The Impact of the Affordable Care Act on Special Needs Planning

A special needs trust is essential for protecting a loved ones quality of life and access to government benefits.

A special needs trust is essential for protecting a loved ones quality of life and access to government benefits.

On March 23, 2010, the Affordable Care Act (ACA) was signed into law by President Obama.  This series of laws, also known as Obamacare, had and will continue to have a major impact on all aspects of our health care system.  No greater example of this can be found than that affecting the long term planning which must be done by members of the special needs community.

Beginning January 1, 2014, insurance companies are no longer able to deny coverage to adults for pre-existing conditions.  In fact, insurance companies are prohibited from denying coverage or charging more to any person based on their medical history, including genetic information.  Insurance companies are also required to offer and renew coverage for any applicant.

Regarding the coverage that must be provided under private plans, minimum benefits must be covered to persons with disabilities.  The minimum coverage is intended to maintain them in the community and improve their function.  These services include rehabilitation and habilitation services, devices and mental health services.

Prior to this section of the ACA becoming effective, the only real option disabled adults had for ongoing, affordable, comprehensive medical insurance, was to become eligible for Medicaid.  In order to become eligible, these disabled adults had to comply with a number of federal and state regulations, the most significant of which are the regulations limiting the amount of assets an applicant can have.

Those individuals having more than the allotted amount of assets were forced to choose between paying privately for their care or putting the excess resources into a self-settled or first-party special needs trust.  These trusts have their own set of complex rules, not least of which is the requirement to reimburse the Commonwealth of Pennsylvania for all Medicaid monies expended on behalf of the disabled person when that person passes away.

In addition, families wishing to provide funds to the disabled person to help that person maintain his or her quality of life would be required to set up a third-party or common law special needs trust.  While the rules and regulations governing these trusts are not nearly as involved as those pertaining to first-party trusts, the net result is the same, i.e., the disabled person loses control over these funds, which must be administered by a designated Trustee.

With the options provided by the ACA, it is now very important for adult disabled persons and their families to decide whether it is worthwhile to do all that is required to obtain and maintain Medicaid eligibility.  While some may initially wish to shy away from dealing with the government and its inherent regulations, it is important to realize that private insurance plans all have significant limitations.

Initially, it is important to note that medical insurance under the ACA will still not cover significant long-term care expenses.  This is particularly problematic for individuals in the community who need home and community-based services or residential services.

Furthermore, there will be limitations on the number of visits for speech, physical and occupational therapy.  Private plans will not cover environmental/vehicular modifications, structured day programs, supported day programs, respite care (in-home), or community residential services in adult companion care.  Disabled people residing in facilities such as nursing homes and assisted living facilities will not be covered under insurance purchased through the ACA.

Additionally, for many disabled persons supplemental security income (SSI) is an important source of income.  A person can only qualify for SSI if they have a very limited amount of assets and income.  Therefore, a special needs trust will be required to preserve SSI payments.  Finally, individuals with specials needs may feel it necessary to maintain Medicaid eligibility so that they can continue to participate in Medicaid based waiver programs.  Waiver programs can provide funding to allow disabled people to obtain the supports and services they need to be successful.  The failure to plan for continued eligibility for these programs can detrimentally affect a person’s ability to lead a more meaningful life.

The Affordable Care Act certainly gives disabled adults choices that they have never had before.  It is important, however, that these persons and their advisors weigh all the alternatives carefully before deciding which course of action to take.

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