MONEY Taxes

You Just Got a Break If You Messed Up Your Obamacare Tax Credit

The IRS will give you more time to pay back any excess premium subsidies when you file your taxes.

Consumers who received too much in federal tax credits when buying insurance on the health law’s marketplaces last year got a reprieve of sorts from the Internal Revenue Service this week. Although they still have to repay some or all of the excess subsidies, the IRS won’t ding them with a late payment penalty if they don’t repay it by the April 15 tax deadline.

“They’re trying to make this work,” says Timothy Jost, a law professor at Washington and Lee University who’s an expert on the health law.

Under the law, people with incomes between 100% and 400% of the federal poverty level ($11,670 to $46,680 for an individual in 2014) who did not have insurance through their job could qualify for tax credits to make premiums more affordable. They could elect to have these subsidies paid in advance directly to the insurance company, and many did. A typical tax credit was about $3,000 annually.

The amount people received was based on an estimate of their 2014 income. At tax time, that amount has to be reconciled against consumers’ actual income on IRS Form 8962. If consumers or the marketplace underestimated their 2014 income, they may have received too much in tax credits and have to pay back some or all of it.

How much people have to repay is based on their income and is capped at $2,500. People with incomes over 400 percent of the poverty line have to repay the entire amount, however.

This penalty reprieve only applies to the 2014 tax year. The IRS will allow people to repay what they owe on an installment basis. But be forewarned: Interest will continue to accrue until the balance is paid off.

MONEY Financial Planning

The Most Important Money Mistakes to Avoid

iStock

Smart people do silly things with money all the time, but some mistakes can be much worse than others.

We asked three of our experts what they consider to be the top money mistake to avoid, and here’s what they had to say.

Dan Caplinger
The most pernicious financial trap that millions of Americans fall into is getting into too much debt. Unfortunately, it’s easy to get exposed to debt at an early age, especially as the rise of student loans has made taking on debt a necessity for many students seeking a college education.

Yet it’s important to distinguish between different types of debt. Used responsibly, lower-interest debt like mortgages and subsidized student loans can actually be a good way to get financing, helping you build up a credit history and allowing you to achieve goals that would otherwise be out of reach. Yet even with this “good” debt, it’s important to match up your financing costs with your current or expected income, rather than simply assuming you’ll be able to pay it off when the time comes.

At the other end of the spectrum, high-cost financing like payday loans should be a method of last resort for borrowers, given their high fees. Even credit cards carry double-digit interest rates, making them a gold mine for issuing banks while making them difficult for cardholders to pay off once they start carrying a balance. The best solution is to be mindful of using debt and to save it for when you really need it.

Jason Hall
It may seem like no big deal, but cashing out your 401(k) early has major repercussions and leads you to have less money when you’ll need it most: in retirement.

According to a Fidelity Investments study, more than one-third of workers under 50 have cashed out a 401(k) at some point. Given an average balance of more than $14,000 for those in their 20s through 40s, we’re talking about a lot of retirement money that people are taking out far too early. Even $14,000 may seem like a relatively easy amount of money to “replace” in a retirement account, but the real cost is the lost opportunity to grow the money.

Think about it this way. If you cash out at 40 years old, you aren’t just taking out $14,000 — you’re taking away decades of potential compound growth:

Returns based on 7% annualized rate of return, which is below the 30-year stock market average.

As you can see, the early cash-out costs you dearly in future returns; the earlier you do it, the more ground you’ll have to make up to replace those lost returns. Don’t cash out when you change jobs. Instead, roll those funds over into your new employer’s 401(k) or an IRA to avoid any tax penalties, and let time do the hard work for you. You’ll need that $100,000 in retirement a lot more than you need $14,000 today.

Dan Dzombak
One of the biggest money mistakes you can make is going without health insurance.

While the monthly premiums can seem like a lot, you’re taking a massive risk with your health and finances by forgoing health insurance. Medical bills quickly add up, and if you have a serious injury, it may also mean you have to miss work, lowering your income when you most need it. These two factors, as well as the continuing rise in healthcare costs, are why a 2009 study from Harvard estimated that 62% of all personal bankruptcies stem from medical expenses.

Since then, we’ve seen the rollout of Obamacare, which signed up 10.3 million Americans through the health insurance marketplaces. Gallup estimated last year that Obamacare lowered the percentage of the adult population that’s uninsured to 13.4%. That’s the lowest level in years, yet it still represents a large number of people forgoing health insurance.

