Although Obamacare is the most monumental health care law since the enactment of Medicaid and Medicare in 1965, it’s the least understood social program.
Popularly known as Obamacare, the Affordable Act of 2010 is and remains, without a doubt, the most significant change in the US health care policy since the enactment of Medicare and Medicaid in 1965. Unfortunately, it remains one of the most divisive and misunderstood social programs of our era perhaps because of differing opinions made on both sides of the political divide. But politics aside, it’s important to understand exactly what Obamacare is and what’s at stake for you as a consumer.
Signed into law by President Barack Obama in 2010, Obamacare is a major overhaul of the U.S. healthcare system to make health insurance affordable to Americans. It was designed to offer healthcare subsidies to the American people while protecting them from high healthcare costs from insurance companies.
Whatever you think of Obamacare, this comprehensive guide will walk you through Obamacare step-by-step. It will help you understand what is at stake for you as a consumer, physician, or employer.
What is Obamacare?
Unless you’ve been living on another planet other than the earth or in a cave somewhere far from the United States, you’ve heard of Obamacare. That aside, many Americans still don’t understand what Obamacare entails and how it works despite having been around for nearly a decade. So what is Obamacare?
Obamacare is an alternative name for the Patient Protection and Affordable Care Act (ACA) of 2010. The term “Obamacare” was invented by the critics of former President Barack Obama’s efforts to reform the healthcare system but the name stuck. While many people think that Obamacare is just about health insurance, it has pretty much changed how healthcare is delivered in the U.S.
When President Obama and Congress created Obamacare in 2010, the main aim was to ensure that all Americans would be able to get health insurance. This would only be achieved by lowering the costs of healthcare and by making healthcare insurance affordable even to ordinary people.
In essence, the chief objective of Obamacare is to reform the country’s healthcare system by providing healthcare coverage to all Americans and to lower the costs of healthcare services.
Understanding the Basics of Obamacare
In 2013, just a year before Obamacare went into full effect; more than 2 million people had filed for bankruptcy as a result of unpaid healthcare bills. Worst still, nearly 15% of the American population was uninsured and more than 32 million Americans were not able to get health insurance coverage for various reasons including pre-existing conditions.
Some of the main goals of Obamacare include:
- Offering all Americans with affordable healthcare insurance
- Providing healthcare coverage for all uninsured Americans
- Regulating the health insurance industry
- Reducing healthcare costs and spending in the U.S.
- Improving the quality of healthcare and health insurance in the country
Coverage Highlights under Obamacare
One of the main highlights of Obamacare is that health insurance companies are required to offer the following for all policyholders.
Subsidized coverage – The federal government subsidizes health coverage for individuals if their annual income is below a particular threshold. For example, you can qualify for certain subsidies if you’re earning less than 400% of the federal poverty level (FPL), which is about $48,000 per year for an individual and about $98,000 for a four-member household.
The reasoning behind this is that Obamacare might bring additional expenses to individuals and households. As such, the government subsidizes these healthcare costs to ensure that health insurance isn’t beyond the means of ordinary people.
Young Adult Coverage – Anybody under the age of 26 is eligible for health insurance coverage under his/her parents’ individual or employer-sponsored coverage plan. This is applicable in all states and it doesn’t matter whether the individual is in school, married, has children, or is eligible for employer-sponsored insurance.
Consumer Protection – One of the main reasons why Obamacare was enacted was to protect consumers and policyholders against unscrupulous tactics employed by health insurance companies. As such:
- Obamacare mandates that a policyholder cannot be denied health insurance coverage based on his/her pre-existing conditions. It’s, therefore, illegal to be denied healthcare insurance based on a chronic illness or permanent disability.
- It’s illegal to be charged higher premiums based on your gender, chronic issues, or disability. You can only be denied coverage if you’ve ever been involved in insurance fraud.
- There’s the 80-20 rule that requires insurance companies that spend less than 80% of premium revenue on medical services to rebate the overage to policyholders.
- Healthcare coverage plans must include free preventive services. Again, health insurance providers are not allowed to put limitations on “Essential Health Benefits” such as preventive treatments and screenings that might reduce cancer or other diseases.
- Group health insurance plans such as employer-sponsored health insurance plans can only kick in for all employees within a period of 3 months (90 days) from the time he/she becomes eligible for this coverage.
Medicaid/CHIP Expansion – One of the main aims of Obamacare was to expand Medicaid and the Children’s Health Insurance Program (CHIP). This was to ensure that low-income families in the country, as well as millions of uninsured Americans, could get health insurance coverage.
