The Patient Protection and Affordable Care Act of 2010

The Patient Protection and Affordable Care Act of 2010 (ACA) embodies many reforms of the health insurance industry in the United States. The principal objective of the ACA is to ensure access to health insurance for everyone. As of 2014, almost everyone in the United States will be required to have health insurance. In addition, no one may be denied coverage by health insurance companies, regardless of age, preexisting conditions, or the amount of coverage that may be subsequently needed. The rationale for these reforms is that if all Americans are members of the insured pool, the risks for insurance companies will be spread across a larger group of persons so that the cost of private insurance will be less.

The ACA is in some respects similar to Medicare, a health insurance system run by the federal government, funded by a 2.9% tax imposed on everyone who earns wages, with 1.45% each paid by the worker and the employer. Medicare provides health insurance coverage for all individuals who are over age 65 and eligible for Social Security or Railroad Retirement benefits and for those who have received Social Security Disability Insurance benefits for two years or more. There are no exclusions for preexisting conditions, degree of health need, or age after 65. The pool of the insured under Medicare includes those who are healthy and those who are not.

The ACA provides that, by 2014, the pool for private health insurance coverage will be expanded to include nearly everyone. The pool will include younger, healthier citizens than the current Medicare pool. The Congressional Budget Office worked over the numbers daily during the legislative deliberations on the ACA, and the conclusion was that this should work.

Beginning in 2014, health insurance exchanges will be created through the ACA to provide a mechanism for access to health insurance with sufficient coverage -- that is, hospitalization, prescription drug coverage, rehabilitation, mental health services, substance abuse treatment, preventive and wellness health coverage, chronic disease management, pediatric coverage (including dental and vision for children) and maternity coverage.

The health insurance exchanges will provide a marketplace in which to compare plans. The four types of plans that will be available will be labeled Bronze, Silver, Gold and Platinum. Health insurance companies that intend to participate in the exchanges must offer at least one Silver and one Gold plan. The Bronze plan will pay 60% of the insured’s costs, the Silver 70%, the Gold 80% and the Platinum 90%. Bronze plans will have a $5,950 annual limit for out of pocket expenses.

Small businesses will be able to access health insurance for their employees through the exchanges. As noted earlier, health insurance companies will not be able to exclude anyone from coverage for a preexisting condition or set a cap for the amount of coverage.

Beginning in 2014, all individuals in the United States who do not have health insurance coverage will pay a penalty. There is a sliding scale of assistance and premium credits to make health insurance affordable. The term “affordable” means that the premiums may not exceed 8% of the family’s annual income.

If an individual refuses to obtain health insurance, a penalty of the greater of $95 or 1% of his or her annual taxable income will be charged in 2014. In 2015, the penalty is $325 or 2% of taxable income, and in 2016, $695 or 2.5% up to a maximum of $2,085. If a person’s income is too low, there is an exemption from the penalty. In 2014, employers with more than 50 employees will be required to provide health insurance coverage for employees or the employer will be penalized.

There will be a uniform enrollment form for health coverage through the exchanges. The exchanges can be a clearinghouse to determine eligibility for Medicaid, the Children’s Health Insurance Program, or premium credits using this uniform enrollment form. Moreover, the exchanges can screen for families that may be exempt from tax penalties.

Until the ACA, the only health care coverage available to persons with disabilities has been either Medicare or Medicaid. Medicare is only available to workers (and certain dependents of workers) who have a sufficient work history to be eligible for Social Security benefits. For persons with disabilities who have a limited work history, unless they became disabled before age 22 and later qualified for Medicare upon the worker parent’s retirement, disability or death, Medicaid has been the only available source of health care coverage.

Because Medicaid provides health coverage only to the poor, disabled individuals often require special needs trusts in order to shelter so-called excess resources. For special needs planners, assuring access to Medicaid has been a primary focus of planning.

Because the ACA eliminates the option for health insurance companies to deny coverage for a preexisting condition, new health insurance options will open up for some folks with disabilities. As of September 23, 2010, health insurers are no longer permitted to deny coverage to children under the age of 19 who have a preexisting condition.

Depending on the disability, a disabled child who has recovered a personal injury settlement does not necessarily have to plan exclusively for continuing eligibility for Medicaid by transferring the recovery to a special needs trust. Parents who have health insurance through employer-sponsored group health plans can now add a disabled child to their coverage, and can enroll a child up to age 26 as a dependent on the parent’s health plan if the child is without alternative coverage. Thus, there is significant relief here.