Lastly, as of 2014, not having health insurance is a big money mistake. For tax year 2014, if you didn’t have health insurance, there’s a fine of the higher of $95 or 1% of your income. For tax year 2015, the penalty jumps to the higher of $325 or 2% of your income. While there are some exemptions, if you are in a position to do so, get health insurance. Keep in mind that for low-income taxpayers, Obamacare includes subsidies to lower the monthly payments to help afford health insurance.

MONEY Benefits

Why Some Same-Sex Couples May Have to Marry Now

Same-sex wedding toppers on top of aspirin bottle
Sarina Finkelstein (photo illustration)—Getty Images (2)

With same-sex marriage legal in 35 states and D.C., a few employers are starting to roll back back health insurance and other benefits for domestic partners.

Until recently, same-sex couples could not legally marry. Now, some are finding they must wed if they want to keep their partner’s job-based health insurance and other benefits.

With same-sex marriage now legal in 35 states and the District of Columbia, some employers that formerly covered domestic partners say they will require marriage licenses for workers who want those perks.

“We’re bringing our benefits in line, making them consistent with what we do for everyone else,” said Ray McConville, a spokesman for Verizon, which notified non-union employees in July that domestic partners in states where same-sex marriage is legal must wed if they want to qualify for such benefits.

Employers making the changes say that since couples now have the legal right to marry, they no longer need to provide an alternative. Such rule changes could also apply to opposite-sex partners covered under domestic partner arrangements.

“The biggest question is: Will companies get rid of benefit programs for unmarried partners?” said Todd Solomon, a partner at McDermott Will & Emery in Chicago.

It is legal for employers to set eligibility requirements for the benefits they offer workers and their families — although some states, such as California, bar employers from excluding same-sex partners from benefits. But some benefit consultants and advocacy groups say there are legal, financial and other reasons why couples may not want to marry.

Requiring marriage licenses is “a little bossy” and feels like “it’s not a voluntary choice at that point,” said Jennifer Pizer, senior counsel at Lambda Legal, an organization advocating for gay, lesbian and transgender people.

About two-thirds of Fortune 500 companies offer domestic partner benefits, but only a minority is changing the rules to require tying the knot, said Deena Fidas, director of the workplace equality program at the advocacy group Human Rights Campaign.

Because same-sex marriage isn’t legal in all states, “many employers operating in multiple states … are retaining their partner benefit structures,” said Fidas.

Most companies making the changes, including Verizon, are doing so only in those states where same-sex couples can get married. And most give workers some time to do it.

“We gave them a year and a quarter to get married,” said Jim Redmond, spokesman for Excellus BlueCross BlueShield, which made the change for employees shortly after New York allowed same-sex unions.

Employers that offer domestic partner benefits — for both same-sex and opposite-sex partners — generally allow couples in committed relationships to qualify for health and other benefits upon providing documents, such as financial statements, wills, rental agreements or mortgages, proving they are responsible for each other financially.

Such benefits were particularly important before the federal health law barred insurers from rejecting people with pre-existing medical conditions.

“We had clients over the years who were living with HIV … the only health insurance they had, or had hope of getting was their partner’s, through a job,” said Daniel Bruner, director of legal services at the Whitman-Walker Health clinic in Washington D.C. “Now folks have more health insurance options.”

After the Supreme Court ruled the federal Defense of Marriage Act unconstitutional in 2013, the portion of the health insurance premium paid by employers on behalf of the same-sex spouse was no longer taxable under federal rules, although state taxes often applied where such marriages were not legal. When state marriage laws change, so do those tax rules.

In Arizona, Dena Sidmore and her wife, Cherilyn Walley are saving more than $300 a month in taxes on the health insurance from Walley’s state job, which covers them both. The savings came after the state’s same-sex marriage bar was thrown out by the courts in October.

They didn’t marry for benefits. They already had coverage under domestic partner requirements affecting Arizona state workers. They simply wanted to be married. Indeed, they tied the knot in September 2013, after driving all night to Santa Fe, N.M., where same-sex marriage was legal.

“It was lovely,” Sidmore said of the ceremony at the courthouse. But for her, the real change came when Arizona’s bar on same-sex marriage was overturned by the courts. She remembers thinking: “This is real. It’s not just a piece of paper.”

After the courts lifted the same-sex marriage ban, Arizona dropped its domestic partner program. State workers had until the end of last year to marry if they wanted to keep a partner on benefits.

Sidmore has no objection to employers requiring a marriage license for benefits because “spousal benefits require marriage,” although she thinks there should be exceptions for older residents who might face the loss of pensions or other financial complications if they remarry.

Benefit experts recommend that employers consider what it might mean for workers if benefits are linked to marital status — especially those that operate in states where same-sex marriage is not legal.

