(This article was last updated on October 12, 2017)
On March 23, 2010, the Patient Protection And Affordable Care Act was officially signed into law. Since then, many have speculated about its impact on the healthcare industry, and debates have been held on both sides of the political spectrum as to the success of the law and its outcomes for average American citizens. The Affordable Care Act is also known as the ACA or Obamacare, and it was created to make healthcare more affordable and easily accessible to a wider range of Americans. Under the law, people in the United States who don't qualify for an exemption are required to obtain a minimum amount of healthcare. This essential fact of the law has become muddied through news media outlets, speculation, and widespread misinformation. The purpose of this article is to give you a summary of Obamacare so that you understand your rights and responsibilities under the law.
Provisions of the Affordable Care Act
With a little less than a thousand pages of terms and conditions, the Affordable Care Act is sure to confuse even the most skilled reader. Few people have read this massive law in its entirety, which accounts for the fact that so much misinformation abounds concerning its provisions. In fact, there was so much uproar about the law and its provisions that the Supreme Court had to rule on its constitutionality or its legality according to the U.S. Constitution. The Supreme Court upheld the ACA on June 28, 2012 with the exception of a provision that required states to expand the Medicaid eligibility requirements. For more information on the unconstitutionality of this provision, see the section below on Medicaid expansion. Once upheld by the Supreme Court, the ACA could be implemented according to plan.
What are the provisions of Obamacare? While we won't go over every provision in detail here, we will describe how the law works, what it means to you as an individual and what it means to small businesses. In essence, the provisions of the ACA provide for better and more affordable healthcare coverage for U.S. citizens. Obamacare focuses on:
- Improving healthcare nationwide
- Providing better and more effective healthcare to Americans
- Offering more affordable choices to those without insurance or those who dislike their current plans
- Reforming the way that insurers and providers offer their services
- Putting regulations into place to keep insurers and providers honest
- Reducing the amount of spending generated through an inflated healthcare system
- Providing incentives like tax breaks to small businesses so that they cover their employees
Under this law, millions of uninsured people now have access to healthcare options that they may not have been able to obtain in the past. Additionally, the law provides for the protection of patient rights and ensures that insurers and healthcare providers provide accessible healthcare to those who may have been refused prior to the implementation of the law. In subsequent sections, we'll discuss how these provisions affect you as a citizen.
A Brief Overview of the Healthcare Industry
Many people attribute Obamacare to President Obama thanks in large part to media coverage and widespread misinformation. However, the concept of an individual mandate under government-funded healthcare dates back to 1989 with the implementation of a plan by conservative think-tank The Heritage Foundation. In fact, former governor of Massachusetts Mitt Romney initiated a similar idea in his state called "Romney Care," after which the current provisions of the ACA were modeled. The Affordable Care Act is a result of decades' worth of debates, bills, forums and discussions from both sides of the congressional aisle.
What was wrong with healthcare in America prior to the implementation of the Affordable Care Act? Many people have wondered this same question, but these people may have already been covered through private or employer-sponsored insurance plans. Generally speaking, people have a tendency to notice problems only if the problems apply directly to them. Unfortunately, healthcare in the United States has long been fraught with inconsistent policies and procedures that made it difficult for many people to obtain coverage.
Those with lower incomes, disabilities and a Pre-existing Condition might not have received the right care or been denied coverage due to any number of factors. Additionally, women might have paid much more than men for coverage while older people may have been denied a variety of treatment options offered to younger patients. If there was a discrepancy in your paperwork, insurance providers could drop you from your plan with little warning and no recourse.
The purpose of the Affordable Care Act is to remedy these discrepancies in the American healthcare industry and increase consumer rights and protections. By forcing insurers to offer plans for people with pre-existing conditions and regulate the cost of insurance, Obamacare opens up healthcare access to millions of people who otherwise wouldn't have access. Even those who already had insurance will benefit from Obamacare. Under the new law, insurance now has to cover a lot of basic treatments and situations that your insurance may not have covered before.
