Affordable Care Act and Ramifications Discussion

Parent Cafe
1881

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<p>No they aren’t. You aren’t paying a dime in extra taxes based on that income. You just may lose eligibility for a tax credit. But that’s not any different than anything else in the tax system. For example, I can write off the cost of state property taxes I pay, but if my income was high enough to trigger AMT, I’d lose that deduction. </p>

<p>All tax exemptions and differential treatment of tax rates is based on policy goals to encourage certain types of investment. Muni bond interest isn’t taxed to encourage investors to buy government bonds, as opposed to say, corporate bonds. The federal government is going to reward you if you invest your money in a way that serves a common purpose with paying taxes: that is, to help finance local governments. </p>

<p>Similarly, they tax capital gains and dividends on long-term investments at a favorable rate, or even 0 rate for lower income individuals, because they want to encourage and reward people for holding on to their investments over time. </p>

<p>You still get the tax break always had on municipal bonds or any other tax-free investment. They only extra taxes you pay under ACA is the penalty you incur for not having insurance. </p>

<p>Whether you choose to buy insurance on the exchange (eligible for subsidies), or on the open market (not eligible for subsidies) - is up to you. The subsidies are to ensure that affordability is not a barrier to purchasing insurance. The fact the municipal bond income is exempt from taxation does not mean that it doesn’t exist. </p>

<p>In other words, the government has given you one tax break already on actual income by not taxing it. If you want the same income to be disregarded in calculating your eligibility for a government benefit, that is asking for a double tax benefit – not only do you want your tax-free income to be disregarded for tax purposes, but you also are asking for the total amount to be subtracted out from a needs test. </p>

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<p>They won’t be added back in because they are not “income.” They are not income because you did not get a deduction when you deposited the money – you are just withdrawing from a bank account you own, so it is no more “income” than going to the bank and withdrawing from savings would be “income.”</p>

1882

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They are also going to get an influx of currently healthy customers who have been excluded from insurance in the past because of past health concerns. Not everyone with a pre-existing condition has current expensive medical needs.</p>

1883

<p>So if I get tax exempt interest from muni bonds, that is income which should be counted against subsidy eligibility, but if I own taxable bonds in a Roth IRA and withdraw the interest earned on those bonds, that isn’t income? The beauty of a Roth IRA is that all of the earnings, gains, income created in the account are withdrawn tax free. It is still income in my mind, and probably should be included in MAGI. </p>

<p>Also, the characterization of healthcare insurance subsidies as “tax credits” makes me think of the disqualifying income as being taxed, because losing a tax credit has the same economic effect as paying a tax, but I have already figured out that a refundable tax credit really has nothing to do with taxes.</p>

1884

<p>That would require people to do all sorts of accounting that would be a nightmare, to figure out what part of the Roth withdrawal derives from principal and which comes from income – unless someone withdrew everything at once. The Roth IRA does let you shelter assets – that’s to foster the government policy of encouraging people to save for retirement, rather than being destitute in old age. </p>

<p>I’m confused. Why do you think that people who have enough money that they need to worry about taxation of income from their investments ought to be getting government subsidies to buy insurance?</p>

1885

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<p>Sorry you are confused. What is your definition of “enough” money? I think anyone should worry about the taxation of income from their investments, whether they are investing $1000 or $100,000. I also don’t understand your confusion over who I think “ought to get government subsidies.” I didn’t write the law. The tax credit subsidies are based on income, not assets.</p>

1886

<p>That’s right, and income=income, whether it is tax-exempt income (such as muni bonds), tax-preferred income (such as qualified dividends and long-term capital gains), or fully taxed income (such as a paycheck). </p>

<p>The government has its own definition of need, just like college financial aid administrators. It’s there money, they get to set the rules.</p>

<p>It is logically inconsistent for you to be averse to paying taxes and at the same time expect to receive subsidies when you have a higher income. (And by “higher” I don’t mean rich, I just mean above 400% of the poverty line, which is the threshold set by the ACA). Where do you think the money for the subsidies comes from? </p>

<p>The income from your investments is income, even if it is derived from an asset. To be denied a subsidy because your income is too high is not taxation – it is simply failure to qualify for a government benefit. </p>

<p>Personally, I’ve had hard times financially in my life but as far as I know, I never was so hard up that I would have qualified for food stamps or subsidized school lunches for my kids. I thought that was a good thing – I’ve always looked at the stats for median income in my area and counted myself lucky if I was earning at or above median-- and figured I had no business expecting a government handout if I could put myself in the top half of earners. </p>

<p>As you know, you can avoid taxation of your investment income by opting for tax-sheltered investments. That’s your privilege. But the subsidies are meant for people who are on the poorer end of the spectrum. </p>

<p>I’d love a subsidy if I qualify for one, but I’d prefer to have enough money that I don’t. That is, I’d rather be a $60K earner who doesn’t qualify for subsidies than a $40K earner who does. </p>

<p>As I am self employed and getting older, I look at that subsidy as a safety net. It means that I don’t have to fear losing the ability to pay health insurance if I lose my primary source of income. So maybe this year and next I pay full cost, and then maybe I get sick when I am 63 and my income shrinks… I don’t have to be facing loss of my insurance at the exact point in time that I am also seeing a hit on my earning power. </p>

<p>And I’m happy to pay taxes on my investment income, whatever that ends up being. I consider myself very fortunate to even have investment income – most people I know do not, and I did not while my kids were in college.</p>