While some couples, like Sidmore and Walley, may be willing to travel to tie the knot, others may not want to, or may be unable to afford it. Additionally, some workers may fear if they marry, then move or get transferred to a state where same-sex marriage is barred, they would face discrimination.

Joe Incorvati, a managing director at KPMG in New Jersey, married his partner, Chuck, in 2013 when it became an option. “We’d been together for 38 years, so it just seemed natural,” he said.

KPMG offers domestic partner benefits and does not require employees to be married for eligibility. While he’s comfortable in New Jersey, Incorvati said it could be a problem if his company wanted to transfer him to a state where same sex marriage is not legal.

Even though his work benefits would remain the same, “Would I have the same rights as in New Jersey?” Incorvati asked. “The answer may be no.”

Kaiser Health News (KHN) is a nonprofit national health policy news service.

MONEY Health Care

The Most and Least Expensive Places in the U.S. for Health Insurance

South Franklin Street with Mount Roberts tram car passing overhead in Downtown Juneau, Alaska.
Buy your own health insurance? You're paying top dollar if you live in Alaska. Alamy

A survey of health insurance premiums on the exchanges finds that costs tend to be the highest in rural areas with less competition.

In health insurance prices, as in the weather, Alaska and the Sun Belt are extremes. This year Alaska is the most expensive health insurance market for people who do not get coverage through their employers, while Phoenix, Albuquerque, N.M., and Tucson, Ariz., are among the very cheapest.

In this second year of the insurance marketplaces created by the federal health law, the most expensive premiums are in rural spots around the nation: Wyoming, rural Nevada, patches of inland California and the southernmost county in Mississippi, according to an analysis by the Kaiser Family Foundation, which has compiled premium prices from around the country. (KHN is an editorially independent program of the foundation.)

The most and least expensive regions are determined by the monthly premium for the least expensive “silver” level plan, which is the type most consumers buy and covers on average 70% of medical expenses. Premiums in the priciest areas are triple those in the least expensive areas.

Along with the three southwestern cities, the places with the lowest premiums include Louisville, Ky., Pittsburgh, and western Pennsylvania, Knoxville and Memphis, Tenn., and Minneapolis-St. Paul and many of its suburbs, the analysis found.

Starting this month, the cheapest silver plan for a 40-year-old in Alaska costs $488 a month. (Not everyone will have to pay that much because the health law subsidizes premiums for low-and moderate-income people.) A 40-year-old Phoenix resident could pay as little as $166 for the same level plan.

That three-fold spread is similar to the gap between last year’s most expensive area — in the Colorado mountain resort region, where 40-year-olds paid $483—and the least expensive, the Minneapolis-St. Paul metro area, where they paid $154.

Minneapolis remained one of the cheapest areas in the region, although the lowest silver premium rose to $181 after the insurer that offered the cheapest plan last year pulled out of the market. Premiums in four Colorado counties around Aspen and Vail plummeted this year after state insurance regulators lumped them in with other counties in order to bring rates down.

Cynthia Cox, a researcher at the Kaiser foundation, said the number of insurers in a region was a notable similarity among both the most and least expensive areas. “In the most expensive areas only one or two are participating,” she said. “In the least expensive areas there tends to be five or more insurers competing.” She said that other factors, such as whether insurers need state approval for their premiums and the underlying health of the population, may play a role as well in premiums.

The national median premium for a 40-year-old is $269, according to the foundation’s analysis.

Alaska’s lowest silver premium rose 28% from last year, ratcheting it up from 10th place last year to the nation’s highest. Only two insurers are offering plans in the state, the same number as last year, but the limited competition is just one reason Alaska’s prices are so high, researchers said. The state has a very high cost of living, which drives up rents and salaries of medical professionals, and insurers said patients racked up high costs last year.

Ceci Connolly, director of PwC’s Health Research Institute, noted that the long distances between providers and patients also added to the costs. Restraining costs in rural areas, she said, “continues to be a challenge” around the country. One reason is that there tend to be fewer doctors and hospitals, so those that are there have more power to dictate higher prices, since insurers have nowhere else to turn.

By contrast, in Maricopa County, Phoenix’s home, the lowest silver premium price dropped 15% from last year, when Phoenix did not rank among the lowest areas. A dozen insurers are offering silver plans. “Phoenix, during the boom, attracted a lot of providers so it’s a very robust, competitive market,” said Allen Gjersvig, an executive at the Arizona Alliance for Community Health Centers, which is helping people enroll in the marketplaces.

