A BRIEF SUMMARY OF THE NEW HEALTH CARE LAW

As mentioned in an earlier post, I went to my gym earlier in the week and found out that they were discontinuing offering the tanning bed to members, starting in May.  This was the first ripple from the new health care law - there will be a 10% tax on indoor tanning services, and so my gym is simply dropping the service rather than dealing with the administrative headaches of collecting and reporting the tax.  So, I have been digging around to try to separate the wheat from the chaff in the debate, and find out what else we can expect, and when we can expect it.  Obviously, I cannot capture the entire law and its ramifications in this article - the sea is so large and my boat is so small - but I have tried to distill out the essence.  So here goes:

2010     -No denial of coverage to children based on preexisting conditions. 

             -Children allowed to stay on their parent's insurance plans until age 26.

             -$250 rebate for Medicare beneficiaries who hit “donut hole" ($2,830 annual prescription drug limit)

            - Adults with pre-existing conditions eligible for temporary high-risk pool (superseded in 2014 by health care exchange program)

             -Insurers prohibited from charging co-pays or deductibles for preventive care and medical screenings on NEW insurance plans (existing plans grandfathered till 2018).

             -Insurers are prohibited from dropping policyholders when they get sick

             -New website at Dept. Health and Human Services will provide consumer insurance information for individuals and small businesses in all states

2011     Seniors in “donut hole" ($2,830 annual prescription drug limit) will receive a 50 percent discount on brand name drugs. 

2013      3.8% Medicare Payroll Tax on investment income (interest, dividends, annuities, royalties, capital gains and rents) for individuals who earn more than $200,000 annually and joint filers reporting more than $250,000.

2014     -Everyone must purchase health insurance or face a $695 annual fine; exemptions for financial hardship or religious beliefs

             -Subsidies to purchase insurance for individuals with income up to 400% of the poverty line.

             -Tax penalty ($2000 per employee) on employers (over 50 employees) who do not offer health insurance to their workers. 

             -Medicare Payroll withholding increases from 2.9% to 3.8% on earned income.

             -Qualifying medical expenses income tax deduction increases from 7.5% to 10%

             -No lifetime and annual limits on coverage 

             -No denial of coverage to anyone with preexisting conditions.

             -Exchanges created for small businesses to purchase coverage

             -States expand Medicaid to include childless adults.  Federal Government pays 100 percent of costs for covering newly eligible individuals through 2016. 

2018     -Insurance companies will pay a 40% excise tax on "Cadillac" high-end insurance plans worth over $27,500 for families ($10,200 for individuals). 

             -All insurance plans will provide coverage for preventive care and checkups without co-payment.

The official name of the Act is the "Patient Protection and Affordable Care Act of 2010" in the event you want to google it and look for particular provisions.  Certain provisions of the Act have already been challenged in court - the focus is the "individual mandate" - can the federal government order you to buy health insurance and fine you if you do not?  No legal scholars on either side suggest that the government cannot accomplish virtually all of what this new law proposes - the further regulation of health care and insurance - by passing the law and then raising taxes to pay for it.  However, the new law, while it raises certain taxes, avoids raising income taxes on "the middle class" to pay for the expanded coverage by instead requiring each individual to buy insurance.  The result is that this is not a "tax", but an "individual mandate".  That explanation is sufficient for some, and deficient for others.  The Supreme Court will eventually sort it all out.  

©2010  Douglas P. Humes 

The first ripples in the health care pool ...

I went to my gym this morning to swim.  There is a tanning bed there - but not for long.  It is being discontinued as of May 15th.  The new health care law puts a 10% tax on individuals receiving indoor tanning services.  The tax has to be explained, collected, reported, and the cost of the tax flows directly to the user - the price paid for the service must be increased.  Much easier for a gym like mine, offering it simply as an additional service, to discontinue it.   But what about a business set up solely for tanning?  Will all tanners continue to pay the higher price?  Basic economics principles say no - elasticity of demand as a function of price - and so use will decline, and the businesses on the margin will close.  The tax primarily affects female business owners, who own about two-thirds of tanning salons in the U.S.  Fewer businesses in the industry mean fewer suppliers and manufacturers.  A net loss of jobs at both the retail and wholesale level.  This provision is a tiny little piece of the entire bill - one sentence in the  thousands of pages, but already it has a ripple effect.  It is easy to see the loss here.  What is gained?  And that is the real question that is overlooked in the loud and angry debate - what will the actual effects of the bill be when the laws of economics and individual behavior kick in?  The only thing certain is that no one knows.  

