(This article was updated on July 15, 2015)
Five years into the Affordable Care Act, there’s still some confusion about what this new law does for the American people. For starters, it’s important to point what the ACA is not. The ACA does not promise free health care to anyone. It’s not like Medicaid, which is a joint federal and state program that does provide free coverage for low-income Americans. Obamacare is also not health insurance. Rather, the law provides greater access to low-cost and affordable coverage to millions of Americans through subsidies and a health insurance marketplace.
Before the law was signed in 2010, nearly 50 million people in America lacked health insurance of any kind, largely due to the high price tag. Recent reports suggest that this number has improved significantly. A Gallup poll found that only about 11.9 percent of the U.S. population remains uninsured as of the first quarter of 2015.
While the ACA does not guarantee free coverage, the law has certainly helped to improve the lives of hundreds of millions of Americans over the past five years. In the following sections, we’ll give you some information about the law that will help you make better decisions about your health care coverage.
The ACA guarantees that insurers can’t treat their customers unfairly and that consumers have certain protected rights. For instance, men and women will pay the same rates for the same services. People with pre-existing conditions won’t be turned down for coverage. Each health insurance plan offered today must also cover ten essential benefits, including things like mental health care, maternity care, pediatric services and prescription medication.
As an insurance enrollee under the ACA, you can also expect that your insurer won’t drop you from your plan without notice or without reason. Insurers have a cap on how much they can spend on administrative overhead, and you’ll get a prorated refund if the company spends too much on executive costs. In essence, the law holds insurers accountable for their spending and their actions, gives patients more fighting power against corrupt or unfair practices, and ensures that more people have greater access to good health care.
The Insurance Marketplaces
How does the law help people get covered? The ACA created federal and state marketplaces or health insurance exchanges to make it easier for people to sign up for insurance. The Supreme Court ruled that states could decide on whether or not to create their own exchanges. To date, just 13 states and the District of Columbia have set up a state-run marketplace. The remaining states redirect consumers to HealthCare.gov, the federally facilitated marketplace.
Health insurance exchange sites lay out health insurance plans like an online store. Once you give the government your information, you can see what’s available in your area and compare plans by type and cost. There are four types of plans available: bronze, silver, gold and platinum. Bronze plans have lower premiums but require higher out-of-pocket expenses. There’s also a catastrophic plan available for adults under 30, but its coverage is limited and designed for emergencies.
Federal Tax Credits
One of the most significant changes that the ACA implemented was the subsidy system. Under the law, low- to middle-income Americans qualify for advance premium tax credits to help offset the cost of annual health insurance premiums. Also referred to as subsidies, tax credits can substantially reduce what you pay each month for insurance. The amount that you qualify for depends on your income and family size. In general, tax credits are calculated based on the cost of a silver-level marketplace plan.
Even though the amount is calculated based on one tier type, you can apply the subsidy to any plan. Some people apply their subsidies to a pricier plan in order to get more coverage for less money. Subsidies are only available to people who can’t get coverage through work unless there are extenuating circumstances. The Kaiser Family Foundation offers a subsidy calculator to help you estimate how much you’re likely to receive.
In June 2015, the Supreme Court ruled that people living in states without a state-run marketplace can still take advantage of federal subsidies. No matter where you live, if you qualify for a tax credit based on your income and other factors, then you can apply for subsidies to help lower your monthly payment.
Individual Shared Responsibility
The ACA also changed the guidelines on when people can enroll in health insurance. Before the law, employers set their own enrollment periods while private companies offered varying sign-up dates. Now, you can only sign up for health insurance during the annual open enrollment period. The sign-up period for 2015 ended in February, but there may be exceptions if you meet certain qualifications and still want to enroll. Otherwise, the next enrollment period lasts from Nov. 1 through Jan. 31. If you don’t sign up for health insurance during this period and you don’t qualify for an exemption, then you will pay a fine as part of the individual mandate.
