How health care reform could impact your debt load

More preventive care and prescriptions will be covered, but insurers will raise premiums to pay for these benefits. (©iStockphoto.com/Sean Locke)

By Andrew Housser

Since President Obama's election, health care reform has been in the news almost continually. While the specifics of how the reform will impact consumers are uncertain, reform has become law and will affect household budgets.

The consumer cost implications of these reforms are very important. After all, health care debt contributed to more than 60 percent of bankruptcy filings in 2007, according to Harvard University research. With the first changes taking effect in the next few months, here is what you should know about how some of the most prominent reforms could affect your finances – and your likelihood of going into medical debt.

1) Adult children can have more coverage, longer

Parents who have young adult children and health insurance can breathe easier: Health care reform provides an additional coverage option. Adults can remain covered on their parent's health insurance policy until their 26^th birthday.

Debt prognosis: Good. Students and young adults, including those still seeking employment in the tight job market, now have an option for insurance. In a medical emergency, they might be able to cover bills with insurance instead of credit cards.

2) Coverage limits are no more

Health care reform prohibits insurers from placing lifetime maximum limits on coverage. A Kaiser Family Foundation study found that at least 10 percent of cancer patients had treatment protocols that surpassed their insurance coverage limit, leaving them essentially without coverage. Other chronic conditions can be costly as well.

Debt prognosis: Good. Insurance now must cover all medical conditions, no matter the cost. Insured people will not have to take on dramatic debt to pay for care, although many people with chronic medical problems do go into debt to pay for care. Premiums, however, might increase to fund this richer benefit.

3) Families can get relief with premiums

The law gives help with premiums, starting in 2014, to people who buy their own health insurance -- that is, where an employer does not provide insurance. Many households will qualify for tax credits to keep premiums below 9.5 percent of income. Small businesses qualify for other premiums to help them provide coverage to employees.

Debt prognosis: Fair. Most people do not go into debt to pay for health insurance premiums, but the reform law requires people to carry health insurance. This provision will give some people assistance with premiums if needed.

4) More preventive care and prescriptions will be covered

Some observers argue that insurers will raise premiums to pay for these benefits. Like it or not, when insurance does not cover these costs, they all too often go unpaid when money is tight. Worse yet, people avoid getting the care they need because of the cost. That neglect can add up to greater health and financial problems.

Debt prognosis: Good. In terms of cost, most people will benefit from not paying extra for services beyond premiums they must pay anyway, but premiums might indeed be higher.

5) By 2014, insurers cannot exclude people based on pre-existing conditions

For the many people who cannot get health coverage because of medical conditions, this provision will make a significant financial difference. A similar provision states that insurers cannot charge higher premiums because of gender, health status or other factors

Debt prognosis: Excellent. In the past, people in these situations have had to go uninsured, and have been at great risk for falling into high levels of medical debt.

While the overall financial impact of the health care reform legislation remains up for heated debate, it is clear that many people will be able to breathe a sigh of relief at knowing they have more secure coverage. For individuals and families, some of the health reform legislation should make it easier to avoid catastrophic medical debt -- and to get and retain health insurance coverage.

Source: http://www.ktnv.com/Global/story.asp?S=13110167