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YOUR BOTTOM LINE

How Health Care Reform Effects You; How to Avoid Paying Taxes Legally; Beware of Companies Who Offer Cash for Your Gold

Aired March 27, 2010 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


POPPY HARLOW, CNN HOST: Well, good morning, everyone. I'm Poppy Harlow. This is the show that saves you money. How to avoid paying taxes, legally of course. We've got the step-by-step on that one. And five easy ways to save 500 bucks a month. We'll walk you through it. Plus the true cost, folks, of unorganized paperwork, how to clean house and save some money in the process. YOUR BOTTOM LINE starts right now.

Well of course, top of mind across the country right now, historic health care reform. The most dramatic changes since Medicare and Medicaid signed into law by the president this week. It's been a long road filled with compromises, challenges and, of course, your questions about how the bill will affect you.

Now, before the House approved the bill last weekend we asked in a CNN/Opinion Research Poll how respondents thought their families would be affected by the bill. Take a look here at the results.

Just 19 percent, 19 percent, said they'd be better off; 47 percent worse off and 33 percent said they think they'll stay about the same. Now, you've been sending us your questions through iReport.com. here's just one of the concerns that we're hearing over and over again.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm not really sure how this health care reform affects me.

(END VIDEO CLIP)

HARLOW: Great question. John is not alone in that question. Take a look at all the faces there. They are just some of the folks join in this dialogue online. This morning we're break it all down for you, get you the answers to your questions with our good friend Andrew Rubin, vice president of Clinical Affairs and Affiliates at NYU Langone Medical Center and our very own

Thanks for being here, guys.

ANDREW RUBIN, NYU LANGONE MEDICAL CTR: Thank you.

HARLOW: I think the first question, Jim, let's address is what are the changes that people really care about that are going to affect them this year? JIM ACOSTA, CNN CORRESPONDENT: Well, Democrats really like that question, Poppy, because in the next two to three months we're going to see some aspects of this bill that they think the public will really like. For example, children with pre-existing conditions. The insurance companies will no longer able to deny coverage to those children based on pre-existing conditions.

There will be a high-risk insurance pool set up for people who can't get insurance because of pre-existing conditions. Another thing that will happen within the next two, three months, people who are young adults, maybe graduating from college, not yet 26 years old, but may not be able to get health insurance, they will are able to stay on their parents' insurance policy until they turn 26. That's something that a lot of middle class families like and Democrats want to get that message out that those changes are coming.

And then of course there are more changes down the road coming years later. But, let's address the issue, Andrew, of pre-existing conditions. Significant diseases, life threatening diseases, HIV, cancer, diabetes, will these qualify as pre-existing conditions?

RUBIN: Well, here's what most don't know insurance companies get it decide what are preexisting conditions. However, in that list they would most insurance would...

HARLOW: But, the insurance companies still have a say, here...

RUBIN: They absolutely have a say. You know, pregnancy is a pre-existing condition for most insurance companies.

HARLOW: Yeah, it's fascinating.

ACOSTA: And throughout this entire process I've talked to a number of families. One young man, the young boy that was sitting next to President Obama when he signed the legislation. I talked to him. His mother died because she lost her job, lost her health insurance and because of pre-existing condition could no longer get coverage. I talked with countless other families who went through similar situations.

So this is real. And to the gentleman who asked the question, well how does this affect me? It may not affect you. And it may not save money in the long run. But what Democrats are saying, and proponents of this legislation are saying is that it will save lives. At least that's what they're saying right now.

HARLOW: Let's get to an e-mail from Harris. And Jim, I'll let you get this one. Harris asks, "My daughter graduates from college this May. I've received notice from our insurance carrier she will be dropped June 1. What's the effective date of the new legislation extending coverage for children up to 26 year years old." So, when does this kick in?

ACOSTA: This is in the next two to three months we're going to see this kick in. and so, folks are out there wondering, you know, what about my kid who just got out of his master's program, he's 24 years old, I need to get, you know, -- there may be a gap where they're not going to be covered a period of 15, 20, 30 days, but once that piece of legislation takes effect, they should be OK, they should be wrapped into this.

