Many Consumers Will Lose Their Insurance Under Affordable Care Act

From Kaiser Health News: 

Rod Coons and Florence Peace, a married couple from Indianapolis, pay $403 a month for a family health plan that covers barely any of their individual medical care until each reaches up to $10,000 in claims. And that’s just the way they like it.

"I'm only really interested in catastrophic coverage," says Coons, 58, who retired last year after selling an electronic manufacturing business. Since they're generally healthy, the couple typically spends no more than $500 annually on medical care, says Coons.

"I'd prefer to stay with our current plan because it meets our existing needs."

That won’t be an option next year for Koons and Peace. In 2014, plans sold on the individual and small group markets will have to meet new standards for coverage and cost sharing, among other things. In addition to covering 10 so-called essential health benefits and covering many preventive care services at no cost, plans must pay at least 60 percent of allowed medical expenses, and cap annual out-of-pocket spending at $6,350 for individuals and $12,700 for families. (The only exception is for plans that have grandfathered status under the law.)

Plans with $10,000 deductibles won’t make the cut, say experts, nor will many other plans that require high cost sharing or provide limited benefits, excluding prescription drugs or doctor visits from coverage, for example.

According to the Department of Health and Human Services, based on the 10 states and the District of Columbia that have so far proposed individual market premiums for next year, the average individual monthly rate will be $321 for a mid-level plan.

Many policyholders don't realize their plans won't meet the standards set by the Affordable Care Act next year, say experts.

Read the rest of the article here.

Woman Prevails in Guardianship to Protect Her Wishes

Momentous news from the Washington Post:

In a victory for the rights of adults with disabilities, a judge declared Friday that a 29-year-old woman with Down syndrome can live the life she wants, rejecting a guardianship request from her parents that would have allowed them to keep her in a group home against her will.

The ruling thrilled Jenny Hatch and her supporters, who included some of the country’s most prominent disability advocates.  For more than a year, Margaret Jean Hatch, whom everyone calls Jenny, had been under a temporary guardianship and living in a series of group homes, removed from the life she knew. Hatch wanted to continue working at a thrift store and living with friends Kelly Morris and Jim Talbert, who employed her and took her into their home last year when she needed a place to recover after a bicycle accident.

                                                             *      *     *

Legally, Hatch’s case came down to two questions: Was she an incapacitated adult in need of a guardian, and, if so, who would best serve in that role — her mother and stepfather, or Morris and Talbert?

But for national experts on the rights of people with disabilities, several of whom testified on Hatch’s behalf, the case was about much more. It was about an individual’s right to choose how to live and the government’s progress in providing the help needed to integrate even those with the most profound needs into the community.

In the end, Newport News Circuit Court Judge David F. Pugh said he believed that Hatch, who has an IQ of about 50, needed a guardian to help her make decisions but that he had also taken into account her preferences. He designated Morris and Talbert her temporary guardians for the next year, with the goal of ultimately helping her achieve more independence.

“For anyone who has been told you can’t do something, you can’t make your own decisions, I give you Jenny Hatch — the rock that starts the avalanche,” her attorney, Jonathan Martinis, exulted after the decision.

The decision is momentous because it is so rare that a person deemed incompetent or incapacitated is given any legal ability to direct his or her guardianship, or direct decisions of the guardian.  Guardianship, unfortunately, impacts the disabled, including the aged as they confront short-term and long-term disabilities.  Too often, seniors do not consider carefully this issue in crafting an estate and financial plan.

For a prior article regarding this case, go here. 

For more information regarding guardianship, see the following articles:

• Estate Plans Should Consider and Attempt to Resolve Guardianship;
• Illinois Permits Guardian Authority to Petition for Termination of a Ward's Marriage; 
• GAO reports on Guardianship Abuse;
• National Groups Acknowledge Need for Guardianship Reform;
• Report on Abuse by Guardians and the Guardianship Process Released;
• Another Reason for Guardianship Planning: Guardian Convicted of Homicide in Death of Ward 

Woman Prevails in Guardianship to Protect Her Wishes

Momentous news from the Washington Post:

In a victory for the rights of adults with disabilities, a judge declared Friday that a 29-year-old woman with Down syndrome can live the life she wants, rejecting a guardianship request from her parents that would have allowed them to keep her in a group home against her will.