Florida AG and 12 other states file suit against new health care law

"Attorney General Bill McCollum today filed a lawsuit against the U.S. Department of Health and Human Services, U.S. Department of Treasury and the U.S. Department of Labor alleging the Health Care Reform bill signed into law by President Obama this morning is unconstitutional.  The bipartisan lawsuit was joined by 12 Attorneys General and is the first challenge of the new law.  ...The Attorneys General from South Carolina, Nebraska, Texas, Utah, Louisiana, Alabama, Colorado, Michigan, Pennsylvania, Washington, Idaho, and South Dakota joined Florida’s lawsuit, filed today in the United States District Court for the Northern District of Florida."  [source:  http://www.myfloridalegal.com/newsrel.nsf/newsreleases/2426DBDB65C843D7852576EF005DB3A4 ]

Here's a link to the actual complaint that was filed, for those few people who still like to read about the issues before taking sides:  

 http://www.scag.gov/newsroom/pdf/2010/healthcare.pdf

The interesting part will come after the answer has been filed and both sides file briefs, exploring the fault line between the rights of the States under the 10th amendment and the use of the Commerce Clause to justify the individual mandate.  

The 10th amendment:  "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

The Commerce Clause:  The United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes". 

In first year law school, we spent about half of the year in our Constitutional Law class looking at the evolution of the Commerce Clause, from its modest beginnings to basic interstate trade issues, to the New Deal and Franklin Roosevelt's Court Packing plan, and the "switch in time that saved nine," where two justices who had voted with the conservative court switched their votes and created a new majority which became more deferential to Acts of Congress.  The reach of the Commerce Clause broadened in the 1960's for use in attacking segregation in the South - and reached its peak when the Court found that the federal Civil Rights laws reached all the way in to the kitchen at Ollie's Barbecue, a family owned restaurant in Birmingham, Alabama, specializing in barbecued meats and homemade pies, because of "meat that it bought from a local supplier who had procured it from outside the State".  That was the commerce that was being regulated:  hot dogs and buns that "moved in commerce" and arrived at Ollie's Barbecue.  

It certainly led to the right result - seating and service for blacks in all restaurants in the South, but through the back door.  For those who are result driven, and don't care about the path traveled to get there, that is all that matters.  For those who view the Constitution as an agreement between the states and the federal government as to what rights they each have, and a check on government power, the use of the Commerce Clause as a trump card, to be played any time the Federal government wishes to legislate, seems to be a usurpation of rights reserved to the States.  Thoughtful people can hold either view.

Reading the pleadings, the briefs, the opinions, is interesting perhaps for lawyers.  We were trained to think that issues like these should be resolved based on reason and the rule of law.  But the loud and angry mob on both sides of this debate will insist that the only correct result is the one they have emotionally invested in ... and no matter which way the case is decided, there will be a mob to launch personal attacks on the judges who make the decision.   And I know many lawyers who are more comfortable in the mob than in the legal arguments.  A sad commentary on the tenor of our public debate, where we have largely lost the capacity for civil discourse, and respect for our government and its institutions.  We are poorer as a result.  

Estate Planning: Having the Conversation

When I was first practicing law in the 1980's, the term "estate planning" conjured up visions of lawyers in expensive suits and large offices sitting down with the DuPonts and the Pews and figuring out ways to keep their fortunes intact through the next ten generations. Estate planning meant avoiding taxes through intricate schemes and legal gymnastics that most of the people I knew didn't need. Today [now 2020 - ed.], the federal estate tax only applies to estates over $11.58 million per person. Only the wealthiest 2% of the population needs to be concerned with planning for federal taxes. But I have lived more life since then, I have seen loved ones become ill and pass away, and I have gone to their homes and sorted through their things, and discovered more about what estate planning really means. It is about planning, about organizing, about confronting your own mortality, and most of all about having "the Conversation".

People shy away from thinking and talking about the various events of life that can change their day to day routine so quickly: about accidents, illness and disease, aging and death. They are events that we cannot control, but they are events that we can plan for. Having the conversation starts with talking to yourself: what is your contingency plan if you are hospitalized, if you have a lingering illness, if you cannot make your wishes known to your doctors and loved ones. Who do you want to make those decisions when you can't?