1887

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[Walgreen</a> Joins Rush To Employer Exchanges, An Alternative To Obamacare Marketplace - Forbes](<a href=“http://www.forbes.com/sites/brucejapsen/2013/09/17/walgreen-joins-rush-to-employer-exchanges-an-alternative-to-obamacare-marketplace/]Walgreen”>Walgreen Joins The Rush To Employer Exchanges)</p>

1888

<p>I hate the way Forbes continually reports health insurance news in a way that confuses the ACA exchanges with the private corporate exchanges described in the article you quoted. They are entirely different things, and I think that the articles are deliberately misleading in the way the distinction is buried deep within the article. </p>

<p>The lede ought to be that there is a growing industry of private exchanges being set up outside the realm of the ACA exchanges, and instead the reporting gives the false impression that major insurers are offloading their employees onto the Obamacare exchanges. </p>

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<p>What “promise” did workers ever have in the past? Over the years employers have routinely taken cost-cutting measures such as changing their employees to plans with higher deductibles or reducing the percentage of insurance premiums paid by the employer.</p>

1889

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<p>I thought the article was pretty clear about the private corporate exchanges as an alternative to Obamacare.</p>

1890

<p>^^me too.</p>

<p>I thought the headline was clear, the word “Alternative” was prominently displayed, and not “buried deep.”</p>

1891

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<p>Workers didn’t have “promises” or protections or rights. That’s one of the things that ACA is supposed to rectify. </p>

<p>I have a theory: As this shakes out, there will be employers who don’t punish their employees for needing health insurance, and there will be employers who do. A few years down the road, the Walgreens of the world will be bemoaning the fact that they seem to be losing their best people to less stingy employers.</p>

1892

<p>Walgreens is still paying for insurance for their employees – they are just changing the way that insurance selection is managed. For many employees, that may result in an increase in the quality of the benefits. </p>

<p>Did Walgreens pay 100% of employee premiums in the past? What about premiums for employee spouses and dependents?</p>

<p>If not, there is room for savings for many employees, because perhaps they can keep the same employer contribution but apply it to a less costly policy. That could particularly benefit younger employees who may qualify for lower premiums from the exchange, if the employer subsidy is a dollar amount rather than a percentage. </p>

<p>I’d note that using an outside exchange also provides a cost-effective way for an employer to assist part-time employees to buy insurance. Rather than making part-timers ineligible, they can offer insurance to all their employees, but simply prorate the employer contribution for part timers. I’ll bet a major retailer like Walgreens has a large number of part timers – I don’t know if they will be doing as I suggest, but it sure makes a lot of economic sense. The exchange benefits by having more customers.</p>

1893

<p>^^According to an article in today’s WSJ, 36% of Walgreen’s employees are single and under 30, so a cheap catastrophic plan would be ideal for them.</p>

1894

<p>^some of those under 30’s may already be covered under their parents’ insurance plans due to ACA</p>

1895

<p>^^good point. But then…</p>

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<p>…then many of their ee’s do not need health benefits…but yet the law requires that Walgreens provide the benies anyway. (Perhaps those <27 would rather have higher wages.)</p>

1896

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<p>I’m not sure how you got this from what I said. The point is that employers who provide better subsidies for their employees are going to end up with better employees. Walgreen will then have to make a decision: Is it content with a lower-quality workforce in the name of fattening its profits? Or will it decide that investing in its workforce is actually a smarter move?</p>

1897

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My daughter was a manager at Walgreen’s through college and grad school, as was her boyfriend. They have provided benefits, but the benefits have always been very limited. Even prior to the ACA, this was a company that absolutely, emphatically did not want to invest in its work force. The chosen model at the retail level is many low-paid employees working a limited number of hours and very few employees at a higher level working many more hours than is usual in the field. Their scheduling ugliness had nothing to do with the ACA and I am not convinced that the ACA will have much of an impact at this particular company. My husband has a second job at a company that made similar management decisions long before the ACA was a twinkle in President Obama’s eye. That company is a very interesting point of comparison. It’s a medium-sized company that is stunningly, staggeringly profitable but is owned by one man. He decided years ago that he would never again hire full-time workers because after a certain number of hours, they are unionized and make very good money and benefits. So he hasn’t hired any full-time employees at any level in about 8 years. During this time, competitors have sprung up that are branches of larger companies. Also very profitable, but offering full-time work, benefits, salaries. The first guy loses all of his employees to those companies as soon as the employees have enough experience to jump. He then goes on to hire many inexperienced people who will leave when they can or just not make it that long because the work is tough and miserable. He is hiring constantly, can’t get enough people, but he will not change his model because it works for him. Investing in employees is not always a plan chosen as desirable by employers. Many employers emphatically do not want better employees, they want fungible and undemanding employees. The shame of this, IMO, is that in this specific sitaution, the man will hire anyone, so a young person with no experience, skills or questionable background could get hired and work for six months and move on, but very few will actually put up with it.</p>

1898

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<p>I’m not sure why this model is perceived as “shameful.” Given how many young people are not able to find jobs, especially without previous experience, I think we need some of these types of employers. It seems to me that fast-food restaurants used to serve this purpose (providing temporary, no benefits, first-job work for inexperienced young people), but those jobs are now permanently taken by unskilled adults.</p>

1899

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That is not what I said. What I said was that it is a shame that workers without the benefit of experience or skills don’t take advantage of the opportunity to gain those things even though the job is pretty miserable.</p>

1900

<p>I’m still trying to read the bill to find out exactly what’s in it!</p>