Although the ACA will provide near universal access to health insurance in 2014, it does not expand the services available for the long term care needs of people with disabilities or long term chronic diseases. It is still the case that these types of services are available only through private resources or Medicaid.

Look for future newsletterss that will cover some of the ACA’s provisions in greater detail. For example, we plan to discuss one provision in the ACA called the CLASS Act, which may provide some relief for long term care needs, and the extension of Medicaid eligibility to adults who have less income than 133% of the federal poverty guidelines ($14,412 for a single person in 2010).

We will also describe coverage available to persons with preexisting conditions that would otherwise make them uninsurable. These provisions also will open up health coverage for some disabled individuals.

Source: www.specialneedsalliance.com

NAPA Becomes Law

Following the unanimous approval of Congress earlier this month, and the thousands of e-mails and messages advocates sent to the White House last week, President Obama signed the National Alzheimer's Project Act (NAPA) into law. Once implemented, NAPA will ensure our nation has what Health and Human Services Secretary, Kathleen Sebelius calls an "aggressive and coordinated national strategy" to confront the present and rapidly escalating Alzheimer crisis.

Today is a day to celebrate. This is a victory for the 5.3 million people who live with Alzheimer's in this country and the nearly 11 million caregivers. It is a victory for you and more than 300,000 other advocates who stood up and demanded that our nation's leaders create a plan for combating this disease. The journey to take NAPA from concept to law of the land is a victory for all of us.

Tomorrow we will return to the hard but rewarding work that lies ahead. NAPA is a milestone and a very important step forward, but it is not the destination. Our destination is a world without Alzheimer's and we can only arrive there through therapies that stop this disease and improved care and support for those contending with it. Rest assured that we will work tirelessly to maintain the momentum evident today. We will work to ensure NAPA is implemented effectively so that it lives up to its promise, and we will work to advance our other legislative priorities for 2011, including a major, immediate increase in research funding.

As you know, there is no time to waste.

-Harry Johns, President and CEO, Alzheimer's Association

A brief description of NAPA (National Alzheimer's Project Act)
NAPA is the largest legislative victory in many years for the Alzheimer cause. Over the last several years, the Alzheimer's Association has been the leading voice in urging Congress and the White House to pass the National Alzheimer's Project Act. NAPA will create a coordinated national plan to overcome the Alzheimer crisis and will ensure the coordination and evaluation of all national efforts in Alzheimer research, clinical care, institutional, and home and community-based programs and their outcomes. Alzheimer's advocates were instrumental in moving NAPA through Congress. More than 50,000 e-mails, nearly 10,000 phone calls and more than 1,000 meetings by the Alzheimer's Association and its advocates led us to the historic legislative victory for the Alzheimer community.

Source: alz.org

Portability Provision of Estate Tax law may be "Wolf in Sheep's Clothing"

The new Estate Tax law may create complications for middle class married couples: The recently enacted Tax Relief Act of 2010 brings back the federal estate tax with a whimper not a bang. But one provision, intended to help married couples, may result in new tax complexities and expense for those of even very modest wealth.

Under the new rules, individuals who die in 2011 or 2012 will have an exemption amount of $5 million dollars (reduced if they made large gifts during lifetime). If their taxable estate does not consume the entire $5 million exemption, the unused portion can be passed on to their surviving spouse. However, the unused exemption amount is available to the surviving spouse only if an election is made and the amount is calculated on a timely filed estate tax return of the deceased spouse. This estate tax return must be filed to pass on the unused exemption even if no return is otherwise required.

In its December 10th technical explanation of the provisions of the law, the Congressional Joint Committee on Taxation gives the following example of how this "portability" provision will work:

"Example 1: Assume that Husband 1 dies in 2011, having made taxable transfers of $3 million and having no taxable estate. An election is made on Husband 1's estate tax return to permit Wife to use Husband 1's deceased spousal unused exclusion amount. As of Husband 1's death, Wife has made no taxable gifts. Thereafter, Wife's applicable exclusion amount is $7 million (her $5 million basic exclusion amount plus $2 million deceased spousal unused exclusion amount from Husband 1), which she may use for lifetime gifts or for transfers at death."