The individual mandate stems from a concept known as “shared responsibility.” In order for insurance to become affordable and for subsidies to work, everyone needs to contribute to the health care system. The government instituted the individual mandate, which requires all eligible Americans to obtain health insurance or face a fine for non-compliance.
The IRS collects the fine when you file your taxes each year. This year was the first year that fines were collected, and millions of Americans were caught off-guard by the fee. How much can you expect to pay if you don’t sign up for health insurance when you’re eligible? In 2015, the fee is the greater of $325 or 2 percent of your taxable income. The amount is prorated based on when you lacked insurance. That means that when you file your taxes next year, you’ll pay 2 percent of your income for each month that you didn’t have coverage.
Employers also have a mandate to provide health insurance for full-time workers. Small businesses get incentives for offering coverage through the Small Business Health Options Program or SHOP. You can read more about the employer mandate by checking out our article on the subject.
Individual responsibility payments increase each year. In 2016, the fee jumps to $695 or 2.5 percent of your taxable income, whichever is greater. The amounts will continue to increase based on inflation. At some point, individuals will need to decide whether it’s worth it to keep skipping out on health care coverage. The benefits of getting covered typically outweigh the negligible cost you save by avoiding enrollment.
(This article was updated on October 5, 2014)
Before we begin answering the question of, “What is Obamacare?”, we need to first examine the status of the healthcare industry before Obamacare’s inception. The public needs to understand why a national healthcare policy was necessary, what it is, and perhaps more importantly, what it is not. The public also needs to understand the penalties for not obtaining health insurance. Why the public is being penalized for not obtaining health insurance is more reasonable than detractors think. First, let’s go back in time to a place from which the healthcare industry can be examined before Obamacare was implemented.
What Happened Within The Healthcare System That Led To Obamacare Being Passed Into Law?
As near as economists can track it, the whole healthcare industry exploded in the 1990s. This was due to several factors. The huge outcry for cures for AIDS, cancer, leukemia and other killer diseases rose to more than just a shout; near frenzy is more like it. New technologies emerged, malpractice suits skyrocketed, the minimum wage stayed where it was, but spending increased. A recession didn’t help matters, while the law governing all this remained the same. All of these take money, and the public footed the bill. They were taxed to pay for all of the above, to the point where the middle class no longer exists. It was taxed out of existence. Here’s why. Cancer research, immunology, laser surgery, Lasik eye surgery, various types of plastic surgery, burn treatment, the formulation of new drugs for any condition under the sun and some that weren’t, all escalated in the 90s. If there was a disease, condition or even an idea, it was researched. Specialized treatment centers for these conditions and diseases sprang up. Doctors and nursing staff specializing in these diseases and conditions had to be found. Continuing education in these subjects and specialties had to be put into place.
These dedicated individuals had to be paid. From the beginning, technologies existed in the 90s that helped unborn babies grow to full term, helped their lungs develop properly and to bring up their birth weight. From there, technology advanced to lasers for surgery, better heart bypass procedures, CT scanners, better MRI procedures, medical records sharing technologies, including teleprocessing prescriptions to a pharmacy. The class of drugs used to fight diseases and support their sufferers improved. Diabetics today take fourth generation drugs to stimulate insulin production in their bodies. Heart patients no longer take blood thinners and beta-blockers. They take one pill that does it all. Post-menopausal women now take hormone replacement therapy that more naturally mimics their body’s actual hormones instead of synthetic hormones that cause heart attack and stroke. Before the 1970s, medical malpractice suits were rare. The efficiency and state-of-the-art condition of drugs at that time was non-existent. If patients died, it was because all that could be done at that time had been done. However, throughout the 80s and 90s, medical research had turned out some amazing, for their time, drugs that did a thorough job of helping the condition and supporting its sufferers.
