Check out these four tricks used to get you to spend more (without you knowing it).
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Imagine for a moment that you’re 8 years old and you run a lemonade stand. It’s the most simplistic of businesses—all you need are cups, lemons, sugar, water, ice and the right price.
Unfortunately, the neighborhood discovers kinks in your business model. As a result, they impose a strict rule saying you may only charge $0.10 per cup—and if someone can’t afford that price, you must give it away for free.
Now you’re left with few options for staying open. You could make customers bring their own cups, dilute your lemonade with water and serve it warm with no ice. But who wants to decrease quality? Instead, why not ask someone else—a parent, a grandparent—to shoulder the extra costs?
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After all, that is what the Affordable Care Act requires us to do. While the promise to fix healthcare, cover all Americans, ban lifetime caps, limit out-of-pocket expenses, and insure kids until age 26 sounds nice, someone has to pay for it.
That someone is you.
Since you’re not actually 8, it’s a good idea to be educated on the changes and make provisions in your budget for 2013. Read on for three important changes that took place January 1 of this year.
Flexible Spending Accounts
Flexible Spending Accounts (FSAs) allow you to pay for approved medical expenses using non-taxed dollars. In the past, employers determined how much money employees could deposit into their account each year. Most employers set the top amount at $5,000 or set no limit at all.
- The change: The Affordable Care Act now caps all FSAs at $2,500 per year.
- What it means: Any medical expenses you incur above $2,500 will now be paid for using after-tax dollars. Families who visit the doctor often, take prescription medication, have a special-needs child or have a teen needing braces will feel this cap the most.
Medical Tax Deductions
Previously, you could deduct any medical expense above 7.5% of your adjusted gross income (AGI).
- The change: Starting this year, the deduction threshold increases to 10% of your AGI.
- What it means: The average family, making $50,000, will need to spend an additional $1,250 in medical expenses before reaching the new deduction threshold. That equals an additional $200 to $400 per year in taxes.
Medical Device Excise Tax
An excise tax is one paid on the purchase of a specific good, like gasoline or cigarettes. Prior to 2013, no excise tax existed on medical devices.
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- The change: The sale of certain medical devices will now be taxed at 2.3%.
- What it means: While most purchases are made by companies and not individuals, this new tax will ultimately drive up the price end-consumers pay for medical goods and services.
Unfortunately, the changes don’t stop there. While the complete plan isn’t scheduled to roll out until 2014, bringing with it tons of new laws and plenty of questions, one thing is certain: We can expect costs to keep going up.
What we can’t do is wait.
Your next budget committee meeting is now a health care mini-summit. Discuss what the 2013 changes mean for your family and determine what you can do now to prepare for the year ahead. Make space in your budget where needed.
The Affordable Care Act is no lemonade stand. It will take research, understanding and action for you to be ready. As Dave teaches in Financial Peace University (FPU), your health and your money are serious business.
What questions, concerns or fears do you have about how the Affordable Care Act will impact your family? Dave’s trusted health insurance experts can answer your questions today!