Now, this is going to be a big task for the folks who are at the Department of Health and Human Services, because, I mean, all of this legislation, all of this bureaucracy is going to have to go into effect in very short order.

HARLOW: Sure, that's a great point. and Peggy asked this, Andrew, I want to read you her e-mail, she's from Delaware, she said, "If this is going to help us get cheap insurance, why do we have to wait four years?" She's talking about some things that kick in 2014.

RUBIN: So, let's be really clear about this, first of all, I think insurance -- this health care reform affects everybody, because it offers a lot of protection that doesn't exist in this nation, right now. So, even when, you know, you may not see a change right away for yourself, everyone is going to have layer of protection that they don't have.

And this specific question, it's going to take a long time for the insurance market to actually be prepared to accept all these new customers and operate under the new laws. That's why it's going to take some time. She also makes a comment about cheaper insurance; I actually don't think it's going to be cheaper. In the short term or the long term...

HARLOW: Really?

RUBIN: No. I think in the short term insurance companies still have the ability to control premiums, there's some state regulations involved there, but the certainly they have the right, as costs continue to go up, they have the right to raise your premiums. What I think it's going to do in the long term, it's going to control the increases, the spiraling increase in costs in this country and that will then stabilizing premiums. I don't think this country should be expecting a huge reduction in premiums.

HARLOW: But, it's important to note and also, we have an iReport I want to play for everyone out there. And this comes from Michael Ingram talking about the penalty for people that don't have insurance when this all kicks in. So, take a listen to this one.

(BEGIN VIDEO CLIP)

MICHAEL INGRAM, IREPORTER: I can't afford a health care package that I don't want, but I'm going to be forced to take and since I can't afford that I'm going to be fined $750 or so. What's going to happen when I can't pay that fine? Am I going to jail for that?

(END VIDEO CLIP)

HARLOW: That's a good question.

ACOSTA: Very good question. You know, that's what opponents of health care reform have been saying through all of this is that the mandate, the individual mandate that that gentleman just talk about is unconstitutional. And you have several attorney generals, I think somewhere in the neighborhood of a dozen attorney generals around the country right now who are going to challenge this in court.

You know, this is a difficult question, but that's why the White House, that's why Democrats in Congress say, this is why we want to wait until 2014 because these sorts of issues need to be worked out. They're confident that those lawsuits are not going to pan out, and that in the end, there is going to be assistance for people who can't pay for this.

There are big subsidies that are coming into play. Medicaid is doing to be expanded. That gentleman may want to find out whether or not he's eligible for Medicaid. If he can't afford health insurance and can't afford to pay the penalty, he probably qualifies for Medicaid.

HARLOW: That's a very good point.

RUBIN: That's an important point. Whether you like the mandate or not, and that's not what I'm here to talk about, the entire reform is built on everyone having insurance. It collapses without it.

HARLOW: Right, and I want to follow up on that with an e-mail from David in California, he's talking about COBRA and he wrote in: "What happens to people currently on COBRA with the passage of this new new health care bill?"

RUBIN: Sadly, we have to wait four years for all these reforms to kick in. so, if someone has a pre-existing condition, they'll be able to go to these state pools, high-risk pools and get coverage. But in the absence of that, they're going to have to apply to insurance markets like they do today.

HARLOW: All great points and a lot of things that people didn't know insurance companies, as you said Andrew, they're still going to have a say in all this. You'll want to watch how this all plays out. Thank you Jim. Thank you Andrew. Thanks so much.

There are so many more answers to your questions on health care reform plus a wealth of information on living well, diet, fitness, it's all available online anytime at CNNheal.com, your questions answered there.

And while the health care took center stage on Sunday, the House also voted to make Washington the top shop for cheap student loans while boofrting funding for need-based scholarships. Here are some of the details you need to know if you're looking for one of those loans.