When Medicine Stops Preventing Disease And Illness
The only thing about that was that the side effects of these amazing drugs started killing people. Families, in shock, looked around for answers. When none came, they turned in rage against the doctors that prescribed the drugs. Doctors’ malpractice insurance rose steeply. Some gave up practicing, either from grief or from poverty. The malpractice suit phenomenon increased during the 90s and early 00s to the point that courts were buried under malpractice suits. Payouts ran into the millions. The accumulative number of suits and payouts ran into the billions. Before the 90s, minimum wage rose at the rate of between 15 cents to 25 cents every two to six years. In the 90s, things began to sharply look up. Minimum wage rose by 40 cents, but it stayed that way for almost ten years. In the 00s, minimum wage rose 70 cents over two years, and then rose to its present $7.25 in 2009. Now take into account that in the 60s and 70s, when minimum wage was less than $3.00, more people were college graduates who made reasonable salaries. In the 80s and 90s, more people lived in the United States. Some were college graduates, some were hourly workers. Add to that the fact that children were now entering the workforce to help their families. Illegal immigrants flooded the workforce, they were also making minimum wage or less. It had to go up; there was no way around it. But the fact remains that there were more in the workforce than there was money to pay them all. Medical spending increased because the sentiment of the industry became one of “if there was a twitch somewhere, it needed a drug to stop it”.
That required research and development of the drug. Further research and development had to be done to stop the side effects of previously issued drugs that truly did a good job helping people. As unhealthy lifestyles began to take a serious toll on the population, drugs needed to be researched and developed to help. The medical research industry dug itself into a hole trying to meet the demand for new and better drugs, faster and more miraculous drugs. Of course, these were expensive when they were introduced, so the very sufferers they were aimed at couldn’t afford them. Not only that, the drugs are now found to be the cause of other conditions and illnesses the sufferers of the original condition cannot tolerate. However, the cost of researching and developing those drugs has to be paid, as well as the cost of shelving the ones that are killing people. It is commonly thought that the only recession-proof industries are food, housing and healthcare. People have to eat, have a roof over their heads and a doctor when they are sick. This is just plain common sense. Except more people are homeless because they lost their jobs, couldn’t pay the mortgage and are now living on the streets or on charity. More people patronize alarming numbers of newly established dollar stores than major grocery stores.
More people are uninsured now than ever before. In a recession, only what is absolutely necessary is kept, with that which can be worked around to be let go. In other words, in this last recession, almost 45 million Americans went without insurance so they could have a roof over their heads. When a medical situation became drastic, ER’s all over the country were busy. Except the patients couldn’t pay. The medical community ate the charges. That too makes prices rise. Now factor in the law governing the healthcare community. These are passed at the local, state and federal levels. There are laws regulating discrimination in healthcare facilities with regard to religious matters, laws regulating what health insurance will and will not pay for and laws about laws that have been revised. And that’s just healthcare facilities. Add laws governing research and development through the Federal Drug Administration, women’s studies and the insurance industry, and you have a tangle of rules and regulations it would take God to unravel. There are people working for private interests, lobbyists and special concern interests thrown into the mix to make sure their objectives and agendas get made into law.
The Basic Concept Behind Obamacare
This is only the most basic of explanations as to how matters got to the need for healthcare reform. The basic idea of Obamacare was to plant a large sledgehammer atop the insurance industry’s ability to jack up prices so insured persons would pay bigger co-pays while the company failed to pay its share, the medical industry’s capability of treating everyone, because suddenly everyone had the same level insurance in addition to seniors not having to choose between paying for their medicine and eating. The object of Obamacare was to level the playing field. No one would have more than anyone else, everyone would have the same chance to buy health insurance, and no one would be turned away from necessary healthcare because they couldn’t pay. Think about it. The insurance industry is being forced to offer affordable coverage to even those below the poverty line. It is being made to offer prices everyone can afford, with no worry of prices being raised while coverage is curtailed or cancelled. While minimum wage and lower levels of income either stay the same or diminish through layoffs or employment ending, healthcare prices will not rise.
That alone would be a good enough reason for healthcare reform. Obamacare was necessary. There was no control. People were dying because they could not afford healthcare insurance. Even if they could afford it, the medicines they needed insurance to help pay for were drastically out of their price range. Healthy people saw no reason to pay the equivalent of their car payment each month, so they refrained from getting insurance entirely. Other than healthy persons who needed it the most couldn’t get insurance because the insurance companies either wouldn’t accept them due to a pre-existing condition or dropped them when they became ill. Obamacare brought control back to life.