You don't have to choose the best Federal Marketplace plan in order to make a difference when it comes to providing health insurance for those in need; any plan helps create more options for more people. Prior to the ACA, there were approximately 45 million Americans who did not have any kind of health insurance. These people included low- to middle-income families, senior citizens and women who had to pay more for basic preventative services. Obamacare seeks to provide these people with the coverage they need to prevent common illnesses and conditions. The ACA also provides for the standardization of coverage and benefits as well as the regulation of insurers and healthcare providers. If you're interested in learning the specifics of how Obama improves modern healthcare in America, then check out the ACA's official site.
How Obamacare Affects You
If you're like most American citizens, you want to know how a law applies directly to your life. After all, it's one thing to discuss political topics in theory; it's another thing entirely to understand its impact on your everyday life. Obamacare was designed to help people like you obtain affordable healthcare coverage even if you have a pre-existing condition or have been denied in the past for various reasons. In an effort to transform the healthcare industry, the ACA has helped millions of people gain access to the type of care they need to live healthier lives.
How does Obamacare work in your favor? For starters, you have more options for purchasing health insurance. You can still obtain healthcare coverage through same options you always could: private companies, your employer, Medicaid or Medicare. Now, you can also buy healthcare coverage through your state's insurance marketplace or through the federal government's open Marketplace. In a later section, we'll go over these options in detail.
Under the law, you must obtain health insurance or face a tax penalty imposed by the Internal Revenue Service on your annual tax returns. For 2015, the deadline to enroll was initially February 15, 2015; however the deadline was extended until April 30th to allow people who recently filed their 2014 tax return and was penalized for being uninsured to enroll so they don't face another hefty penalty. The 2016 open enrollment period starts on November 1, 2015 and ends on January 31, 2016.
If you failed to enroll in a government plan or acquire health insurance through an acceptable source during the 2015 calendar year, you will owe a penalty fee for each month that you did not have healthcare. This fee varies and may be waived in certain circumstances by claiming an exemption status. While the fee for non-compliance is sometimes referred to as the "individual mandate" provision of the ACA, it was actually considered a tax by the Supreme Court in its June 2012 ruling and therefore subject to collection by and interest assessed by the IRS.
In 2015, the individual mandate requires that non-compliant citizens pay a tax equal to two-percent of their total adjusted gross income in 2013 or $325.00 per uninsured adult in the family and $162.50 per uninsured child in the family, whichever is greater. This tax only applies for 2015 and will increase in 2016. The penalty in 2016 is 2.5 percent of your adjusted gross income or $695.00 for uninsured adult and $347.50 per uninsured child, whichever is greater. However, you may be able to get an exemption in some situations. More on exemptions is available in another article.
There's also a coverage gap for people who are only temporarily without insurance during the year. You're allowed a gap of sixty-days without fear of being taxed by the IRS for not complying with the law.
There are limitations to the program. There will be people who can't pay a Premium at any price even if those prices are much lower than those of private insurance companies or employer-provided health plans. It's estimated that approximately 30 million people or 10 percent of the U.S. population will not be able to afford any of the insurance options available at the full cost. However, there is hope if you fall within this category. The government has put in place several financial assistance options to help offset the cost of mandated insurance. More on a Subsidy and financial assistance can be found in a subsequent section of this article.
There are several sources for finding simple and straightforward explanations of Obamacare and its impact on the American healthcare industry. Sources include this website, online articles, the official page of the Affordable Care Act and videos like the one created by the Kaiser Foundation that explains the ACA in about seven minutes. Despite these efforts, many people remain unaware of the requirements or even the benefits of the new law.
Before Obamacare came into law, 85 percent of Americans had some type of health insurance. President Obama has made it clear that these people are already enjoying the benefits that Obamacare offers to those without insurance and have been for the last three years. People without insurance or those who want different coverage now will benefit from the same features as well as the individual mandate, employer mandate and the health insurance exchange or Marketplace. Even though the law is now officially in place, many of the best benefits are still to come. Over the next eight years, the ACA is designed to evolve into a plan that radically alters healthcare in America.