The ruling thrilled Jenny Hatch and her supporters, who included some of the country’s most prominent disability advocates.  For more than a year, Margaret Jean Hatch, whom everyone calls Jenny, had been under a temporary guardianship and living in a series of group homes, removed from the life she knew. Hatch wanted to continue working at a thrift store and living with friends Kelly Morris and Jim Talbert, who employed her and took her into their home last year when she needed a place to recover after a bicycle accident.

                                                             *      *     *

Legally, Hatch’s case came down to two questions: Was she an incapacitated adult in need of a guardian, and, if so, who would best serve in that role — her mother and stepfather, or Morris and Talbert?

But for national experts on the rights of people with disabilities, several of whom testified on Hatch’s behalf, the case was about much more. It was about an individual’s right to choose how to live and the government’s progress in providing the help needed to integrate even those with the most profound needs into the community.

In the end, Newport News Circuit Court Judge David F. Pugh said he believed that Hatch, who has an IQ of about 50, needed a guardian to help her make decisions but that he had also taken into account her preferences. He designated Morris and Talbert her temporary guardians for the next year, with the goal of ultimately helping her achieve more independence.

“For anyone who has been told you can’t do something, you can’t make your own decisions, I give you Jenny Hatch — the rock that starts the avalanche,” her attorney, Jonathan Martinis, exulted after the decision.

The decision is momentous because it is so rare that a person deemed incompetent or incapacitated is given any legal ability to direct his or her guardianship, or direct decisions of the guardian.  Guardianship, unfortunately, impacts the disabled, including the aged as they confront short-term and long-term disabilities.  Too often, seniors do not consider carefully this issue in crafting an estate and financial plan.

For a prior article regarding this case, go here. 

For more information regarding guardianship, see the following articles:

• Estate Plans Should Consider and Attempt to Resolve Guardianship;
• Illinois Permits Guardian Authority to Petition for Termination of a Ward's Marriage; 
• GAO reports on Guardianship Abuse;
• National Groups Acknowledge Need for Guardianship Reform;
• Report on Abuse by Guardians and the Guardianship Process Released;
• Another Reason for Guardianship Planning: Guardian Convicted of Homicide in Death of Ward 

Disabled Woman's Guardianship Battle Draws Attention to Guardianship Risks

A 29-year-old Virginia woman with Down syndrome is fighting her parents' attempt to obtain guardianship in a case that has drawn attention to the inherent conflict existing in the laws regarding adult guardianship. These laws seek to protect persons who cannot help themselves, but inherently risk the freedom and independence of those persons who are capable of helping themselves.

There seems to be little question that Ms. Hatch wants to make decisions independently. Before August 2012, apparently, neither of Margaret Jean Hatch's divorced parents wanted to care for her. According to published reports, her father claimed that he couldn't provide an appropriate level of care, and her mother claimed that her relationship with her daughter was too contentious. Consequently, Ms. Hatch, who has an IQ of 52, moved back and forth between friends' apartments and group homes, eventually living with her employers, Kelly Morris and Jim Talbert, owners of a retail shop.

Ms. Morris and Mr. Talbert determined that Ms. Hatch would have a better chance of qualifying for Medicaid waiver services if she was homeless, so they encouraged her to move into yet another group home until her Medicaid application was approved. Ms. Hatch moved back in with the couple once she began receiving waiver services, but two days later, her mother, Julia Ross, and her stepfather, Richard Ross, filed for guardianship. According to the Washington Post, the Rosses claimed that Ms. Hatch "lies, causes confusion, is inappropriate behaving with men, contacts neighbors relentlessly, and is obsessed with others who are nice to her."

Ms. Hatch chose to contest the guardianship, and she has drawn support from members of her community who insist that she should have the right to live where she wants. Her supporters have gone so far as to start a "Justice for Jenny" campaign. The case has drawn the interest of national advocates, including Jennifer Mathis of the Bazelon Center for Mental Health Law, who told the Post, "[t]here is a default assumption that people with intellectual disabilities and people with mental illness need people to make decisions for them, that they can’t, with aid, fend for themselves. Which just isn’t true."