What Is Causing Confusion Around Obamacare?
Perhaps the present confusion lies in what the public thinks it’s going to get when it signs up for Obamacare. Obamacare is not insurance. Obamacare is not subsidized like it would be if folks obtained insurance through an employer. Obamacare doesn’t cover medicines, treatments or hospitalizations. It isn’t Medicare, and it has nothing to do with veterans’ benefits. Perhaps what confuses people the most is that they hear they must “sign up” for Obamacare. They hear they will be penalized if they don’t. They’ve never been made to pay for having no insurance before. Therefore, the confusion grew.
Is Obamacare The Real Name Of The Law?
Obamacare is the popular name for the Patient Protection and Affordable Care Act, or ACA. Its purpose is to reform the healthcare industry, make affordable health insurance available to all Americans and improve the quality of healthcare and healthcare insurance. The Act extends and improves the rights of patients as well as protecting them. Medicaid and Medicare were expanded to include those Americans who fell beneath the federal poverty line, or who could not otherwise qualify. In time, employers will offer their employees health insurance, with participating small businesses receiving subsidies by the government. The ACA in its entirety can be read here. The following is a summary, in non-legalese, which may help the public understand the ACA a little better.
Understanding All Of The Details Within The Affordable Care Act (Obamacare) Bill
Title 1: Quality Affordable Healthcare for All Americans
Provides for the control of individuals and families over their own health insurance coverage:
- No one may be dropped due to a pre-existing condition
- No cap on annual benefits
- No one may be dropped due to an honest mistake on applications
- Adult children may be on a policy until age 26
- Preventive care and immunizations are required •Standardized insurance documents so people will know what they’re comparing
- Establishes an online portal so Americans can read the law as well as check on state-based health insurance marketplaces
- High cost of healthcare information is lower due to centralized data centers •Americans will no longer be charged more for health insurance due to gender, income or health status
- In 2015, small businesses will offer health insurance to employees •Allows for equality in the workplace regarding health insurance
Title 2: The Role of Public Programs
Public programs like CHIP, or Children’s Health Insurance Program, Medicaid, Medicare, home care and veterans care are expanded and improved under the ACA. Moreover, prescription drug costs are reduced so more Americans can afford prescription drugs. The title also provides for access to healthcare insurance for all Americans. Programs run by the states individually for which the ACA recommends expansion and improvements are only implemented if that state approves the ACA’s suggested, new terms.
Title 3: Improving Quality and Efficiency of Healthcare
In this title, the ACA provides for:
- A decreased donut hole in Medicare drug costs. Seniors will save a bunch of money from the closing of the donut hole.
- Healthcare facilities as well as healthcare professionals will receive incentive to improve care.
- Provides healthcare to rural areas.
- Puts a stop to overpaying insurance companies to protect Medicare. Medicare will be protected by the ACA.
- Preventive care is included in ACA, saving taxpayers money from paying for sick uninsured people to go to the hospital.
- Independent and neutral healthcare professionals and not Congress, will brainstorm ways to protect and improve Medicare to keep it a quality concern and reduce costs.
- Medicare has never been protected to this extent before, but the ACA is doing it.
Title 4: Prevention of Chronic Disease and Improving Public Health
This part of the Act empowers not just the healthcare industry, but the local and state governments to find ways and means of keeping their people healthy, so they won’t need healthcare. Preventive medicine and a healthy lifestyle are being prescribed in order to keep healthcare costs down.
In other words, we’re no longer just treating the symptoms, we’re treating the cause.
- Preventive measures for seniors will cost them nothing.
- Nutritional information will be available to all, because it’s of vital importance.
- Many preventive measures for women have been introduced.
- Prevention, wellness and public health are being funded like never before. The Act creates a strategy for a national health and prevention methods that are effective and doable to reduce preventable diseases and disability in Americans.