Essential Benefits – Through Obamacare, the following benefits are considered essential and must be included in all group and individual health insurance coverage plans.
- Hospitalization
- Emergency services
- Ambulatory patient services
- Maternity and newborn care
- Prescription drugs
- Laboratory services
- Rehabilitative and habilitative services
- Mental health and substance abuse services
- Pediatric services
- Preventive services and chronic disease management
Importance of Obamacare
Going to the hospital or a doctor in the United States can be very expensive. If anything, healthcare costs are the number one cause of bankruptcy in the country. But with health insurance, you get to worry less as you’ll only pay a small fee known as copayment every time you visit a doctor or a hospital.
Before Obamacare, many people were uninsured and just took chances. If anything, many health insurance companies couldn’t offer health insurance coverage for those with pre-existing conditions such as chronic illnesses and disabilities. Fortunately, things have changed for the better thanks to Obamacare. That being said, here are some important aspects of Obamacare.
- It aims to provide discounts and subsidies through the Health Insurance Marketplace.
- It eliminates any form of discrimination in health insurance coverage based on gender or pre-existing conditions.
- It aims to make healthcare insurance coverage affordable while improving the quality of care for all Americans.
- It expands Medicaid to offer coverage to the uninsured low-income Americans
- It protects policyholders from being dropped by their policies when they’re sick.
- It ensures that Americans are not over-reliant on health insurance companies.
- It allows children to remain on their parents’ insurance coverage plans until they’re 26.
- It has cost-reducing provisions that are meant to reduce the increase of Medicaid and Medicare spending as well as the overall healthcare costs.
How Does Obamacare Work?
Everybody seems to understand that the main aim of Obamacare is to make healthcare insurance affordable and available to all Americans, to expand the Medicaid program, and to support innovative medical care delivery. However, most people seem not to understand how Obamacare works.
The main goal of Obamacare was to slow down the rising costs of healthcare. The intention was to ensure that healthcare would become affordable to more people, especially those who need it most. As such, low-income Americans were given priority through various subsidies that could ensure that they afford rising healthcare costs.
Again, Obamacare has helped in expanding Medicaid to include those who earn up to 138% of the federal poverty level. Some states, however, have decided not to expand Medicaid in line with Obamacare. They include Florida, Alabama, Mississippi, Georgia, Kansas, Missouri, Oklahoma, North Carolina, South Dakota, North Dakota, Texas, Wyoming, Wisconsin, and Tennessee.
You have to keep in mind that the federal poverty level keeps rising each year due to inflation. As such, you can get Medicaid tax credits if your income is less than 400% of the FPL. This is applied monthly and not as an annual tax rebate. You can also enjoy reduced deductibles and copayments.
The Obamacare Tax Penalty
The original requirement in Obamacare included a tax penalty for anyone who didn’t purchase a health insurance plan. This was known as the individual mandate and was designed to offset the cost of paying for healthcare for those who didn’t have health insurance plans perhaps because they could not afford it or had some special exemptions.
However, the individual mandate and tax penalty were repealed in 2017 by the Trump administration. The repeal came into effect in 2020 though some states such as Hawaii, California, Maryland, Connecticut, Washington, Rhode Island, and Minnesota still have their individual mandates intact.
Understanding the Obamacare Health Insurance Marketplace
The federal government created an online health insurance marketplace to ease the process by which individuals and groups purchase health coverage and also to maximize enrollments. Health insurance companies who choose to list their plans on the website are charged a small fee to increase their visibility in the marketplace, which is www.HealthCare.gov.
As an individual, you’re expected to purchase any plan listed on the online marketplace within the Obamacare Open Enrollment Period. This is usually between 1st November and December 15th each year. If you’ve missed this period as a result of certain life circumstances, you may qualify for the Special Enrollment Period.
In addition to the federal nationwide health insurance marketplace, many states have created their own marketplaces to assist their residents in accessing health insurance coverage. Some of the states that have their own marketplaces include; California, Hawaii, Connecticut, Colorado, Massachusetts, Maryland, Rhode Island, New York, Nevada, Minnesota, West Virginia, Washington, and many more.
As a consumer, it doesn’t matter whether you use the nationwide health insurance marketplace or a state-specific marketplace; Obamacare ensures that you have the option of choosing one of the four individual health insurance plans:
Bronze – The insurance company pays 60% of the healthcare costs while you pay 40%
Silver - The insurance company pays 70% of the healthcare costs while you pay 30%
Gold – The insurance company pays 80% of the healthcare costs while you pay 20%
Platinum – The insurance company pays 90% of the healthcare costs while you pay 10%
You have to keep in mind that a bronze plan would mean that you pay a low monthly premium but very high deductibles and out-of-pocket costs. On the other hand, a platinum plan means that you’ll pay higher premiums but the lowest deductibles and out-of-pocket costs. As such, Obamacare gives you the option of choosing a plan that suits your condition and budget.
