6 Ways to Cash in on the Health Law

After a tumultuous infancy, the health-care reform law celebrates its first birthday March 23. Despite ongoing legal challenges, several provisions of the law have taken effect and are making changes in the way people pay for medical care. Over the past year, I’ve received many questions from readers about how the new law affects them. Here’s what you need to know to make the most of the new rules.

1. Health coverage for adult children. One of the highest-profile changes was the rule permitting adult children to stay on their parents’ health-insurance policies until age 26, rather than kicking them off when they turn 21 or graduate from college. You usually need to add your kids to your policy during open enrollment in the fall for coverage to start at the beginning of the next plan year. But parents may add adult children in the middle of the year under certain circumstances, such as if the kids lose their own health-care coverage. Contact your insurer or employer for specific sign-up rules.

If you already have family coverage for younger siblings, then you may not have to pay more to add your grown kids. But if you have to switch from an individual plan to a higher-cost family plan, it pays to compare the extra premiums with the cost of buying the young adult his or her own policy. In many states, a healthy twentysomething can buy an individual health insurance policy for about $100 per month. See Keeping Adult Children Insured for more information about the new rules and alternatives.

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2. Coverage for preventive care. Many insurance plans must now provide certain preventive-care screenings without charging deductibles or co-payments. Depending on your age, this rule may apply to blood-pressure, diabetes and cholesterol tests, mammograms and colonoscopies, flu shots, routine vaccines, well-baby and well-child visits and other services.

If your health-insurance plan has not made major changes to its costs and benefits since health-care reform was enacted (technically called a “grandfathered” plan), the preventive-care requirements may not apply. Ask your insurer or your employer’s benefits office whether your plan qualifies. See the preventive-care page at Healthcare.gov for a detailed list of the eligible services.

Medicare beneficiaries also get some new preventive benefits, including an annual wellness visit and a personalized prevention plan. Also, Medicare no longer charges co-pays or deductibles for mammograms, cervical-cancer and colorectal-cancer screenings, cholesterol tests, flu and pneumonia shots, hepatitis B vaccinations, and certain kinds of prostate-cancer screenings. See the Manage Your Health section of Medicare.gov for a list of who qualifies for these services and how often you can take advantage of them.

3. Restrictions on using flexible spending money for nonprescription drugs. Starting this year, you may no longer use tax-free money in your flexible spending account or health savings account to stock up on over-the-counter drugs, such as pain relievers and allergy medications, with the exception of insulin. But there is a loophole: You can use the money if you get a prescription. Don’t schedule a special appointment, but the next time you’re at the doctor’s office, ask for prescriptions for any pain relievers, allergy medications, anti-fungals or cough-and-cold medicines you use regularly. See Make the Most of the New Flex-Account Rules for more about this and other changes to FSAs.

4. Stiffer penalty for nonmedical withdrawals from a health savings account. Although HSAs have always provided attractive tax benefits, the downside was that you paid a 10% penalty if you used the money for nonmedical expenses before age 65. That penalty has now doubled, to 20%, starting in 2011.

But there are still plenty of medical bills you can spend the money on penalty-free at any age, including insurance deductibles and co-payments, prescription drugs, uninsured vision and dental care, and a portion of long-term-care premiums (based on age).

You may open a health savings account if you have a health-insurance policy with at least a $1,200 deductible for individual coverage or $2,400 for family coverage in 2011. See What to Know About Health Savings Accounts and Health Savings Account Answers for more information about how these plans work and which expenses qualify.

5. The shrinking Medicare Part D doughnut hole. The worst thing about the Medicare prescription-drug program has always been the doughnut hole -- the coverage gap after your total drug costs reach $2,840 for the year, in which you have to pay all of your bills yourself until your out-of-pocket drug costs reach $4,550 for the year. But the doughnut hole is starting to close in 2011, and it will disappear entirely by 2020.

This year, after your total drug costs reach $2,850, your pharmacist will automatically apply a 50% discount on brand-name drugs. The pharmacy will continue to apply the discount when you purchase the medications until your out-of-pocket costs reach $4,550; the entire cost of the drug (before the 50% discount is applied) counts toward the amount needed to fill the coverage gap. Also starting this year, you’ll pay only 93% of the cost of generic drugs in the doughnut hole, with the government picking up the remaining 7%. See Help With High Drug Costs for more information about the new rules and how these discounts are applied.

6. New coverage for people with preexisting conditions. The health-reform law will eventually prohibit insurers from rejecting people because of their health. But that rule doesn’t take effect until 2014, so the law also created high-risk insurance pools to help cover people with health problems until then.

The Pre-Existing Condition Insurance Plan sounds good on paper, but it has been less popular than expected because of a big catch: You may only qualify for coverage if you have been uninsured for at least six months. The new pools -- some are run by states, some by the federal government -- can be a good solution for people who have been uninsured for an extended period of time. But there are better options for people with health problems who are about to lose coverage: You may have other federal and state protections, including coverage-extension requirements or access to state high-risk pools that existed before health-care reform and may not have a six-month waiting period. See FAQs on the New High-Risk Pool for more information about the new pools and your alternatives.

For many more strategies to help you lower your medical expenses, see 30 Ways to Cut Health Care Costs.