The cheapest silver plan in Phoenix comes from Meritus, a nonprofit insurance cooperative. The plan is an HMO that provides care through Maricopa Integrated Health System, a safety net system that is experienced in managing care for Medicaid patients. Meritus’ chief executive, Tom Zumtobel, said they brought that plan’s premium down from 2014. The insurer and the health system meet regularly to figure out how to treat complicated cases in the most efficient manner. “We’re working together to get the best outcome,” Zumtobel said.

Katherine Hempstead, who oversees the Robert Wood Johnson Foundation’s research on health insurance prices, found no significant differences in the designs of the plans that would explain their premiums. “In most of the plans – cheap or expensive – there seemed to be a high deductible and fairly similar cost-sharing,” she said.

Highest and Lowest Premiums

Here are the 10 most and least expensive regions in the country–with the counties listed in parenthesis–based on premium prices for the lowest-cost silver plan. Regions are counties that share the same price for the same lowest-cost-plan and are either geographically contiguous or are part of the same rating area created by the state.

Premiums are listed for 40-year-olds; and for most states the difference in prices stays the same for people of any age. Vermont and two upstate New York area—Ithaca and Plattsburgh—also are among the 10 most expensive places, although those states do not let insurers adjust premiums based on the consumer’s age, making comparisons inexact. Older residents in those states will end up getting better deals than in most places, while younger ones tend to pay more.

10 Highest Premiums
Region Monthly premium
Alaska (entire state) $488
Ithaca, NY (Tompkins) $459
Bay St. Louis, Mississippi (Hancock) $456
Plattsburgh, NY (Clinton) $446
Rural Wyoming (Albany, Big Horn, Campbell, Carbon, Converse, Crook, Fremont, Goshen, Hot Springs, Johnson, Lincoln, Niobrara, Park, Platte, Sheridan, Sublette, Sweetwater, Teton, Uinta, Washakie, and Weston) $440
Vermont (entire state) $428
Rural Nevada (Churchill, Elko, Eureka, Humboldt, Lander, Mineral, Pershing, and White Pine) $418
Casper, Wyoming (Natrona) $412
Inland California (Imperial, Inyo, and Mono) $410
Cheyenne, Wyoming (Laramie) $401
10 Lowest Premiums
Region Monthly premium
Phoenix, Ariz. (Maricopa) $166
Albuquerque, N.M. (Bernalillo, Sandoval, Torrance, and Valencia) $167
Louisville, Ky. (Bullitt, Jefferson, Oldham, and Shelby) $167
Tucson, Ariz. (Pima and Santa Cruz) $170
Pittsburgh, Pa. (Allegheny and Erie) $170
Western Pennsylvania (Beaver, Butler, Washington, Westmoreland, Armstrong, Crawford, Fayette, Greene, Indiana, Lawrence, McKean, Mercer, and Warren) $179
Knoxville and Eastern Tennessee (Anderson, Blount, Campbell, Claiborne, Cocke, Grainger, Hamblen, Jefferson, Knox, Loudon, Monroe, Morgan, Roane, Scott, Sevier, and Union) $181
Minneapolis-St. Paul (Anoka, Benton, Carver, Dakota, Hennepin, Ramsey, Scott, Sherburne, Stearns, Washington, and Wright) $181
Memphis and suburbs (Fayette, Haywood, Lauderdale, Shelby, and Tipton) $184
North of Minneapolis (Chisago and Isanti) $189

Kaiser Health News (KHN) is a nonprofit national health policy news service.

MONEY Taxes

How Obamacare Could Make Tax Filing Trickier This Year

Affordable Care Act health insurance marketplace navigator Herb Shook pulls up information on his computer to help someone re-enroll in an Affordable Care Act health insurance plan Friday, Nov. 14, 2014, in Houston.
If you got a health insurance subsidy via the online marketplace, you may have more work to do on your tax return. David J. Phillip—AP

For the first time, you'll need to show that you had health insurance last year. For some, that means more paperwork.

In addition to the normal thrills and chills of the income tax filing season, this year consumers will have the added excitement of figuring out how the health law figures in their 2014 taxes.

The good news is that for most people the only change to their normal tax filing routine will be to check the box on their Form 1040 that says they had health insurance all year.

“Someone who had employer-based coverage or Medicaid or Medicare, that’s all they have to do,” says Tricia Brooks, a senior fellow at Georgetown University’s Center for Children and Families.

The law requires people to have “minimum essential coverage,” but most types of insurance qualify.

But for others, here are several situations to keep in mind.

If you were uninsured for some or all of the year

If you had health insurance for only part of 2014 or didn’t have coverage at all, it’s a bit more complicated. In that case, you’ll have to file Form 8965, which allows you to claim an exemption from the requirement to have insurance or calculate your penalty for the months that you weren’t covered.