The law is its infinite wisdom provides the method for all of the people who do not plan for these events. If you cannot take care of yourself, the law permits a guardian to be appointed, in a process involving lawyers, a judge, hearings, time and expense. If you have not made your wishes known through a living will, then the law provides the same process: lawyers, a judge, hearings, perhaps Congressional hearings and political battles as well, all to determine what you might have decided if you had been competent to decide the issue of your own life and death. A little thoughtful planning, a discussion with your family, a little expense, and you can provide for these situations, you can decide the issues that only you should really decide, you can document them, and then you have done all you can. You have bought a relatively inexpensive form of insurance for the situation. But most important, you have had the conversation, first with yourself, and then with your loved ones. You have made a plan.

Estate planning today means having a durable financial power of attorney that designates one or more trusted loved ones to take charge of your financial affairs when you are unable to do so. It means having a living will - also called a medical directive - that expresses what you would want done if you are in an end-stage medical condition, and selecting the person or people who you want making those decisions when you can't. It means having a will that provides for your loved ones and appoints the person you want to handle your affairs. It means considering making gifts while you can enjoy the giving; checking to make sure your insurance beneficiary designations are up to date; putting your records together in one safe place, writing notes to explain your affairs, and even attending to your genealogy, and putting the names of the people on the back of the old family pictures. It means telling your loved ones that you love them, writing them letters to be opened when you are gone, and showing them how much you love them by the thoughtful way in which you have prepared for that day.

By having the conversation, first with yourself, and then with your loved ones, and then putting an estate plan in place, you do not ward off the events of life, but you have done everything in your power to prepare for them. So start today, in the morning over coffee or tea, and have the conversation.

first published: (2-21-08)  *  last revised 5-1-2020  *  ©2008 Douglas P. Humes

Doug Humes has been a practicing attorney in Pennsylvania since 1980.  He has experience in real estate, community, corporate and small business law, and estate planning.  In 2003, he opened his private general practice at the Millridge Manor House in Bryn Mawr, Pennsylvania.  You can contact him at Tel: 610-525-7150, or via email at humeslaw@verizon.net).

On the Shoulders of Giants: Direct Debit of HOA/Condo Assessments - Can it be done; should it be done; how is it done?

[I belong to various mailing lists, where other lawyers from different specialties gather to discuss issues and how they handle them in their practices.  I have made a habit of copying the particularly useful suggestions, comments, and forms that are submitted in these lists into my personal collection of forms and commentary that constitutes my electronic law library.  Now that I have started blogging, I am going to pass along items that I believe may be helpful to clients and other practitioners in these areas.  I don't claim any originality in these postings - they are basically a compilation of the good ideas of others - using my language and editing.  I am therefore standing on the "Shoulders of Giants" when I do so.]

I have had landlords who have negotiated into their leases the concept of having direct debit from the tenant's account for monthly rent.  Creditors love this idea - the money comes on time, without float, without excuses.  Most of us are over the fear of some horrible Big Brother type assault on our finances when it is done by computer rather than by check.  We (most of us) are comfortable with online banking.  We pay some of our bills and utilities this way.  So why not extend the idea to HOA and Condominium assessments? 

Can a Board require this, to the exclusion of any other payment method?  Probably not right now.  There are people who don't have computers, don't have the software, don't bank online, or don't have the confidence in electronic payments.  They will always need to have an alternative available for them.  However, in light of the convenience and time saving of the electronic debit, could a board offer a discount to those who would agree to electronic debit payments?  Yes, I think so.  Just as sending out paper bills, with stamps, which someone must create, stuff, lick, and post, is labor intensive, so is opening the envelope, stamping the check, doing the math, putting them together with a deposit slip, and making the deposit to the bank.   With a pre-authorized monthly or quarterly debit, the transaction happens while we are going about our other business.  It saves effort, and so should result in some savings that justifies giving a discount.  Who can complain?  If you have been to a public meeting, in these situations everyone can and often does complain.  However, if they have the same right as everyone else to pay electronically, like cash or credit at the pump, then your objectors should be few, particularly if you can show actual savings to the Association. 