With that in mind, bronze and silver plans can be perfect if you’re young, healthy, and rarely have to visit the doctor. On the other hand, gold and platinum plans would be ideal for you if you’re older or have frequent health issues that may require regular visits to the doctor.
How to Sign Up for Obamacare in the Health Insurance Marketplace
Here are the steps of signing up for Obamacare in the health insurance marketplace.
Set up an account – You should set up an account in the marketplace. You can either do this on the federal marketplace website (www.HealthCare.gov) or your state’s health insurance marketplace.
Fill out an eligibility form – You should then fill out an eligibility application form. In this form, you’ll answer questions about the size of your household, family income, current health coverage information, and many more.
This will help the marketplace in determining and calculating whether you’re eligible for discounts and subsidies and at what percentage.
Compare the available plan options – There are several plans in the marketplace so it’s upon you to compare the available plans and choose a plan that suits you based on your budget and health condition. Some of the things to compare include:
- The benefits offered
- The monthly premiums
- Deductibles
- Copayments
- Out-of-pocket costs
- Coinsurance
Choose a plan and enroll in it – Select the right plan for you and enroll in it. You should then provide payment information and how you will be paying the monthly premiums. If you or a member of your family qualifies for Medicaid, CHIP, or any other healthcare program, a representative will contact you to enroll.
Things that You Need When Applying for Obamacare
There are a few basic pieces of information that you will need to fill out when applying for individual health insurance in the marketplace. As such, you need to be armed with the following:
- Social Security Number
- Date of Birth
- Tax filing status and number of dependents
- Current job and income information
- Current insurance information
- Payment information such as credit card
Costs, Subsidies, and Penalties of Obamacare
When you enroll for any health insurance plan, you typically pay a monthly premium for that plan. While it’s the same with Obamacare, this social program has subsidies that can help low-income individuals cover the costs of their plans. These subsidies are known as tax credits and are available for families and individuals who fall within a particular income bracket.
Initially, the federal government, through Obamacare, provided various payments to health insurance companies to keep their deductibles low. However, the Trump administration cut those payments though the law still requires health insurance providers to keep charging consumers low deductibles.
That being said, you can still apply for premium tax credits if you qualify to help lower your health insurance costs. You can be eligible for premium tax credits if you meet the income criteria (400% below FPL), do not qualify for an employer-sponsored health plan, and can purchase a health insurance plan within the Open Enrollment Period.
As far as penalties are concerned, these penalties were removed by the Trump administration in 2017. Before that, there were penalties for being uninsured.
There were also exemptions such as hardship exemptions (being homeless), income-related exemptions (lowest-priced coverage is more than 8.16% of an individual’s income), group membership exemption (such as Native Americans), and other exemptions (such as being in jail or living abroad).
In terms of cost, the cost of Obamacare may vary from state to state. It may also depend on your preferences and choices as an individual. As such, there are no specific figures regarding the cost of health insurance. The best thing to do is to choose an insurance plan that has the right pricing for you.
Keep in mind that the cost of health insurance is regulated by the government. So you can rely on eHealth brokers and use their experience and expertise to find the best coverage for you based on your situation and budget.
How Obamacare Affects You, Your Family, and Your Business
Initially, Obamacare was all about Americans who were uninsured and could not afford health insurance. But in the long run, it will pretty much affect every American. In terms of how Obamacare affects you, this will actually depend on who you are.
Are you employed? Are you unemployed? Do you own a business? How are you planning to purchase your health insurance? In this section, let’s outline how Obamacare can affect you, your family, and your business.
Individuals and Families
For individuals and families, Obamacare would impose a tax penalty known as the individual mandate if you did not have health insurance. This was possible before 2017 but the Trump administration removed the individual mandate clause. You, however, have to keep in mind that some states still impose the individual mandate on individuals and families who do not have health insurance coverage.
That aside, you can be eligible for premium tax credits and other cost-sharing discounts but these may depend on your income level. Generally, households that are below the FPL are more likely to be considered. You also have many options in the health insurance marketplace.
More importantly, Obamacare has ensured that healthcare insurance is affordable than ever before and easily accessible to everyone. Again, you won’t be denied coverage based on your gender or pre-existing conditions since it’s against the law.