The Consequences of Non-Compliance With Obamacare
We've mentioned that there are consequences for refusing to purchase healthcare, and some people object to this tenet of the law because they feel that such consequences are an imposition against personal freedoms. However, Obamacare only works properly if everyone contributes. Thus, the individual mandate and employer mandate work to protect uninsured Americans. If you don't obtain what the government calls "minimum essential coverage," then you will be charged a fee for every month that you lack this essential coverage. Your coverage begins on the first of the month following mid-month enrollment. In other words, if you sign up for coverage by March 15th then your coverage begins April 1st provided that you've paid your premium.
You can apply for healthcare coverage through the Federal Marketplace at any time, but as with health insurance plans provided by an employer you can only enroll in a plan during open enrollment. Through the Marketplace, you can also check on available subsidies and financial assistance to help offset the monthly premiums. Subsidies are available of up to 9.5 percent for qualified applicants. You can find more information on financial assistance in a later section.
Options for Purchasing Health Insurance
One of the biggest concerns about Obamacare came from those who already had insurance. Many wondered if they would be able to keep their current plans as well as their current healthcare providers. In short, you will be able to keep your existing plan for the most part even if there may be some minor changes in the way that you receive care. In addition, if you got insurance in 2015 either through the state or Federal Marketplace or directly through an insurance carrier, your plan will automatically renew in 2016 unless you opt to change plans. In this section, we'll discuss in detail the options for purchasing or obtaining insurance referenced above.
People who purchase health insurance from their employers make up approximately 50 percent of the insured population. This means that half of all people who are currently covered buy plans from work. You might think that these people won't see any real benefit from Obamacare, and if you're part of this 50 percent population then you may wonder how the ACA affects your healthcare coverage. Rest assured that you should be able to keep your existing policy under the new law provided that your employer upholds its end of the bargain. Here are some changes and information regarding Employer-Sponsored Health Insurance coverage:
- You will now have access to free Preventive Services such as routine physicals.
- Under Obamacare, there's a cap on Out-of-Pocket Costs, which means you could end up paying much less in yearly visits, checkups and other healthcare visits.
- Insurers cannot inflate the cost of service or offer unfair price discrepancies based on age, gender or pre-existing conditions.
- Insurers also cannot drop patients from plans due to illness or any other unsubstantiated reason.
- Employers with more than 50 employees must offer health insurance to Full-time Employee or face a penalty fine. For smaller businesses, the government offers incentive programs in the form of tax credits to help offset the cost of providing insurance.
Thanks to the Affordable Care Act, it's estimated that roughly one third of American citizens will be covered by a plan purchased on the Marketplace. Plans range in levels from bronze to platinum with bronze plans being low-cost, high-deductible and platinum plans being more expensive with more coverage. Regardless of the plan chosen, if you participate in a Marketplace plan then you can expect a variety of benefits including:
- State-sponsored marketplace websites that offer apples-to-apples comparison features to help you make a decision about your coverage
- AFederal Marketplace for those who don't live in a state that offers its own marketplace
- Coverage for standard medical treatments such as hospital and doctor visits, maternity care, mental health care and prescription drugs
- Tax credits to help offset the cost of your plan if you meet certain eligibility requirements
Think of your state's marketplace or health insurance exchange as a virtual shopping mall in which all the stores offer the same products for you to peruse and evaluate against each other. You'll see a number of insurers and coverage options so that you can choose the marketplace plan that works for your needs and budget. The government has allowed individual states to decide whether they want to set up a health insurance exchange or marketplace.
As stated above, these marketplaces are designed to help you pick the right plan that works for your or your family's needs. Some states have chosen not to set up a marketplace, and in those states residents will have access to the Federal Marketplace where they can compare plans and apply for financial assistance if needed.
Whether you buy insurance from your employer, a private company or the government, you are entitled to what the ACA considers "ten essential benefits" designed to keep people healthier and prevent major issues that could overwhelm the cost of healthcare. Essential benefits include the following:
- Access to prescription medication
- Emergency services
- Hospitalization or surgery
- Laboratory services
- Mental health services such as behavioral therapy, counseling, substance abuse treatments and psychotherapy
- Outpatient care, which is also referred to as ambulatory patient services
- Pediatric care
- Prenatal and postnatal care
- Preventative care in the form of general wellness checkups along with management services for chronic diseases
- Rehabilitative care and the use of devices necessary for rehabilitative recovery
The remaining U.S. population comprises about 30 million people who buy private insurance and 30 million people who can't afford any of the options available. For those with private insurance, you will most likely benefit from the same features as those who purchase plans through their employers. If you can't afford insurance, then there may be subsidies available to reduce your cost. You should also note that the government will waive the penalty fee associated with not having insurance for people who qualify for exemptions.