Must the Board undertake this change by the more laborious amendment of the bylaws, or can this be done by adoption of a rule?  Most list mates seem to think that it can be done by rule adopted by the Board.  Your mileage may vary - depending upon your state, your association's articles or bylaws.  Always check your state law, and then your governing documents, to make sure there is nothing that can trip you up.  And if you want to propose doing this, do your homework, quantify the savings, check with your bank on any other fees, so that when you present the idea, you have fully considered the pros and cons.  If you have already done the math and double checked it, it should sell itself.  

Small Claims Court in Pennsylvania

Most religions are in agreement that we should all love our neighbor, but occasionally we find that in the midst of conflict, the only way to resolve a dispute is to sue our neighbor.  There are times when people feel they cannot walk away from a dispute and must take a principled stand.  The court system since time immemorial, serves as the place to go to settle issues that cannot be resolved by the parties themselves.  That is one part of the lawyer's industry - conflict resolution.  But if for every dispute you had to each hire a lawyer and go through a lengthy procedure - the full blown trial process in the county common pleas court, then for smaller matters (smaller in dollar value, not emotional value), there would be no effective method to bring it to a head and resolve it once and for all.  The parties might be tempted to take the matter into their own hands.  Chaos ensues.  The small claims process was created for that situation. 

In Pennsylvania (outside of Philadelphia, where a slightly different system exists), claims of $8,000 or less may be resolved by the lowest level of the court system, a single district justice in a township office.  The District Justice has limited jurisdiction:  he or she can hear summary offenses (like traffic tickets), landlord-tenant claims, contract and certain other civil claims that don't exceed $8000, as well as handling a variety of criminal matters.  You must file your claim with the District Justice office where either the claim occurred, or where the defendant lives.  The paperwork is simple:  a one page form, available from the District Justice's office or online, where the plaintiff is asked to briefly describe his or her claim.  The filing fee is about $56 at last check.  Once the complaint is filed with the court, it sets a hearing 30-60 days out, and then serves the defendant with a copy of the complaint and asks them to file a written answer.  If the defendant responds and shows up at the hearing, then the matter continues.  If the defendant is served but does not show up, then he or she loses by default and a judgment is entered.  If the defendant is not served, the hearing is delayed until the defendant can be served. 

At the hearing, the procedure is simplified:  the claimant is asked to tell his or her case; and let any witnesses testify to what they saw or heard.  When the plaintiff is done, then the defendant presents witnesses and can choose to testify as to why he or she should not be found liable to pay the claimant.  Each side can cross examine the witnesses from the other side.  Typically the District Justice may ask questions as well, to try to narrow the focus to just the legal issues that he or she must decide.    When each party has had their say, the District Justice will thank the parties and send them on their way with the promise of a decision within several days.  The District Justice decides the case, based on the evidence presented at the hearing, and puts the decision (but not the reasons)  on a one page form that shows who won, and how much.  A winning claimant also is entitled to the filing fees and service fees they have paid out.  This decision is promptly mailed out within a few days of the hearing.  A small claim can therefore be filed, heard and decided within a 60 day period.  That is one of its main virtues - the parties have aired their differences and an independent third party had heard both sides and made a binding decision. 

Each party is entitled to bring an attorney; but at the low end of these types of claims, unless your cousin Vinnie is a lawyer and owes you a favor, it may not be cost effective to hire a lawyer and pay them to prepare the case and attend the hearing and do any necessary follow up.  That's another one of the virtues of the small claims process - you do not need a lawyer.  One or both of you can show up without a lawyer (though if one party is a corporation, then they must be represented either by their officers or a lawyer). 

The end game:  if you win, you get a judgment - a legally enforceable order to pay a specific amount.  If the defendant does not voluntarily pay, then the claimant must have the sheriff go out to the defendant's home and levy on personal property in order to sell it and pay the judgment.  Also, the defendant can appeal the decision within thirty days of entry of the judgment, but that typically requires hiring an attorney to file the necessary paperwork and begin to navigate through the much more complex procedure of a trial court.  If an appeal is timely made, then the next trial is "de novo" - nothing that happened at the District Justice office matters.  There is simply a new trial.  

Having attended an arbitration hearing today, and seen parties representing themselves, here are some recommendations if you will go to small claims court without an attorney: 

            1.  Prepare in advance.  If you find yourself involved in any dispute, it is a good idea to begin making your record - keep track of each conversation, and what each party said - buy a small notebook to keep it organized in one place.  Make a paper trail:  either dated notes, or a follow up letter saying "as we discussed on January 29, 2010, you said you would pay me the $50 you owe me by next week."  A year later, your testimony as to exact dates and times and conversation and specific letters that went unanswered will be more persuasive.