Direct government lending to students would be expanded. Fees to banks acting as the middlemen in all of this would be eliminated, that would save the government a lot of money, and some of that money saved would be used to increase Pell grants up to $5,900 by 2017. That is up from about $5,300 today. And we've got a lot more ahead this morning. Five steps to saving $500, plus why unorganized paperwork is costing you big time and what you can do about it.

But, up next it is tax time. How do avoid paying taxes -- that's right -- without breaking the law. That's coming up.

(COMMERCIAL BREAK)

HARLOW: Well, face the reality, folks, Just 19 days until your taxes are due, and just this week Turbo Tax came out with a list of top 10 procrastinating tax cities. Houston tops the list this year, up from the No. 2 slot last year. It is followed by Chicago, New York, Austin and San Francisco.

Rounding out the top 10, Seattle, San Diego, Los Angeles, Dallas and Las Vegas. So don't procrastinate, folks and don't miss out on the chance to avoid paying taxes, legally, of course. CNN legal correspondent Allan Chernoff here to explain.

And Allan, people that have kids should really listen up, right?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Absolutely, Poppy. Check this out. Obviously you know Uncle Sam wants your money, but you can actually put your kids to work to avoid your taxes. What do I mean by putting them to work? I mean shifting investment income over to your children.

We're talking about capital gains, dividends, interest, even income from reality property. For a child, $950 of that income, it's called unearned income, it's tax-free. It's a beautiful thing. If you've got another kid, do the same thing. Shift that investment income over another $950. Together, you've got $1,900 over there tax- free, if you've got two kids. Not too bad -- Poppy.

HARLOW: Not bad at all, but what if you want to transfer over more than $1,900 per child? Can you do that and get away with it, Allan?

CHERNOFF: Right, that's where you can get into some trouble. Right? Because we got these $950 here for the child tax free. You can bring in another $950 that will be taxed at 10 percent. But if you go beyond that, if you go beyond $1,900 per child, the country, the IRS, is going to hit you with what's known as the kiddie tax. You'll be lit with a tax of your marginal tax rate. So, it you're in the 33 percent bracket that income will be hit way tax of 33 percent. Uncle Sam is still watching. He knows you're doing this. Don't do too much.

HARLOW: All right, stay away from the kiddie tax. Allan, thanks so much, appreciate it.

And for the most overlooked deduction to the latest scams and avoiding an audit, we made a promise to be your one-stop shop for all things taxes and as we get closer to that April 15 deadline, we want to answer your questions. Send an e-mail to us at YOUR BOTTOM LINE at CNN.com. We'll do our very best to get you an answer.

OK, and if we gave you five simple steps to saving $500, would you take them? Of course you would. And this stuff is something anyone can do, so grab a pen, grab some paper. Important tips you don't want to miss coming right up.

(COMMERCIAL BREAK)

HARLOW: Well, how about saving 500 bucks, right now? Our next guest says a few simple steps could add a few extra zeros to your bank account. Gail Cunningham of the National Foundation for Credit Counseling joins us now from Dallas.

Gail, thanks for being here. Appreciate it.

GAIL CUNNINGHAM, NATL. FND FOR CREDIT COUNSELING: Thank you. Happy to be here.

HARLOW: We all want to save money, especially right now. And you say there's something can you do to your taxes and it's going to save you hundreds. What are you talking about?

CUNNINGHAM: This is absolutely my favorite topic this time of year. None of us enjoy paying taxes, so why in the world would we want to add insult to injury and give Uncle Sam an interest-free loan? That's what you've done if you get an income tax refund. And the shame of it is that so many people who struggle to make ends meet every single month jump up for joy getting a once a year income tax refund when they actually could have over $200 each and every month in their pocket.

HARLOW: Huge savings, and all you have to do is go on to the IRS web site, right, and make the changes for your deduction?

CUNNINGHAM: Exactly. It's so easy. We don't want to end up owes Uncle Sam either, so go to IRS.gov, type in the search box, the words withholding allowances, that will pull up a very simple worksheet. Fill that out. It will tell you how many withholding allowances you should indicate on your W4 and then go into your HR person and get the W4 adjusted. And you'll have more money in your pocket each and every month.

