3 Ways Obamacare Affects Life Insurance
Obamacare and Your HEALTH Insurance
The Patient Protection and Affordable Care Act, commonly called “Obamacare”, was signed into law by President Obama on 3-23-2010. Initially, 1-1-2014 was set as the last day that most American citizens are required to enroll in a health plan, or else pay a fine. When health care marketplaces opened up for business on 10-1-2013, persons trying to buy health care exchanges met with enough website glitches that the President reluctantly extended that deadline to 3-31-2014. This remains the deadline for those of you who do not have health insurance (whether by choice, by being previously uninsurable, or having lost your coverage due to it not meeting government regulations), to buy it.
The Employer Mandate goes into effect 1-1-2015. This mandate requires all employers of businesses with over 50 employees to provide government sanctioned health insurance to their full time employees, or pay a fee of $2,000 per employee (the first 30 employees are exempt). Because employers could cut hours to part time to avoid paying for their employees’ health insurance, it remains to be seen what employers will do to compensate for the added expense of purchasing possibly much higher priced health care plans for their employees.
Obamacare and Your LIFE Insurance
Just as there have already been some “unexpected” consequences of the Affordable Care Act on current health insurance, the implications of an endeavor this huge is certain to have other unforeseen implications on all aspects of the financial world. The desire, of course, is that the positive change outweighs any negative consequences. I am not writing to critique the Affordable Care Act. I am just here as a blogger, life insurance professional, and observer of life, to extend some opinions on how you might expect Obamacare to affect life insurance, and thereby take advantage of the positive, and avoid any collateral damage.
Keep in mind, these are just my opinions. I am not an economist, a politician, or prophet. It just looks to me that this is where things are now or could be going, and that some people might be able to make some decisions about life insurance with these opinions in mind.
1. Some group life insurance may fall by the wayside if employers choose to cut hours or pay the fee.
Even if an employer opts out of providing health insurance, they can still provide life insurance. However, some businesses get their coverage with one carrier, and may opt out of providing both types of coverage.
Of course, if hours are cut, part time employees will be hard pressed to pay for life insurance. But it would not be a bad idea to get a small, low priced individual policy while you can. If you ever need to drop it, there is no penalty, and you will always feel good knowing your life insurance is not at the mercy of someone else.
2. Obamacare has made life insurance a relatively good value at this time.
My state of Nebraska is one of the top 8 states in which health insurance premiums are taking the biggest jump, and it is the young and healthy who will be hit the hardest. Long term care insurance has had a recent rate increase due to the number of claims. And low interest rates are making it very difficult to save up a nest egg without taking on substantial risk.
By contract, term life insurance premiums have been at record lows for several years now, especially for the young and healthy. There are longer terms to choose from, and many universal life policies have no lapse guarantees. Therefore, it is possible to lock in these low premiums for many years, or a lifetime.
It may not always be this way, as insurance companies try to adjust to being cut out of certain markets and having huge price increases in others. Now could be a very good time to take advantage of these low life insurance rates.
3. Life Insurance policies with “living benefits” are perfect for supplementing Obamacare or private health insurance.
You’ve all heard the ads about “living benefits”. What that means is that a person can use their life insurance in two ways. They can leave the face amount to their beneficiary upon their death. Or they can use some to all of the face amount while they are alive, if they are diagnosed with a critical illness, terminal illness, or chronic illness (depending on the policy).
There is no doubt that many people are going to be choosing higher deductibles on their new health plans, or that employers are going to increase deductibles to cut costs. Having a life insurance policy with living benefits can provide you with a lump sum of cash that can pay your health insurance deductible and other expenses, until your health insurance kicks in.
Update: Since this was written, the individual mandate has been postponed for a year.