ObamaCare News & Notes The success of the Affordable Care Act (ObamaCare) hinges on the willingness of young healthy people to buy in. Unless this generally healthy demographic signs up for insurance, the balance of costs will not be there to pay for the heavy costs that are found with the more elderly demographic or those with pre-existing conditions. About 28% of 19-34 year olds are currently without any insurance. Compared to only 14% of people who are 35 or older who currently do not have health insurance. Expect to see a full court press starting very soon. Initial enrollment begins October 1 st and ends March of 2014. You can expect to see state governments, the federal government as well as non-profit organizations putting out ads, Facebook posts, tweeting on Twitter not to mention mobile apps for your smartphone. All in efforts to get young people to sign up. It s also been well known that the Obama Administration attempted to get celebrities and popular organizations such as the National Football League to help promote ObamaCare. Thus far they have been unsuccessful. The big concern around young people is that premiums under Obamacare don t vary much regarding your age. The cost of insurance for young people may eventually go up. The problem lies with the penalty. In 2014 the penalty for not having coverage is only $95 in 2014. Bumping up to $325 in 2015 and $695 in 2016. The penalty will be adjusted for inflation as the years pass. This penalty is a non-collectable penalty. Meaning the IRS does not have the authority to come take your stuff in the event of you not taking out health insurance. They can however hold your tax refund hostage if you fail to pay the penalty. The one reason to be somewhat optimistic about the younger generation enrolling is subsidies. About 65% of uninsured young adults will qualify for federal subsidies. When Massachusetts set up its health care law in 2006, about 27% of young adults did not carry insurance. Now the number is just 5% ObamaCare News & Notes With the Affordable Healthcare Act (ACA) health care exchanges set to open up this October, we are getting a lot of questions around the topic. We thought it would be best to do a quick question & answer section to address some of the more common questions we have been getting. 1. Q: What is the exchange everyone keeps talking about and how will it work? A: The exchange will be a place where you can go to shop the plans and prices of insurance plans. Ultimately, each private company will have different levels of coverage, bronze, silver, gold & platinum. Plans will all cover the same medical expenditures, however the actual premiums will not all be the same. We ll tell you why in a little bit. 2. Q: How do these bronze, silver, gold and platinum plans work? How much cost do they cover? 1 K apper & Company Dispatch
A: We ll try and keep this simple. The bronze plan will cover 60% of medical costs, silver 70%, gold 80% and platinum 90%. This percentage is made up of deductibles and co-pays. These plans are designed in a way that ultimately the insurance company will pick up their percentage of the tab in some way shape or form. In the last question we mentioned that all the plans will cover the same medical expenditures (see question 4), but will have different premiums. This is why. For example, Blue Cross Blue Shield may have a lower deductible and higher co-pays than Aetna. But Aetna has higher deductibles and lower copays. In the end, both plans paid the same percentage of benefits, but they were paid in different ways. (This is just an example. Actual plans have not yet been made available for sale or research.) 3. Q: What medical expenditures are covered? A: All small group and individual plans must cover the 10 following Essential Health Benefits. a. Ambulatory patient services b. Emergency Services c. Hospitalization d. Maternity & newborn care e. Mental health & substance use disorder services, including behavior health treatment f. Prescription drugs g. Rehabilitative & habilitative services & devices h. Laboratory services i. Preventative services and wellness services j. Pediatric services including oral & vision care 4. Q: Most importantly, how much can I expect my premiums to go up? A: While here in Illinois, no prices or plans have been made available yet for us to research, you do the math. With the 10 items listed above being mandated within all plans, the price of insurance is bound to go up. For example, a 30 year old male with no need for maternity coverage, prescriptions, no history of substance abuse or mental health issues, or any children will still be paying for coverage in those areas. 2 K apper & Company Dispatch
5. Q: Is there anything that the Insurance Companies can rate me for? A: Yes. While the insurance exchange plans will be guaranteed issue, the insurance company is allowed to rate you based on the following. Geographic location, age and tobacco use. For example a 50 year old tobacco user living in the Chicagoland area can expect a higher premium than a 50 year old tobacco user living in Southern Illinois. Simply because the cost of care can be expected to be much higher in Chicago. 6. Q: What is the Premium Assistance Credit & do I qualify for Premium Assistance Credit? A: The Premium Assistance Credit is a tax credit that may reduce the cost of your premiums. You may qualify for it, but your insurance plan must be purchased through the state exchange. The premium assistance credit is based upon your household size and level of household income. You will have to prove your income for 2014 (showing W-2 s, 1099 s and all other income and expenses to your insurance agent/provider/exchange) for this credit, this will be required for all following years. LET US BE YOU OBAMACARE ASSET YOU VE GOT QUESTIONS! WE VE GOT SOLUTIONS! CALL DENNIS, ANDREW, MIKE OR PAULA TODAY! 618-392-0321 Whether you like it or not, the IRS and your healthcare plan will now go hand-in-hand. Let us help you with your Obamacare questions. Call our office for a health insurance review appointment to achieve the most affordable health insurance for you and your family. Estate Corner Estate planning was once thought of as something that only the super-rich needed to Planning for Illinois worry about. This however is not the case anymore. The baby boomer generation set to inherit more money than any generation ever before, approximately $11.6 trillion. A combination of inheriting more, earning more, rising land prices and increased natural gas and oil production in our area, estate planning may be something that you and your spouse need to consider. While it can often be uncomfortable talking about your estate plans, it is something that everyone needs to do. Ensuring that your estate is passed on in a way that is most beneficial for your heirs, and least beneficial for Uncle Sam is something that all people want, but few people act on. Before you start to plan, it s important to know what the current laws are. Currently the Federal Estate tax exemption is $5,250,000 ($10,500,000 for a couple). This means that you are allowed to pass on $5.25 million of assets to your heirs before even thinking about paying any federal estate taxes. The Federal estate tax exemption is transferrable (portable), meaning that the surviving spouse can use any amount of exemption not used up be the first deceased. Naturally, Illinois has slightly more complicated estate tax process. Without estate planning you could find yourself free of Federal tax, but owing Illinois estate tax. The exemption in Illinois is only $4 million. Illinois does not recognize portability of exemptions for surviving spouses, unless certain 3 K apper & Company Dispatch