On page 2 of the instructions for Form 8965 you’ll see a lengthy list of the coverage exemptions for which you may qualify. If your income is below the filing threshold ($10,150 for an individual in 2014), for example, you’re exempt. Likewise if coverage was unaffordable because it would have cost more than 8% of your household income, or you experienced a hardship that prevented you from buying a marketplace plan, or you had a short coverage gap of less than three consecutive months. These are just some of the circumstances that would allow you to avoid the penalty.

In addition, you don’t have to pay a penalty if you live in a state that didn’t expand Medicaid to adults with incomes up to 138% of the federal poverty level $16,104.60 for an individual in 2013) and your income falls below that level.

Some of the exemptions have to be granted by the health insurance marketplace, but many can be claimed right on your tax return. The tax form instructions spell out where to claim each type of exemption.

If you do have to go to the marketplace to get an exemption, be aware that it may take two weeks or more to process the application. Act promptly if you want to avoid bumping up against the April 15 filing deadline, says Timothy Jost, a law professor at Washington and Lee University who is an expert on the health law.

If you don’t qualify for a coverage exemption

If none of the exemptions apply to you, you’ll owe a penalty of either $95 or 1% of your income above the tax filing threshold, whichever is greater. The penalty will be prorated if you had coverage for at least part of the year. The amount of the penalty is capped at the national average premium for a bronze level plan, or $2,448 for an individual in 2014.

The instructions for Form 8965 include a worksheet to calculate the amount of your penalty.

If you received a premium tax credit for a marketplace plan

Under the health law, people with incomes between 100% and 400% of the federal poverty level ($11,490 to $45,960 for an individual in 2013) could qualify for premium tax credits for 2014 coverage bought on the exchanges. If consumers wished, the tax credit was payable in advance directly to the insurer. Many chose that option.

The marketplace determined the amount of premium tax credit people were eligible for based on their estimated income for 2014. At tax time those estimates will be reconciled against actual income. People whose actual income was lower than they estimated may have received too little in advance premium tax credits. They can claim the amount they’re owed as a tax refund.

People whose income was higher than estimated and received too much in advance premium tax credits will generally have to pay some or all of it back. The amount that must be repaid is capped based on a sliding income scale, but people whose income is 400% of poverty or higher will have to pay the entire amount of any tax credit back.

If you bought a plan on the marketplace, you’ll receive a Form 1095-A from your state marketplace by Jan. 31 that spells out how much your insurer received in advance premium tax credits. You’ll use that information to complete Form 8962 to reconcile how much you received against the amount you should have received.

Assuming the information on the form is correct, “It should be easy to reconcile,” says Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities. Tax software programs and tax preparers should know how to make the calculations, she said.

In addition to using commercial tax software or hiring tax preparer, many lower income consumers and seniors can get free tax preparation assistance through the IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs.

Despite resources to help consumers, this first filing season is likely to be bumpy, particularly for people who have complicated family situations or who receive inaccurate information from the marketplace.

“There is just so much confusion out there,” says Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation (KHN is an editorially independent program of the foundation.). “People are going to see these forms and not have any idea what they’re supposed to do with them.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Health Care

The Good News and the Bad News About Health Care Costs

syringe taking liquid from money vial
iStock

The growth of health care costs is slowing, but we're still paying more and getting less

The latest study on health care premiums is a good news/bad news situation. The good news is that premium increases are slowing. The bad news is that you aren’t seeing the savings.

Out-of-pocket health care costs—defined as premiums plus deductibles—now account for 9.6% of median income, up from 5.3% ten years ago, according to the latest report from the Commonwealth Fund, a non-profit health care research group.

That’s partly because health care costs have been rising much faster than incomes. From 2010 to 2013, premiums increased “just” 4.1% a year. (That might sound like a lot, but it’s an improvement from the 5.1% yearly rise between 2003 and 2010.) Meanwhile, from 2003 to 2013, median incomes rose only 1.2% a year on average.

And even as wages have stalled, employers have asked workers to shoulder more of their own health care costs. Deductibles for single coverage have more than doubled since 2003. Today, on average, Americans need to spend 3.8% of their income before health insurance kicks in. And as premiums have gotten 60% more expensive, employers have asked employees to cover an even bigger share of the total cost. You’re paying more, in other words, but getting less.

Your move? Change the way you budget for health care. Here’s how to keep your costs down in 2015.

1) Consider a high-deductible plan.

Sometimes, but not always, a high-deductible plan actually provides a better value than a plan with a lower deductible. While high-deductible plans make you pay more out-of-pocket, you should pay less out of your paycheck every month. According to the Kaiser Family Foundation, the average high-deductible plan for a single person has a $2,215 deductible and will cost you $905 in premiums. Compare that to the average single coverage PPO plan, which has a $843 deductible and will cost you $1,134 in premiums. If you rarely go to the doctor, you’ll save more every pay period with the high-deductible plan.