In the Joint Committee example, it is pretty obvious that the relatively wealthy surviving spouse should hire a lawyer to prepare a federal estate tax return for her deceased husband. At a 35% tax rate, the unused $2 million dollar exemption could someday be worth $700,000 to her heirs.

But doesn't this same logic hold true in the situation of a married couple with a much more modest net worth? Who knows what the future holds for the surviving spouse.

Assume that you are the lawyer meeting with a surviving spouse soon after the death of her husband. The deceased had an "I love you" estate plan which leaves everything to his wife. The value of his estate, for federal estate tax purposes, is $400,000. There is no federal (or state) tax and there is no requirement that a federal estate tax return be filed.

But there is a $5 million dollar unused exemption that can be passed on to the surviving spouse -- IF your client is willing to go to the hassle and expense of having an estate tax return prepared and filed. As the lawyer, how can you not suggest the filing of estate return to calculate the unused exclusion and elect to pass it on? How can you guarantee that the unused exclusion will not someday be incredibly valuable to your client's children or other heirs? At 35% tax rate, an unused $5 million exclusion could someday be worth as much as $1.75 million dollars.

Note that the more modest the estate of the deceased spouse, the more potentially valuable the unused exemption.

Also consider that surviving spouses can acquire unanticipated wealth as a result of fluctuating real estate values as an example.

As a lawyer, I don't want to find myself sitting across the table from my client's children someday trying to explain why a million dollars in avoidable federal estate taxes is due because mom didn't file an estate tax return when dad died. I'm not sure I would feel that much better even if I had some kind of a wavier signed by mom.

So, it seems to me that the portability provision in Title III of the new Tax Relief Act may be the proverbial wolf in sheep's clothing. It may create a lot of additional work for lawyers, and expense for widowed estate administration clients of only modest net worth.

Source: Jeffrey A. Marshall, Certified Elder Law Attorney, 12/19/10.

House Sends Tax-Cut Compromise to President

A massive bipartisan tax package preventing a big New Year's Day tax hike for millions of Americans is on its way to President Obama for his signature.


The measure would extend tax cuts for families at every income level, renew jobless benefits for the long-term unemployed and enact a new one-year cut in Social Security taxes that would benefit nearly every worker who earns a wage.


In a remarkable show of bipartisanship, the House gave final approval to the measure just before midnight Thursday, overcoming an attempt by rebellious Democrats who wanted to impose a higher estate tax than the one Obama agreed to.


The vote was 277-148, with each party contributing an almost identical number of votes in favor (the Democrats, 139 and the Republicans, 138). Opposed were 112 Democrats and 36 Republicans.


NBC News reported that Obama was set to sign the bill and make a statement on Friday afternoon.


In a rare reach across party lines, Obama negotiated the $858 billion package with Senate Republicans. The White House then spent the past 10 days persuading congressional Democrats to go along, providing a possible blueprint for the next two years, when Republicans will control the House and hold more seats in the Senate.


"There probably is nobody on this floor who likes this bill," said House Majority Leader Steny Hoyer, D-Md. "The judgment is, is it better than doing nothing? Some of the business groups believe it will help. I hope they're right."


'Good for Growth'
Sweeping tax cuts enacted when George W. Bush was president are scheduled to expire Jan. 1 -- a little more than two weeks away. The bill extends them for two years, placing the issue squarely in the middle of the next presidential election, in 2012.


The extended tax cuts include lower rates for the rich, the middle class and the working poor, a $1,000-per-child tax credit, tax breaks for college students and lower taxes on capital gains and dividends. The bill also extends through 2011, a series of business tax breaks designed to encourage investment that expired at the end of 2009.


Workers' Social Security taxes would be cut by nearly a third, going from 6.2 percent to 4.2 percent, for 2011. A worker making $50,000 in wages would save $1,000; one making $100,000 would save $2,000.


"This legislation is good for growth, good for jobs, good for working and middle class families, and good for businesses looking to invest and expand their work force," said Treasury Secretary Timothy Geithner.


Some Democrats complained that the package is too generous to the wealthy; Republicans complained that it doesn't make all the tax cuts permanent.


Obama talks tax cuts, business investment
Rep. Ginny Brown-Waite, R-Fla., called it "a bipartisan moment of clarity."


The bill's cost, $858 billion, would be added to the deficit, a sore spot among budget hawks in both parties.


"I know that we are going to borrow every nickel in this bill," Hoyer lamented.