HARLOW: Good to know. And what about cutting $10 here, $10 there, that's a good way to save, as well. What can you cut that money from?

CUNNINGHAM: You know, we have discovered that cutting back rather than cutting out is more effective, particularly long term. Ten dollars, you can shave that off your grocery budget, your clothing budget, gifts, miscellaneous items, you'll never feel it, never miss it. Ten dollars in 10 categories, that' going to $100 a month savings.

HARLOW: And what about some of people's bad habits? They might be able to quit cold turkey, but if they pear back a little bit, they can save, right? CUNNINGHAM: Absolutely. And you know yourself and you know your bad habits and the things that you need to stop, both financially and personally. Things such as playing the lottery, or scratch offs, or online gambling, smoking. Any of those bad habits, like you say, cut back or cut out significant savings.

HARLOW: All right and what about cutting of the things that we all pay for every month, but we just don't use them all the time? The gym, that's a good example, right?

CUNNINGHAM: Oh, the gym's a great example this time of year, because everyone was well intentioned and signed up for that gym membership in January. Check your automatic drafts. That's where you're going to see, for instance a gym membership, maybe a movie subscription that you never order a movie, but it's being drafted each month. And magazine subscription, newspapers, watch things like that.

HARLOW: All right, and we do have credit card reform, which is helping folks on some of those fees on their credit cards and debit cards, but you still have to watch out for those fees, right?

CUNNINGHAM: Absolutely. Even though the card act took care of some of that and kept it one over limit fee per month, that still could still be $39. Or what about when you pull up to those ATMs just because they're convenient, but they're not associated with your bank. All of that adds up. Simple savings of $50 a month.

HARLOW: I will walk extra blocks to my bank's ATM for the savings. So, all great points and you're saving us about 500 bucks a month, if we make these changes. Gail, thanks so much, we appreciate it.

CUNNINGHAM: Thanks for having me.

HARLOW: You're welcome.

All right, folks, well you now know how to slash spending. Time to learn how to raise extra cash with gold. We'll make sure that you're not getting ripped off. That's coming up next.

(COMMERCIAL BREAK)

HARLOW: Well, a few months ago we hit the streets to sell our gold and saw how easy it is to get scammed. But, what about mailing in your gold? Some say it is a golden opportunity. Others though, caution, it's anything but a quick financial fix. Take a look.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: I could get cash for this gold medallion of me wearing a gold medallion.

HARLOW (voice-over): Their ads are pervasive, but some Cash4Gold customers say they're getting a raw deal.

FRANK POINDEXTER, CASH4GOLD CUSTOMER: They slap you in the face with an absurd amount.

UNIDENTIFIED MALE: A golden opportunity to be fleeced.

HARLOW (on camera): You know, there are just a lot of people that are selling their gold right now and there are some people that say they're getting ripped off. There's actually a class action lawsuit against Cash4Gold right now and they invited us down to their headquarters, here in Florida. So we came and we can't show you the outside of the building for security reasons, but we really wanted to come in and see exactly what was going on.

UNIDENTIFIED FEMALE: I'll make sure everything is here and put on receipts.

HARLOW (voice-over): The gold is tested.

UNIDENTIFIED MALE: We just simply just scratch lightly.

HARLOW: Appraised.

UNIDENTIFIED MALE: We add it up.

HARLOW: An offer is made and customers have 12 days to decide whether or not to accept it.

UNIDENTIFIED MALE: Yeah, we'll get about 1,800 degrees.

HARLOW: If they do, their gold is melted down.

UNIDENTIFIED MALE: We melt constantly.

HARLOW: But "Consumer Reports" finds mail-in companies including Cash4Gold sometimes pay out as little as 11 percent of the gold's value.

(on camera): I think some concerns are whether they're valid or not that maybe more gold is getting processed here that someone sent in than they're getting paid for.

JEFF ARONSON, CEO, CASH4GOLD: I know exactly what comes in is weighed up. It is -- a value is assigned to it right from the computer. My people don't make more money off it.