Employers love this kind of plan because it’s cheaper for them—remember, they’re still paying the bulk of your premiums—so 76% of employers offer financial incentives to encourage you to switch.

Before you make the jump, compare the amount of money you would save from lower premiums to the amount of exposure you face because of the higher deductible. Here’s how to decide which is right for you.

2) Use a health savings account.

About 70% of the Americans struggling with medical debt are actually insured, according to the Kaiser Family Foundation. How does that happen? Well, the Commonwealth Foundation found that the average deductible for single coverage is $1,273—and 62% of Americans don’t have savings to cover a $1,000 emergency room visit, according to Bankrate.

That’s why Americans with high deductibles need an emergency fund to cover unexpected medical costs. The best place for that special health-emergency fund is a health savings account (HSA), a tax-advantaged savings vehicle. You qualify for one if your deductible is at least $1,300 for an individual plan or $2,600 for a family plan. If your employer doesn’t offer one, you can open it on your own. Try to save at least the amount of your deductible. Unlike the “use it or lose it” money in flexible spending accounts, HSA savings roll over year to year; and if you don’t end up spending it on health care, you can use it for anything in retirement.

3) Check the price tags.

It’s still way too difficult to figure out how much a given medical procedure will cost ahead of time. But insurers and employers are trying to make it easier to chose less expensive options when they are available and convenient. According to Mercer, 77% of large employers now offer a price transparency tool to help you look up doctors ahead of time to and compare typical costs and quality ratings.

Using it can help you save, especially on procedures like MRIs and CT scans. A study from the Journal of the American Medical Association found that consumers who used a pricing tool before choosing an advanced imaging service saved $124.74 on average.

MONEY Health Care

Why You Could Have to Foot the Full Bill for a Weight-Loss Drug

The government has approved more drugs that suppress your appetite, but not all insurers will pick up the tab for the prescription.

In December, the Food and Drug Administration approved a new anti-obesity drug, Saxenda, the fourth prescription drug the agency has given the green light to fight obesity since 2012. But even though two-thirds of adults are overweight or obese—and many may need help sticking to New Year’s weight-loss resolutions—there’s a good chance their insurer won’t cover Saxenda or other anti-obesity drugs.

The health benefits of using anti-obesity drugs to lose weight—improvements in blood sugar and risk factors for heart disease, among other things—may not be immediately apparent. “For things that are preventive in the long term, it makes plan sponsors think about their strategy,” says Dr. Steve Miller, the chief medical officer at Express Scripts, which manages the prescription drug benefits for thousands of companies. Companies with high turnover, for example, are less likely to cover the drugs, he says.

“Most health plans will cover things that have an immediate impact in that plan year,” Miller says.

Miller estimates that about a third of companies don’t cover anti-obesity drugs at all, a third cover all FDA-approved weight-loss drugs, and a third cover approved drugs, but with restrictions to limit their use. The Medicare prescription drug program specifically excludes coverage of anti-obesity drugs.

Part of the reluctance by Medicare and private insurers to cover weight-loss drugs stems from serious safety problems with diet drugs in the past, including the withdrawal in 1997 of fenfluramine, part of the fen-phen diet drug combination that was found to damage heart valves.

Back then, weight-loss drugs were often dismissed as cosmetic treatments. But as the link between obesity and increased risk for type 2 diabetes, heart disease, cancer and other serious medical problems has become clearer, prescription drugs are seen as having a role to play in addressing the obesity epidemic. Obesity accounts for 21% of annual medical costs in the United States, or $190 billion, according to a 2012 study published in the Journal of Health Economics.

The new approved drugs—Belviq, Qsymia, Contrave and Saxenda—work by suppressing appetite, among other things. Saxenda is a subcutaneous injection, the other three drugs are in pill form. They’re generally safer and have fewer side effects than older drugs. In conjunction with diet and exercise, people typically lose between 5% and 10% of their body weight, research shows, modest weight loss but sufficient to meaningfully improve health.

The drugs are generally recommended for people with a body mass index of 30 or higher, the threshold for obesity. They may also be appropriate for overweight people with BMIs in the high 20s if they have heart disease, diabetes or other conditions.

In 2013, the American Medical Association officially recognized obesity as a disease.

Nevertheless, “people still assume that obesity is simply a matter of bad choices,” says Ted Kyle, advocacy adviser for the Obesity Society, a research and education organization. “At least half of the risk of obesity is inherited,” he says.