elections are made. This is where no planning could eventually come back to cost your surviving spouse and heirs with Illinois estate tax. This is an example of what poor tax planning could result in for an Illinois couple: Jack & Jill have accumulated a joint estate of $6,000,000. Other than a simple will leaving all assets to the surviving spouse they have done no planning. Jack passes, leaving all assets to Jill. There is no issue here; his half of the assets is only $3 million, well under the $4 million exclusion. However, because no special election was made at the time of death, Jack has left Jill with a taxable Illinois estate. Several years later, the estate has grown to $7 million ($3 million over the exclusion. Illinois currently has no inflation protection built into their tax bill) and Jill passes away transferring the estate to her heirs. What will the estate tax bill look like? There is nothing to worry about at the Federal level, but Illinois will receive a sizeable tax payment, about $250,000, from Jack & Jill s surviving heirs. Something that can be avoided with simple steps and planning. (Illinois has a progressive estate tax that caps out at 16%. In this example the estate tax rate was 8.8%). Often times the problem isn t having the assets to pay estate taxes, the problem is having liquid assets to pay the tax. Often people do not want to sell ground, equipment or other hard assets just to pay taxes. There are NO methods more effective for estate planning than the utilization of Survivor Life Insurance. The premiums are often manageable if you start the policy soon enough. They also have other benefits and features that not only your heirs will benefit from but that you can utilize while living. With the right company, these policies build cash value that you can utilize. Even in this low interest rate environment they pay dividends, which over time can result in a 5 to 8 percent gain on your cash. If the right planning is done, once both spouses have passed away, these policies pass on tax free and they stay out of your taxable estate. Giving your heirs the flexibility and liquidity often required and desired. 4 Kapper & Company Dispatch
. General Economic Outlook Local governments are adding jobs again. Up 46,000 jobs in the 2 nd quarter and likely to total 100,000 or so by the end of the year. Local revenues are also stabilizing after the long downturn. Property tax collections, which generally make up 75% of local government income, are rising with the improving housing market. Energy experts believe there is more oil and natural gas underground in the U.S. than originally thought. New drilling technologies are making newly discovered deposits economically feasible. Expect production to keep rising. At 7.5 million barrels per day, crude oil is flowing at a 22-year high. By year-end, production is expected to hit 8 million barrels per day. Agriculture Except for those solely raising News & Notes livestock, farmers of many stripes will see new regulations aimed at keeping pathogens and other contaminants from tainting fruits, vegetables and other food ECONOMIC FORECASTS GDP growth Slow in early 13 rounding out to 2% for the year. Interest Rates 10 Yr T-Notes flat till year end. 30-year mortgage rates begin to creep up Inflation Rising slightly through this year to about 2% Unemployment Steady 7.5% through year end Housing Sales July home sales reached highest level since 2009 Agriculture Imports Outlook (2013-2014 marketing year) All Farm Products A record with Americans adding to diet diversity Beef High prices & tight supply Dairy Foreign exporters selling less Information Provided in part by The Kiplinger Letter products. New safety controls are a mandate from Congress via the Food Safety Modernization Act of 2010. Still very much of this act is up in the air, the severity of some crucial regulations being at the top of the list. This is a positive for farmers worrying about the added costs as well as other pains resulting from the FDA. The FDA is taking it s time to analyze comments from farm sector lobbyists and others regarding the more than 1,000 pages of newly proposed rules. This is the second time that the FDA has extended the comment period, which comes to an end on November 15. Ag lobbyists want to soften the blow to farms as much as possible. Compliance could cost even the smallest farms around $5,000 per year says the FDA. But it hasn t decided yet on an income ceiling for farms that must meet ALL the regulations. It s weighing exemptions for farmers that bring in less than $1 million in sales. Benchmarks of $500,000 & $250,000 are also being weighed as options. The IRS is focusing a lot of resources on contractor vs. employee classifications. It is stepping up efforts to make sure that the workers are classified correctly. In a recent review of 5,000 cases inspectors from the U.S. Treasury found that workers were incorrectly issued 1099 s instead of W-2 s 15% of the time. Resulting in potentially millions of tax dollars lost out on. 5 K apper & Company Dispatch
The USDA still hands out cash to deceased farmers, but far fewer than in previous years. The FSA has begun checking crop payments quarterly against the Social Security Administrations database for deaths. It also quickly reassigns the aid to heirs of the deceased who are farming, thus preventing an heir from exceeding maximum per-farmer aid by getting aid via both estate and personally. It s estimated that FSA tallied $1.1 billion of payments to deceased famers from 1999-2005. That number has been reduced to $3.3 million from 2008-2012, with the FSA reclaiming $1 million of these un-proper payments. All products, services & ideas can be accomplished through our office. We ve expanded our services at Kapper & Company Ltd, utilizing some of the fine companies shown here. 6 K apper & Company Dispatch