Employers
For employers with more than 50 employees, you may be required to offer health insurance coverage for them or pay a hefty penalty called the Employer mandate. On the other hand, if you have less than 50 employees, you may not be required to offer health insurance coverage for them and may not be subjected to any penalty.
For example, an employer who has more than 50 employees and does not provide health insurance coverage will be taxed $2,000 per employee, except for the first 30 employees.
Obamacare also has reporting and compliance requirements that every employer has to adhere to. They apply to all businesses no matter the size. It’s important to adhere to these requirements so that you do not find yourself on the wrong side of the law as an employer.
And thanks to the favorable Obamacare, many employers in the United States are leaving the traditional group health insurance and switching to the more favorable individual health insurance reimbursement.
Pros and Cons of Obamacare
As we noted earlier, Obamacare has always elicited various views across the political divide. But because we always want to remain impartial on matters politics, we’ll just highlight the pros and cons of Obamacare as a social program.
Pros
Here are some of the pros.
More Americans Have Health Insurance
According to statistics, more than 16 million Americans obtained health insurance coverage within the first five years of Obamacare. These figures have certainly increased. Better still, young adults are enrolling for health insurance now than ever before.
Health Insurance is more Affordable
One of the main aims of Obamacare is to make health insurance affordable to every American and it’s already on the right course. This social program prevents health insurance companies from charging consumers unreasonable rates.
Again, health insurance companies are mandated to spend 80% of the premiums they collect on improving medical care for the policyholders. Even though health insurance coverage is never going to be free, making it affordable to Americans is a step in the right direction.
You can no longer be denied coverage based on gender or pre-existing conditions
In the past, people with pre-existing conditions such as cancer and diabetes were always denied coverage or had to pay over the roof to be covered. Again, women had to pay more premiums than men because of the complication that would arise during pregnancy or birth.
Fortunately, Obamacare outlawed such discrimination. Simply put, you can no longer be denied coverage based on a pre-existing condition or your gender.
More Screenings are Covered
Obamacare not only covers more preventive services but has included more screenings to ensure that consumers are healthier. The idea here is that health insurance companies must help their clients become proactive so that they avoid major health issues in the future.
No Limits on Care
In the past, certain chronic conditions would run out of coverage or had to be covered for a limited period. As such, health insurance companies unscrupulously set amount limits they would spend on a consumer with certain health problems.
Fortunately and thanks to Obamacare, insurance companies are banned from presetting a specific amount on the coverage they provide to the policyholders. It means that an insurance company can no longer abandon you when you’re still sick. They have to cater to your healthcare needs until you get back on your feet.
Prescription Drugs are no longer Costly
One of the promises made by Obamacare was to make prescription drugs more affordable to Americans. Well, Obamacare has certainly made prescription drugs more affordable, especially to senior citizens who are on fixed incomes and are not able to afford all their medications.
According to data from the Centers for Medicare and Medicaid Services, Medicare beneficiaries have saved more than $26.8 billion on prescription drugs thanks to Obamacare and these figures are rising every year.
Cons
Here are some of the cons.
Some people pay higher premiums
Obamacare has ensured that Americans have a wide range of options for health insurance coverage. However, some people may pay higher premiums than others. For example, you’re likely to pay much higher premiums if you have a higher income to help cover low-income individuals.
There are Penalties for not having Health Insurance
While the individual mandate clause was removed by the Trump Administration in 2017, some states still impose tax penalties on anyone who doesn’t have health insurance coverage.
You’re Limited by the Open Enrollment Period
You have a limited time to enroll in health insurance coverage during the open enrollment period, which is usually between 1st November and 15th December every year. Failure to enroll during this period may mean that you go the entire year without health insurance unless you have certain qualifying life events that may make you eligible for the Special Enrollment Period.
Taxes are Increasing
There are new taxes in place to help cover the costs of Obamacare. For example, taxes on pharmaceutical sales and medical devices have increased to help cover the costs of Obamacare. Individuals with higher income are also taxed more to help subsidize healthcare insurance for low-income individuals.
Some Employers are Cutting Down Employees
Some employers choose to cut down employees to avoid paying for their health insurance coverage. They also cut down on working hours so that they don’t have to pay health insurance coverage for their employees and also avoid paying fines for not offering health insurance coverage for their employees.
To this end, it’s vital to note that Obamacare is a divisive social program but a very important one. It can be a bit complex so it’s important to take your time if you want to navigate it meticulously. Do your research, shop around, and always go for the right insurance plan for your condition and budget.