- The Act empowers small businesses as well as local and state governments to find ways to promote and improve wellness methods in the workplace and the community. Response to public health emergencies will be stronger.
- Families will now be able to begin preventive and wellness measures at home by having access to science-based nutritional information. The Act was written so that lives could be saved and medical costs reduced by starting at the beginning: the people themselves. The thought process is that if you improve their health and lifestyle, and they won’t get the illnesses and diseases that send them to hospitals in the first place.
Title 5: Healthcare Workforce
The workforce in question is the doctors, nurses, home care professionals and other healthcare professionals. The Act provides for jobs for healthcare professionals, education for those thinking about being healthcare professionals, and provides for scholarships and loan repayment plans for those thinking about going to school and learning about the healthcare industry. The Act funds and expands community health centers. It also empowers states to hire healthcare professionals.
Title 6: Transparency and Program Integrity
Transparent means see-through. Formerly, no one, doctors or patients, could see what the left hand or the right hand was doing, to use an analogy. With transparent healthcare, both doctor and patient work together from the point of diagnosis to find the best method of treatment. The use of the latest technology helps. The idea is quality control, a thing that wasn’t in evidence in the past. The Act also provides states the capability of stopping fraud dead in its tracks. That goes for healthcare providers suspended from practice in one state going to another to continue doing business. The lawsuit epidemic discussed earlier won’t have a leg to stand on under this Act.
Title 7: Improving Access to Innovative Medical Therapies
This title is all about the drugs. Before the ACA, effective generic drugs were kept back so that prices could rise before demand was met. Affordable generics will be available to all as well as discounts on drugs. Hospitals and communities treating low-income families will receive such discounts. Innovative therapies mean biomedical drugs and treatments. All that means is natural things or things derived from humans or animals instead of pharmaceutical things. Vaccines, for example, are the earliest example of biomedics that have been used for hundreds of years.
- Hormone therapies
- Human growth hormones
- Blood and plasma for transfusions
- Tissue, bone, tendons and the like for rebuilding a limb
- Biologic samples used to develop allergy tests and treatments Currently there are no generics of biological treatments, but the ACA provides for development of such treatments. Affordably, of course.
Title 8: Community Living Assistance and Supports Act (CLASS Act)
This title gives workers a chance to pay a premium against days of disability. It would provide for home care or respite care for those who are still able to work but they cannot manage simple tasks such as personal care. Workers would pay a premium in return for cash during such a period of disability. The result was that no one would be in nursing homes and the costs would be covered completely. No taxpayer funds would be necessary. This act was repealed in 2013.
Title 9: Revenue Provisions
Have you ever wanted to see rich folks pay their fair share? Now they will. Under this title, those making over $250K, big business and the healthcare industry will be paying taxes on healthcare. Tax credits will help Americans pay their insurance premiums.
The act also does the following:
- Closes tax loopholes
- Taxes the insurance companies
- Additional health savings
- High income individuals may now get Medicare hospital insurance
When the healthcare reforms are made into law, it will be totally paid for and will reduce the deficit over a period of ten years by one hundred billion dollars.
Title 10: Reauthorization of the Indian Healthcare Improvement Act
This title will modernize and improve healthcare for almost 2 million Native Americans and Native Alaskans.
Now That We Have Explained What Obamacare Is And The Purpose Of The Law Now What?
Probably the question shared by most people is “now that I know what it is, what do I do”? The answer is that you should start doing research on what kind of insurance you want and how much you can afford so that when it is time to enroll again (open enrollment commences November 15 for all regular plans and October 15 for Medicare Part C/Medicare Advantage plans) you are educated and informed and ready to make decisions. Along with this website, you can also check out the government’s official website to sign up for healthcare, Healthcare.gov. Some states also operate their own site, while others work directly with healthcare.gov. Some important information you can get both on this website and Healthcare.gov is the how to determine whether you may qualify for a subsidy or Medicaid. The most important number will be figuring out if your income is within 400 percent of the federal poverty level. This works out to around $46,000 for singles and $93,000 for families of four. If you fall below this figure, you could qualify for discounts and aid with out-of-pocket expenses. Even if you call insurance companies directly, knowing this information will help you get a policy you can afford. If you missed the deadline, you will probably pay a fine for not having insurance by the end of open enrollment season. If, however, you had a life event like a serious illness or moving to another state, you could qualify for enrollment in a special enrollment period later in the year. Hardship cases are taken into account as well. FYI, the fine is one-percent of the money you make in a year excluding the first $10,150.00 in income, or $95 for individuals, whichever is higher. Each year the penalty amount increases.
