
You may think that after your deductible is satisfied, your insurance will foot an unlimited annual bill. However, some insurance providers can cap your annual or lifetime coverage to a few million dollars. If you have some life-altering medical event, like brain surgery or an organ transplant, these millions are eaten up quickly when the hospital itemizes every cost. What happens is that you’re left holding the balance.
The PPACA lifts the lifetime coverage cap. When your monthly bills for checkups and medications for these expensive medical conditions are minimized, it makes all the financial difference. Rather than being forced to take out a payday loan or declare bankruptcy, your out-of-pocket costs are not only proportionate to your income, but covered unconditionally after the deductible is met.
Keep the Folks’ Insurance Policy For Longer
A report by the Commonwealth Fund found that 40 percent of young adults between 19 and 29 didn’t have health insurance last year. Students no longer have to trade in their parent’s healthcare coverage for their undergraduate diplomas. Many dependent students were cut off at 21, but PPACA lets them stick under their parent’s policy until 26.
This works two-fold for parents and kids. Kids cost more to ensure individually, therefore keeping one family plan for an extra five years can save money for both parties. This 20-something age bracket is especially vulnerable for being uninsured if they plan to continue their college education with graduate school.
Because young adults also tend to be in entry level careers that make less money, they often opt out of insurance to save on living expenses. The ability to remain on Mom and Dad’s plan allows them to forgo this kind of health roulette for a little more stability.
Where ObamaCare May Hurt
For all of the potential good that can come from the new healthcare reform law, it has an equal amount of possible consequences, some of which could affect your pocketbook.
The Grey Area of Affordability
What the government regards as affordable doesn’t always reflect what financial pressures you may feel in your own household. They’re looking at numbers rather than your customized situation. Uncle Sam feels that insurance is unaffordable if premiums make up more than 8 percent of your income after tax credits and employer contribution.
If you’re a single 40-year-old adult who makes $24,000 a year, you’ll still have to pay $1,584 out of pocket under the new plan’s subsidies because you fall into the affordable 5 to 7 percent range. When combined with other annual living expenses, this can still feel like a financial pinch.
You’re also not immune from losing your tax subsidies if your household income rises. Once a family of four reaches around the $93,000 annual income mark, they’re ineligible, which means that insurance costs could rise exponentially. This may feel like a scathing double-edged sword when you’ve previously budgeted for and expected that federal aid.
Healthcare Costs Still Remain
While the price to have insurance drops, we’re still left to deal with other healthcare spending, a sentiment echoed by House Speak John Boehner. According to Fox News, studies show that premiums have climbed $1,200 or 10 percent since part of the law previously took effect. As a result, there’s a possibility that it could put a strain on those who currently have private coverage.
A Bad Hiring Cycle
PPACA requires that in 2022, employers with more than 50 workers will have to pay extra taxes if they don’t offer health care coverage. For small businesses that simply hope to break even, this mandate forces their hand to cap hiring additional workers.
When businesses aren’t hiring in order to avoid these taxes, it could create a vicious cycle—people find fewer jobs which causes them to rely on Medicaid and tax subsidies, which not only costs taxpayer, but also your financial independence.
Countdown to 2022
The Patient Protection and Affordable Care Act goes into full effect in 2022. With more than a year left on this countdown, we haven’t heard the final chapter on this law. Republicans will likely try to repeal the court’s decision as critics continue to weigh in on its perks and pitfalls. But out of the ashes of this healthcare reform, payday borrowers may have a different approach to their medical expenses.