At the insistence of Republicans, the plan includes an estate tax that would allow the first $10 million of a couple's estate to pass to heirs without taxation. The balance would be subject to a 35 percent tax rate.


Many House Democrats wanted a higher estate tax, one that would allow couples to pass only $7 million tax-free, taxing anything above that amount at a 45 percent rate. They argued that the higher estate tax would affect only 6,600 of the wealthiest estates in 2011 and would save $23 billion over two years.


House Speaker Nancy Pelosi, D-Calif., called the estate tax the "most egregious provision" in the bill and held a vote that would have imposed the higher estate tax. It failed, 194 - 233.


No Pelosi vote
On the bill's final vote, House Speaker Nancy Pelosi, D-Calif., did not vote; House GOP leader John Boehner, R-Ohio, and Majority Leader Steny Hoyer, D-Md., voted for the bill, and Majority Whip James Clyburn, D-SC, voted against the bill, NBC News reported.


Boehner, after the vote, called the bill's passage "critically important."


"Stopping all the tax hikes is a good first step in our efforts to reduce the uncertainty family-owned small businesses are facing, but much more needs to be done, including cutting spending, permanently eliminating the threat of job-killing tax hikes, and repealing the job-killing health care law," Boehner, House speaker-designate, said in a prepared statement.


House Republicans who will move into powerful posts when the GOP takes control in January urged passage of the bill.


Rep. Eric Cantor of Virginia, in line to become majority leader, said the measure, while not perfect, marked a "first step" toward economic recovery.


Largely marginalized in the negotiations leading to the bill, Democrats emphasized their unhappiness with Obama.


"We stand today with only one choice: Pay the ransom now or pay more ransom later," said Rep. Brad Sherman of California. "This is not a place Democrats want to be. But, ultimately, it is better to pay the ransom today than to watch the president pay even more, and I think he'd be willing to pay a bit more next month."


Source: NBC News and The Associated Press contibuting to msnbc.com, 12/17/10.

Patient Protection & Affordable Care Act

We are committed to keeping you informed about health care reform and the Patient Protection and Affordable Care Act (PPACA). The PPACA has a 10-year implementaion period. Some PPACA reforms become effective as early as September 23, 2010. This newsletter is intended to provide a summary of some of the immediate implications of the reform act. Insurance companies have begun mailing notices to policyholders informing them of the companies' filings for proposed future rate adjustments.

Below is a list of benefit and eligibility enhancements that become effective on September 23rd. It is advised that these changes be communicated to employees. Note that "grandfathered plans" may not need to immediately comply with provisions affecting adult preventive care, discrimination, claims appeals and access to physicians. The September 23rd changes are:

1. Annual and lifetime dollar limits on network coverage are eliminated: Group health plans may no longer set lifetime limits on "essential health benefits."
2. Pre-existing condition limitations are waived for enrollees under age 19.
3. Dependents may remain on their parents' health plan until age 26 (some New York plans extend to age 29). If you have children in their 20's, or your employees do, you may want to consider adding such dependents to your plan.
4. There is no in-network cost-sharing for preventive care services. Plans will provide first dollar coverage for in-network preventive care.
5. Emergency Services must be covered without prior authorization and treated as in-network.
6. Plan members must be allowed to designate a child's pediatrician as the primary care provider. Plans may not require authorization or referrals for a participating OB-GYN.

The PPACA contains information defining discrimination in health plans. Under these new non-discrimination rules, group plans may not discriminate in favor of highly compensated employees (under IRC Section 105h). The term "highly compensated" is defined as one of the five highest paid officers, a shareholder owning 10% of the value of the stock, and/or an employee among the highest paid 25% of the employees. This may mean the end of certain plan designs where executives have a benefit separate from other employees (executive carve-out). Groups with low participation may also be affected.

The PPACA provides a tax credit for employer paid premiums for qualified firms. From 2010 to 2013, small businesses with 25 or fewer employees and an average wage of $50,000 or less are eligible for premium tax credits (for two years) of up to 35% of their contribution. To qualify, the business must contribute at least 50% of premium based on the rate of a single employee. Employers with 10 or fewer employees and average wages of $25,000 or less will be eligible for the 35% credit. In 2014, the credit will increase to 50% of eligible employer contributions. Groups with 11 - 25 employees with average earnings of $25,001 to $50,000 will be subject to a phase-out of the credit.

The PPACA will affect a business's reporting requirements. Companies will be required to report the cost of the employee sponsored health coverage to their employees on IRS Form W2.