Under the new law, young people will pay more for insurance coverage while older people will pay less. However, young people may stay on their parents' insurance plans until they're 26. In addition, the government allows people who have experience a hardship that prevented them from enrolling during the open enrollment period or under the age of 30 to purchase low-cost catastrophic plans that help in the event of an emergency in lieu of more extensive coverage. For people who experienced a hardship, they should enroll in a better plan during the 2016 open enrollment period. Obamacare also ensures that people with pre-existing conditions get the coverage they need without being unfairly treated by insurers or providers.
Financial Assistance and Subsidies
It's not always easy to gauge the success of a new program by its projected impact, but Obamacare may help millions of American individuals and business owners substantially reduce their healthcare costs particularly when it comes to low- or middle-income families. As one of the largest tax cuts ever created for the middle class, Obamacare will potentially save billions of dollars in terms of reduced premiums and better, more affordable preventative healthcare. Government-sponsored healthcare is projected to cost as much as $1.1 trillion over the next decade. If that seems astronomical, that's because it is. However, this trillion-dollar endeavor may also reduce the national debt by $143 billion while providing U.S. citizens with life-saving healthcare coverage.
It's important to keep in mind that while those who earn less than 400 percent of the Federal Poverty Level or FPL will benefit from Obamacare, not everyone will. Some people will still struggle to provide healthcare coverage for themselves and their families, but there are assistance programs set in place to help these individuals.
Under the Affordable Care Act, people who fall below the poverty line will qualify for subsidies to make healthcare more affordable. How do you know if you fall below the poverty line? The federal government sets a national poverty line for the 48 contiguous states, and the number changes each year; Alaska and Hawaii regulate their own poverty lines. For those who make less than 400 percent of the FPL (federal poverty level), premium subsidies are available. The premium subsidy is a subsidy that is automatically deducted from the monthly bill that you owe your insurance company for coverage, which is also called the premium. What is 400 percent of the FPL? For 2016, that number equates to approximately $47,080 per year for individuals and $97,000 for a family of four. For families that make less than 250% of the FPL and enroll in a silver plan, a tax credit may be available as well. This tax credit is reimbursed to the individual or family when they file their income taxes and is designed to reimburse the family for the insurance-related out-of-pocket costs incurred throughout the year. In addition, if a Marketplace plan will cost more than eight percent of your family's adjusted gross income or AGI, then you qualify for an exemption from the individual mandate.
What does all of this really mean? In essence, the government will not enforce a penalty against those who can't afford insurance, and the government works hard to offer options for people who need help making ends meet. Along with subsidies offered by state marketplaces and the federal Marketplace, options exist to help people find coverage. Medicare, Medicaid, CHIP and tax credits will help those who can't afford insurance find a plan that works within their budgets. Especially useful for families with children, the Children's Health Insurance Program or CHIP provides for children regardless of their parents' ability to afford insurance and covers basic preventative care and limited treatments.
Changes to Medicaid and Medicare
As mentioned above, part of the Supreme Court's ruling in June 2012 dealt with the expansion of Medicaid benefits. Medicaid has been around in some form since 1965 and has been through several changes to help make it more beneficial to low-income and low-resource families. Not everyone who earns less than the poverty line qualifies for Medicaid, but most do. Medicaid was designed to help people who couldn't afford insurance to get the care they needed.
With the expansion of Medicaid under the Affordable Care Act, more people would have access to this longstanding government program. Instead of helping only those who fall below the federal poverty line, Medicaid now may help the more than 15.9 million additional people. These people are the ones who may not have been able to afford insurance but also didn't qualify for Medicaid. Obamacare seeks to close the gap on the number of people who can't afford insurance. Medicaid expansion includes wider coverage, new and better benefits, fraud prevention, cost reduction and better care for those who participate.