The Hatch case illustrates the inherent conflicts that arise under guardianship laws, especially for people who may need some assistance, but who may not require full guardianship and do not, therefore, deserve the complete loss of control of their lives and affairs.  

President Obama's 2014 Budget Includes Troubling Changes Affecting Estate Planning

The celebration following the federal government's increase in the estate tax exemption to $5.25 million is, perhaps, destined to be short lived.  President Obama’s proposed budget plan for 2014 came out on April 10, and proposes substantial changes to the estate and income tax code.  These changes would mean real changes in estate planning. 

According to the budget plan, the federal estate tax rate will increase from 40 to 45 percent. The individual exemption equivalent will be reduced from $5.25 million to $3.5 million, and it will not adjust upward over time to keep pace with inflation. This means that as time goes on and inflation increases, people will surpass the exemption mark due to appreciation in the value of their estate, and be subject to federal estate taxes. Further, these changes are proposed  as "permanent changes" meaning that they will not sunset or lapse in time.  

The lifetime gifting exemption equivalent is also affected, since the gift and estate taxes use a unified exemption.  The maximum amount that a person can leave his or her family in combined taxable lifetime gifts and inheritance is thus reduced from $5.25 million, which increases with inflation, to a non-adjusting maximum of $3.5 million.

Limiting Grantor Retained Annuity Trusts

More surprising and substantive changes are proposed for sophisticated estate plans. A GRAT (grantor retained annuity trust) is a tax-reducing trust popular for giving assets to family members while retaining an income benefit for some defined period of time.  The grantor puts his or her assets into the trust and receives  an annuity which pays a fixed amount each year. Gift tax is paid when the GRAT is created and the tax is based upon the present value of the remainder of the trust, meaning that the value of the gift, for gift tax purposes is substantially less than the actual fair market value of the assets.  One of the real challenges in such planning is that if the grantor dies before the trust ends, the assets become part of the grantor's taxable estate,and the purpose for the trust, reducing estate taxes, is frustrated.. If the grantor survives the term of the trust, any assets left to the beneficiary — usually the grantor’s children — are tax free. GRATs have typically been short-term trusts to make it more likely that the grantor survives beyond the term of the trust.

The proposed budget will require a minimum trust term of ten (10)  years for all GRATS. This defined longer term makes it more likely that the grantor may die during the trust’s existence, and increases the chances that the trust does nothing to reduce the value of the taxable estate. If death of the grantor occurs within the ten year term, the trust is taxed as part of estate, effectively losing nearly half its value to federal estate taxes.  The proposed budget, therefore, limits greatly the attractiveness of  GRATS as an estate planning option.

Eliminating Intentionally Defective Grantor Trusts

The proposed budget also effectively eliminates intentionally defective grantor trusts (IDGT).  An IDGT  is used to freeze the value of appreciating assets for tax purposes. This strategy allows the grantor to be the owner of the assets for income tax purposes but it removes the value of the assets from the grantor’s taxable estate. As the value of the trust increases, the transferor receives the income earned by the assets (and pays tax on the income) but the assets grow outside of the transferor’s estate.

Under proposed budget:, there would be no separation in the tax codes for this trust. Estate or gift tax would have to be paid on the trust at the time of the owner’s death. This would make the IDGT obsolete.

Signalling a Change?

Perhaps the most significant change reflected in the proposed budget is that the federal government has, once again, returned to a  lack of appreciation for the benefits of certainty and stability in estate and business planning.  Among the reasons that many celebrated the recent changes to the estate tax code (recent being changes adopted at the last minute, less than six months ago), is that the inflation adjustment and portability provisions signaled, to some,  an appreciation for long-term stability and certainty.  It appeared to some that having resolved the estate tax exemption amount, and having adjusted it automatically for inflation over time,  the federal government was, in effect, acknowledging the need for stability and certainty, eschewing uncertainty, and detrimental periodic and last minute legislative changes.  

Of course, perhaps the proposed budget is really the "same as it ever was."  

This article is based in large part on an article by Phoebe Venable, entitled "Obama's Budget Plan would Hit Estate Plans Hard," published May 11, 2013, in the Tennessean, and available online here.