            2.  Arrive on time:  if you are not there when the case is called, you lose. 

            3.  Look your best, and present your case in an organized way.  Usually, a chronological account of what happened is best for most claims.  Have copies of each document you want to present - a copy for the judge, one for the other party and one for you.  Have the original document with you to be able to show to the judge. 

            4.  For each item of damages you claim, you need to prove it:  a witness, a written receipt, a phone record or other writing.  Written proof is more persuasive than a year old hazy memory. 

            5.  Be polite and civil.  To the judge, to your witnesses, to the other party and their witnesses.  It's simply good manners.

When you are in conflict with another, you may always choose to turn the other cheek, but if you find that you must stand on principle, or must right a wrong done to you, then for those claims below the dollar threshold, the doors of justice are open to you to quickly and inexpensively have your day in court.

©2010  Douglas P. Humes

Secret Santa: The State Escheat Lists

[a reprint of an article from 12-31-08, with updated links, because still relevant every year]

When you buy a gift card that is never used; when you walk away from the balance of an old bank account; or where someone dies owning securities but there is no heir to inherit the shares; where you move and forget about a deposit left with utility companies; where insurance money is due to unknown beneficiaries; where the lease on a safe deposit box lapses and no one shows up to pick up what is inside; what becomes of these property rights?  In feudal England, where our laws derive from, all unclaimed property returned to the King.  Like the end of a game of Monopoly, all the money went back into the box, to be redistributed in a new game.  The concept is called "escheat" and it survives in the laws of the fifty states.  As Blackstone said (I've always wanted to quote Blackstone - it sounds so authoritative), "The word itself is originally French or Norman, in which language it signifies chance or accident, and with us denotes an obstruction of the course of descent … in which case the land naturally results back … to the … lord of the fee." 

We have no lords of the fee these days, but still have the problem of what to do with lost or unclaimed property, and we have adopted the same solution:  the state has the right to all unclaimed property.  In the words of the Pennsylvania law, "All abandoned and unclaimed property and property without a rightful or lawful owner as hereafter set forth is subject to the custody and control of the Commonwealth …"  Of course in Pennsylvania they cannot claim property in Alaska or even New Jersey, and so the law further limits their reach to property that is physically located in Pennsylvania, and for intangible property, if the last known address of the owner is within the Commonwealth.  When is property considered abandoned and unclaimed?  The Pennsylvania law in its wisdom goes on for eighteen pages, but the bottom line is that for most property in an account, if there has been no activity for five years, then the property is presumed abandoned.  So how does the Commonwealth find out about what is unclaimed?  The holder of the property must file a report each year.  The Commonwealth then compiles a list, containing the names, items of property and last known addresses, if any, of the owners listed in the reports, and makes the information publicly accessible.  Before the Internet, that public notice was an ad in a newspaper in each county showing all of the unclaimed property for addresses in that county.  Now, those ads still run, but Pennsylvania has set up a website, at http://www.patreasury.org/unclaimedProperty.html , that is open 24 hours a day, seven days a week, with a search engine to easily search for any items by last name or company name of the owner.  New Jersey has a similar site at:  http://www.unclaimedproperty.nj.gov/l .  Delaware too:  http://php.delawareonline.com/state/unclaimed.php .  If you want to search for some other state, use the search term "unclaimed property" along with the state name. 

If you find a listing for property that may be yours, or someone you know, each site has a procedure for filing a claim, and a process for proving who you are and that you are entitled to the return of your property.  If the property is something other than money, then the state may have sold it, but will give you the cash value of the property realized in the sale.  There are companies who will file your claim for you for a fee, but as noted on the Pennsylvania site, "Our staff will assist you in recovering your property free of charge." 

So how big a problem is this for the Commonwealth?  In their own words, "The Treasury Department is seeking the owners of over $1 billion in unclaimed property.  In 2007, we returned nearly $88.8 million to over 63,000 owners."  That is a lot of unclaimed property.  I hope some of it is yours, or someone's that you know, and that in 2011 you thread your way through the process and help to return some of this amount to its rightful owners.  Pass the word!

©2010  Douglas P. Humes