Many people who take an anti-obesity drug will remain on it for the rest of their lives. That gives insurers pause, says Miller.

The potential cost to insurers could be enormous, he says.

Susan Pisano, a spokesperson for America’s Health Insurance Plans, a trade group, says the variability of insurer coverage of anti-obesity drugs “relates to issues of evidence of effectiveness and evidence of safety.”

In 2012, the U.S Preventive Services Task Force, a non-partisan group of medical experts who make recommendations about preventive care, declined to recommend prescription drugs for weight loss, noting a lack of long-term safety data, among other things. But its analysis was based on the older drugs orlistat, which is sold over the counter as Alli or in prescription form as Xenical, and metformin, a diabetes drug that has not been approved for weight loss but is sometimes prescribed for that by doctors.

The task force did recommend obesity screening for all adults and children over age 6, however, and recommended patients be referred to intensive diet and behavioral modification interventions.

Under the health law, nearly all health plans must cover preventive care recommended by the task force without cost sharing by patients. Implementation of the obesity screening and counseling recommendations remains a work in progress, say experts.

Dr. Caroline Apovian, director of the Nutrition and Weight Management Research Center at Boston University, says many of the patients she treats can’t afford to pay up to $200 a month out of pocket for anti-obesity drugs.

“Coverage has to happen in order for the obesity problem to be taken care of,” says Apovian. “Insurance companies need to realize it’s not a matter of willpower, it’s a disease.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Medicare

The Huge Health Care Expense Medicare Won’t Pay

BurwellPhotography.com—iStock

For peace of mind, you need more than Medicare.

Medicare helps more than 55 million Americans with their health care expenses, with most people age 65 or older qualifying for coverage. With benefits for everything from hospital stays to doctors’ visits, Medicare is an essential part of retirement financial planning for older Americans in dealing with one of the largest expenses they bear. Yet there’s a huge gap in Medicare coverage that doesn’t provide financial assistance for services that an estimated 70% of senior citizens will need at some point during their lives. In order to prepare yourself for those expenses, you’ll need to make separate provisions outside Medicare to ensure that you’ll have the financial resources necessary to cover the costs of care.

Nursing homes, long-term care, and the Medicare gap

Medicare covers many things, but the coverage it provides for nursing homes and other types of long-term care are extremely limited. Medicare Part A, which covers most inpatient care such as hospital visits, does make a provision for covering the costs of a skilled nursing facility. If you qualify, Medicare will pay 100% of the cost of skilled nursing facility for 20 days, and it will cover all but a $157.50 per day copayment in 2015 for the next 80 days of approved care at such a facility.

However, in order to qualify for those services, you need to have had a qualifying hospital stay of at least three days, and the care you receive at the facility must be connected to the treatment you were getting in your initial hospital visit. Once your 100 days is up, you’re responsible for all costs — and you’ll need a break of at least 60 days in a row in order to end your current benefit period and renew your benefits for future coverage.

More importantly, many people in nursing homes aren’t receiving skilled nursing services and therefore don’t qualify for Medicare benefits at all. If the only kind of care you need is custodial care such as helping you get in and out of bed, bathing, or getting dressed, then Medicare won’t cover those costs.

When it comes to home health services, Medicare also has limits. You’re entitled to up to 100 home health visits under Medicare Part A following a hospital stay, and Part B also provides certain home health benefits. But to qualify, your doctor has to certify that you’re homebound, and you must need skilled nursing care or certain other treatment such as physical therapy, speech-language pathology, or occupational therapy services. Again, Medicare won’t cover purely personal care, making seniors responsible for much of their own costs for getting in-home help.

How to bridge the gap

Unfortunately, the costs that Medicare doesn’t cover play a part in most retirees’ lives at some point during their retirement. According to a study from the Department of Health and Human Services, almost seven out of every 10 Americans turning age 65 will need long-term care at some point in their lives.

Most traditional insurance, including medical and disability insurance, follow Medicare’s rules in limiting coverage to those whom are medically necessary and involved skilled, short-term care. Even supplemental Medicare policies typically only cover the $157.50 copayment for covered services and provide nothing for long-term care.

In order to get insurance coverage for long-term care needs, you’ll need a specific long-term care insurance policy. These specialized policies cover a wide array of services, ranging from assisted living facilities and nursing homes to home-healthcare and personal care needs. Premiums depend on the age at which you buy insurance, the maximum daily coverage you choose, and the lifetime maximum benefits the policy will provide. In general, the older you are when you obtain long-term care insurance, the higher your annual premiums will be. Moreover, many long-term care policies include what are known as elimination periods, which define initial time periods of three months or longer during which you’ll be solely responsible financially for covering costs of care.