On a state level, the New York State Legislature passed S58099 on June 7, 2010. This notice provides group policyholders information, or "Advance Notice," about the insurers filing for changes in premium rates for 2011. These filings are subject to review and approval by the New York State Insurance Department. The actual size of the increase will be released in a renewal letter approximately 60 days before renewal date. The total estimated percent increase includes multiple components: a basic increase or trend increase, an additional increase resulting from the cost of benefit enhancements required by the new PPACA, and the elimination of the New York State subsidy for small group mental health benefits (Timothy's Law).

IRS Form 56

In the next decade, over one fourth of the population is expected to have dementia and/or Alzheimer's. After age 65, one out of two of us will be afflicted.

Most of us will have to help our parents or our spouse by filing their tax return and maybe even handling an IRS audit. But, the IRS is not allowed to disclose information to anyone other than the taxpayer.

Like us, the IRS staff have parents and concerns regarding them, so they came up with a solution that does not need the approval of the grid-locked Congress.

The IRS had its attorneys issue a legal memo stating that the simple Form 56 solves the problem. If your parents file a Form 56 naming you as their agent, then you can handle their IRS tax matters. Form 56 is short and simple.

One thing to keep in mind is to be sure that your parent signs Form 56 before they lose their mental capacity.

To see Form 56, go to: http://www.irs.gov/pub/irs-pdf/f56.pdf

Retirement Plans and Government Benefit Eligibility - Part 2

People with disabilities often need help from government benefit programs that provide monthly income, medical care, attendant care, housing and food. Many of these programs, including Medicaid, Supplemental Security Income (SSI) and food stamps, are means-tested. These programs count the amount of an applicant's monthly income and also the applicant's resources (bank accounts, stocks, retirement plans, and other assets) in determining eligibility for benefits.

For those individuals with disabilities who have worked and accumulated money in a retirement plan, how will those plans be treated when it comes time to apply for benefits? If a parent wants to name a child with disabilities as a beneficiary of the parent's retirement plan, how will that affect the child's elgibility for benefits? If a child is offered a retirement plan as part of her employment benefit package in a supported work opportunity, how will that affect her current or future eligibility for benefits?

In almost all cases a retirement plan inherited outright by a person with disabilities will be treated as an available asset or as monthly income that will reduce or eliminate means-tested government benefits, including SSI, Medicaid and food stamps. The fact that the retirement plan is taxable as funds are withdrawn does not mean it will not affect eligibility for needs-based benefits.

For example: If Sam inherits a $100,000 IRA from his mother at her death, that IRA account exceeds the $2,000 Medicaid and SSI asset limit and will disqualify him from those benefits. There are planning opportunities available to Sam's mother to avoid this result but still protect the retirement plan for Sam's benefit.

If the retirement plan is owned by the individual with disabilities, the effect of the plan on government benefits is more complicated. The government benefit program will need to determine if the retirement plan, or any portion of the plan, can be accessed by the individual. In other words, are the plan's assets available to the individual? This issue of availability will vary from plan to plan, and some state Medicaid rules may vary on how availability is determined.

In most cases, if the plan owner is no longer working, the retirement plan will be available and counted as a resource. If the plan owner is still working, the retirement plan may prohibit the owner from withdrawing funds from the plan while employed. In that case the plan should not be counted as an available asset. If the retirement plan allows a hardship waiver of the prohibition on withdrawing from the plan or the option of borrowing against the account, then the plan may be counted as an available asset depending upon how the plan defines "hardship" or under what circumstances employees can borrow again their account.

In some cases, the retirement plan may be treated as monthly income rather than an asset if the plan has been converted from a lump sum to irrevocable periodic payments from the plan over the life expectancy of the plan owner. Income usually reduces or offsets means-tested government benefits, so having a retirement plan treated as income rather than an asset probably will not help. Again, if Sam inherits a $500 per month IRA annuity from his mother at her death, the $500 will offset and reduce his SSI income dollar for dollar (other than $20 that will be disregarded). Instead of receiving his SSI income of $674 plus $500, Sam will receive $500 from the inherited IRA and $194 from the SSI program for total monthly income of $694.

The rules governing the treatment of retirement plans vary depending upon the source of the retirement plan and may vary from state to state. Individuals with retirement plan assets should seek legal advice before applying for means-tested government benefits.