The Hidden Cost of A Pre-Existing Condition Exclusion in the PPACA


In America, it’s estimated that anywhere between 50 to 129 million people, or roughly 19 to 50 percent of non-elderly Americans suffer some sort of pre-existing health condition, according to a recent analysis by the Department of Health and Human Services. Of those people, up to one in five, or roughly 25 million do not have health insurance.

Under President Barack Obama’s Affordable Health Care Act (ACA), starting in 2014, these Americans cannot be denied health care coverage. Insurance companies are bound by law to offer health coverage for everybody. It’s a pre-existing condition exclusion that even businesses are bound to follow. The new law requires businesses to start offering health care coverage to employees or face a tax penalty.

There are costs associated with requiring insurance companies to cover those with higher risk. Many believe health insurance companies, certainly looking to recoup that money, will increase premium rates for all.

The ACA will also, beginning in 2014, require insurers to guarantee plans to any and all applicants, irrespective of his or her health at the time of application. Restrictions will also place limits on how much the insurer can vary premiums for the applicant based on their health status.

Taxpayers, both individuals and corporations, will feel the effects of this new legislation as early as 2013. The following taxes and potential penalties will be implemented as a result of ACA:

  • A 3.8% surtax on investment income when your adjusted income is more than $200,000 or $250,000 for joint-filers. Investment income is income generated through capital gains, rent, interest, dividends, house sales, and more.
  • A 0.9% surtax on Medicare taxes for those making $200,000 or more. Currently, the general population pays a 1.45% Medicare tax, while employers pay another 1.45%. Next year, an individual’s Medicare tax will be 2.35%.
  • A penalty tax, starting at $95 per adult ($285 for a family) in 2014, will increase to $695 per adult ($2,085 for a family) or 2.5% of family income – whichever is greater – for those who don’t buy health insurance.

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