In addition, some states provide programs that assist with certain care needs for senior citizens. Nutrition programs deliver meals directly to many retirees’ homes, and transportation and personal-care assistance are aimed at making lives a little easier. Those services by themselves won’t address many of the major needs people have, but they can nevertheless help bridge some of the coverage gap in Medicare.

Medicare is a vital part of your long-term financial security in retirement, and it covers many different services. But to protect yourself against the needs for nursing and other long-term care, you’ll need to turn to alternatives to Medicare to give yourself the peace of mind that you’ll be able to cover those extensive costs.

MONEY Health Care

Why Getting Mental-Health Coverage Can Be So Tough

Despite rules mandating better insurance benefits, finding care remains a challenge, a new 50-state report concludes.

Even though more Americans have access to health insurance because of the health law, getting access to mental health services can still be challenging.

A new report concludes that despite the 2008 mental health parity law, some state exchange health plans may still have a way to go to even the playing field between mental and physical benefits. The report, released by the advocacy group Mental Health America, was paid for by Takeda Pharmaceuticals U.S.A. and Lundbeck U.S.A, a pharmaceutical company that specializes in neurology and psychiatric treatments.

The report listed the states with the lowest prevalence of mental illness and the highest rates of access to care as Massachusetts, Vermont, Maine, North Dakota, and Delaware. Those with the highest prevalence of mental illness and most limited access are Arizona, Mississippi, Nevada, Washington, and Louisiana.

Among its other findings:

•42.5 million of adults in America, 18.19%, suffer from a mental health issue.

•19.7 million, or 8.46%, have a substance abuse problem.

•8.8 million, or 3.77% of Americans have reported serious thoughts of suicide.

•The highest rates of emotional, behavioral or developmental issues among young people occur just west of the Appalachian Mountains, where poverty and social inequality are pervasive.

Part of MHA’s examination focused on the exchange market and its essential health benefit requirements that guided 2014 coverage. The group found that, while information provided through plans’ “explanation of benefits” might show that there aren’t limits on mental health coverage, limitations including treatment caps and other barriers still exist.

“Parity is in its infancy. Most plans know the numerical requirements around cost-sharing, but few have taken seriously the requirements around equity—around access through networks and barriers to care through prior authorization,” said Mike Thompson, health care practice leader at PricewaterhouseCoopers. “And, in practice, we have a history of imposing much more stringent medical necessity standards on mental health care than other health care.”

However, Susan Pisano, vice president of communications for America’s Health Insurance Plans, an insurance trade group, said the report doesn’t reflect the fact that many health plans have rolling renewals. That means the plans have until Jan. 1, 2015, to fully comply with the parity law.

“Our members are committed to mental health parity, and we’re supportive of legislation, and what isn’t apparent is that benchmark plans represented a snapshot in time … so that doesn’t give us the full picture,” Pisano said. “Our plans have really been working to get in compliance.”

Chuck Ingoglia, senior vice president of public policy at the National Council for Behavioral Health, a Washington-based trade group for community mental health and substance use treatment organizations, said the report’s findings aren’t surprising — though they are troubling. Implementation of the parity law remains a work in progress, he said.

“The law is based on a sound policy premise — that addiction and mental health treatment decisions and management should be comparable to physical health conditions,” he said. “But this also creates a tremendous barrier to proving violations as it requires a consumer to obtain access to plan documents for both types of care, which is frequently handled by different plans,” Ingoglia said.

In addition, the report found that some plans didn’t set out what and how many services were covered. That means consumers would only find out a treatment wouldn’t be paid for by their insurer after they’d already received care.

Americans with mental disorders have the lowest rates of health insurance coverage, so obtaining insurance is a good first step, according to Al Guida, a Washington, D.C.-based lobbyist who works on mental health issues with Guide Consulting Services. But the only way a denial can be reversed is through an appeal, which can be a long and arduous process.

“The vast majority of insurance plans offered on Affordable Care Act federal and state exchanges have close to no transparency, which could lead to abrupt changes in both mental health providers and psychotropic drug regimens with the potential for serious clinical consequences,” Guida said.

Meanwhile, there is a shortage of mental health care professionals—nationally there is only one provider for every 790 people, according to the report.

All of these factors can cause minor mental illnesses to grow more severe, according to Mental Health America CEO Paul Gionfriddo.

He suggested that mental illness should be screened for and covered in the same way cancer, kidney disease, and other illnesses are.

“Right now we’re trapped in a stage where we wait for a crisis, when they’re in advanced stages and then we treat it, and we wonder why it’s so hard to treat it more cheaply,” Giofriddo said.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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