Unfortunately for many low-income families, the Supreme Court also ruled that individual states do not have to subscribe to this portion of the law and may opt out of Medicaid expansion. As of May 2014, 27 states and the District of Columbia have chosen to expand Medicaid.
The Affordable Care Act also seeks to reform Medicare in terms of available benefits and consumer protection. Now, people who take advantage of Medicare will receive the same benefits as those who enroll in other forms of insurance. This means that they can expect better treatment, better coverage, more widely available healthcare options and other reforms to increase Medicare's effectiveness. Additionally, the ACA will begin cutting aspects of Medicare that don't work. You should note that Medicare is not included under the Marketplace; if you're enrolled in Part A or Part C of Medicare, then you already meet full compliance with the ACA.
How Obamacare Works for Businesses
Larger companies will not have trouble with providing healthcare to their full-time employees, but businesses with fewer than 100 employees may struggle to meet healthcare demands. To alleviate the burden of small businesses that need to comply with the law on offering health insurance to employees, the ACA makes it easier and more affordable for these businesses to purchase healthcare on the Marketplace. Small businesses can take advantage of their own marketplace referred to as SHOP. Small businesses can enroll in health insurance for their employees year round and are not limited to a particular enrollment period; however they should be wary of the deadlines imposed on their employees under the ACA and try to enroll by the deadline is possible. The Open Enrollment Period in 2015 began on November 15, 2014 and ended on February 15, 2015. The 2016 open enrollment period for their employees wwill begin on November 1, 2015 and would end on January 31, 2016. Here's some additional information on how Obamacare works for businesses:
- Businesses with fewer than 25 full-time employees do not have to insure their employees, but they do receive tax breaks for complying with the ACA. Tax breaks may equate to up to 50 percent in 2015.
- Companies that make less than $250,000 per year and employ fewer than 50 full-time workers will gain access to better healthcare options for their employees. They can also take advantage of the SHOP to provide coverage for full-time workers.
- Certain businesses that earn more than $250,000 per year and/or employ more than 50 full-time employees may be subject to the employer mandate starting in 2015. This mandate requires those companies to provide health insurance for their full-time staff. In addition, these companies may also notice an increase in Medicare Part A.
Small business owners may have concerns about the cost of providing insurance, but they can rest assured that the ACA helps mitigate these costs. Business owners can choose to pay a fine called the Employer Shared Responsibility Payment instead of covering their employees. This fine falls under the "employer mandate" and helps offset the cost of insurance should your employees need to get treatment. If you own a small business and want to take advantage of the tax credits mentioned above, then you will need to consult with an agent who's well-versed in the program.
Who Pays for Obamacare?
You might be wondering how Obamacare gets funded. After all, with such a large increase in the way that benefits are distributed the cost of Obamacare could skyrocket if not funded through various means. Nothing in life is free, and the ACA makes sure that affordable healthcare stays affordable through the following payment sources.
- Personal income taxes
- A tax on Medicare of 0.9 percent
- Unearned income tax on people who earn more than $200,000 per year
- Spending cuts in other government departments
- A tax levied against insurance companies
- Taxes levied against businesses of more than 50 full-time workers that don't comply with the law
In essence, taxes pay for Obamacare. Many have expressed concern or even outrage about a healthcare system that depends on tax support. However, almost 97 percent of small businesses and 99 percent of families will be able to take advantage of the ACA's new provisions. Taxes also don't affect people who can't afford to pay them. In other words, the more money you make the more taxes you'll pay to support this program. Regardless of how much individuals earn, more than 70 percent of Americans will benefit in some way from Obamacare and healthcare reform. As of the end of open enrollment period in 2014, an additional three percent of Americans who previously lacked coverage now have health insurance and can benefit from everything Obamacare currently has to offer.
The summary above is designed to give you a better idea about what the Affordable Care Act means for you as an American citizen. While news sources and politicians have debated Obamacare endlessly, the real test of the program is in how it relates to individuals and businesses on a personal level. Over time, more people will gain access to healthcare that is affordable, convenient and helpful in preventing common illnesses and medical conditions.