HARLOW (voice-over): Cash4Gold says it pays 20 percent to 80 percent of the gold's value, but that's not what Frank Poindexter claims he got.

POINDEXTER: About a week and a half, I think after, I sent the package off to them with the gold in it, I received a check.

HARLOW (on camera): How much was the check for? How much was the check for?

POINDEXTER: I was astounded. It was for 15 cents.

HARLOW: Fifteen cents. POINDEXTER: Fifteen cents.

HARLOW (voice-over): Fifteen cents for what he says was more than a dozen pieces of gold appraised at roughly 200 bucks. But Cash4Gold's internal documentation says just this single gold earring was in frank's packet.

(on camera): Are you saying he lied to you?

ARONSON: I'm just telling you facts.

HARLOW (voice-over): In the end, Cash4Gold settled with frank for $150.

(on camera): And you know, Frank Poindexter is not alone. He's joining that lawsuit against Cash4Gold which alleges among other things that the company sometimes melts down the gold before the 12- day return period has ended and sometimes blames the post office for losing items in the mail.

ARONSON: The class action is meritless. There are three main complainants on the class action suit -- three.

HARLOW (voice-over): After numerous complaints about several companies, New York Democrat Anthony Weiner introduced the Gold Act, pushing for more stringent regulation of the industry on a national scale.

REP. ANTHONY WEINER (D), NEW YORK : Basically when you put that gold in that envelope, you're sending it off to the wild west.

(END VIDEOTAPE)

HARLOW: Now, if that gold act becomes law, it would require consumers accept the offer before their gold is melted down and if they don't do that, then companies would get fined. It would also mandate that companies' ensuinsure any jewelry they return to customers for the same value the customer insured it at when they mailed it in.

And right now in Florida where we were there are stricter regulations as part of a new law that took effect in October. It requires that all mail-in gold companies photograph every item they receive and log it into a national law enforcement data base. Cash4Gold, I should say, says it worked with Florida to create that legislation.

As for you and how you can make sure you get the most for your gold, take a look at these tips. First of all, shop around. Take your gold to more than one place to be appraised before you sell it. And know the value of your gold: 14 carat, 18 carat, 24 carat gold, they all vary widely in value. And folks, you got to do your research on these companies before you mail in your gold. You should check with your attorney general's office or the Better Business Bureau.

And one of our fantastic CNN Money producers put together a pretty cool piece that shows you step by step just what happens to your gold when you mail it in. Yep, the whole smelting process. To check it out, head to CNN money.com. But up next, don't drown yourself in paper. In today's "Free for All" we will help you cut down on all of that clutter, so it doesn't cost you big time.

(COMMERCIAL BREAK)

HARLOW: Well, there are a lot of good reasons to have a plan for keeping track of your important papers. Clearing out the clutter might be one of them, but how about a worry-free tax season and maximized deductions? Sounds good. According to a report out from "Consumer Reports", one-quarter of Americans said they have lost critical paperwork and that resulted in lost money due to bad organization for about 16 percent of them. so, what can do you? Well here are some tips.

First of all, keep your bank records, your credit card bills, and you investment statements for just a year or less. They're usually online, folks. And also for tax returns, paperwork on household furnishings, loan documents and of course savings bonds you should keep those for at least seven years. And the things you should never, ever throw away? Pension plan documents, estate planning documents, and, of course, your life insurance policies.

It is, folks, a good idea to keep all of your paperwork filed in a fire and water proof container in your home or better yet in a safe deposit box at the bank.

Well, we will see you right back here next week for YOUR BOTTOM LINE, the show that saves you money. Same time for us, 9:30 a.m. Eastern on Saturday, right here on CNN. And don't miss Christine Romans and CNN chief business correspondent, Ali Velshi on "YOUR MONEY," today at 1:00 p.m. Eastern and tomorrow at 3:00.

But, tight now it a's time for a check of your top stories in the CNN "NEWSROOM." Have a great weekend, everyone.