About the Penalties For Not Complying With Obamacare & The Individual Mandate
Why would any sane person pass a law that costs someone even more money for not being able to afford health insurance? Since the deadline passed for signing up, more than eight million previously uninsured Americans now have health insurance. Some received it through their state’s marketplace, while others received it through qualifying for Medicaid. Those Americans are going to remain covered. Millions of other Americans got insurance with help paying the premiums. They, too, will remain covered. Think about it. That’s money going back into government coffers. How long has it been since that happened? Not only that, but the healthcare reforms are completely paid for. That, too, benefits all Americans.
Never in the history of insurance or healthcare has the individual been empowered to control his own health. Today he is being given the chance and in some instances subsidized to eat wisely and live a healthy lifestyle. Preventive and wellness methods will keep him healthy. No one is dictating terms and conditions. No one is forcing your hand. You have the power. Why in the world wouldn’t you use it? Obamacare takes into account the individual needs of people powerless to fight big business. It looked at the jaw-dropping 45 million uninsured persons, took a look at the excesses of the healthcare industry and did a change-up. The Supreme Court even says the change-up is Constitutional. Obamacare is affordable. Take out your paycheck stubs from years ago and compare the prices. It’s going to be cheaper than when there was no past system of checks and balances on the insurance and healthcare industries. It will remain that way for at least the next ten years.
When was the last time an employer actually offered health insurance? With an affordable deductible? With no rises in co-pays from time to time? Add empowerment, a healthy lifestyle and affordability, which are all vital to the welfare of Americans, and you have a winner. Now take that more than seven million people plus the millions more on Medicaid and think of the care they will receive for pre-existing conditions, serious treatments such as cancer treatments, laser surgery for vision correction and dental benefits. Humane? You betcha. What’s a $95 fine pitted against a chance to live a normal healthy life?
What Else Should You Know About Obamacare?
A few practical tips would be in order due to the ACA’s introduction. There are bugs in some new things; just look at recalls on new cars. So here are a few tips for dealing with your new insurance.
- Call your new insurance company and ask for your ID number and Group number. If you haven’t received an insurance card yet, tell them, but you can use these numbers to see a doctor if you need one before your card arrives.
- When you’ve chosen a doctor in the network, call to see (a) if s/he’s taking new patients, (b) if s/he takes your insurance and (c) if s/he uses the pharmacy you prefer and if it’s in your plan.
- Read your policy carefully so you’ll know your responsibilities. Know what your deductible is, know what your copay will be at both the doctor office and the pharmacy, and know when your payments are due. Pay them on time.
- Check to see what preventive and wellness measures are covered by your policy. Flu shots, weight control and stop-smoking products or services may or may not be covered.
- If you have questions, don’t hesitate to call your insurance company for answers. If the customer service reps seem clueless, don’t hesitate to ask for a supervisor. Not everyone knows the ins and outs of the ACA yet, but some upper-management personnel do. Go for those and keep track of the answers to your questions. If the doctor office isn’t sure if something is covered, you can tell them to call such and such a person for answers. We hope we have explained thoroughly what the ACA is and how it works.
We sought to explain how the need for healthcare reform came to be so urgent as well as some of the ins and outs of the ACA. Hopefully after all of this, you still aren’t left wondering , what is Obamacare.
We hope this helps in your research process and ultimately determining if enrolling in an Obamacare compliant healthcare plan is right for you.