What is Obamacare?
What is Obamacare? “Obamacare” is the unofficial name of the health reform law known as the Affordable Care Act, or ACA. In fact, the full name of the law is The Patient Protection and Affordable Care Act. It was signed into law by President Obama on March 23, 2010.
The name “Obamacare” was initially coined by detractors of the law but it has been widely adopted (President Obama has even used it himself) and is now used by Americans of various political stripes. It is no longer considered to carry any negative connotations.
What is Obamacare All About?
The Affordable Care Act has a reputation as a very complex law. But if you want to understand what Obamacare is all about for consumers, there are five basic ideas you may want to understand. In a nutshell, the Obamacare law was designed to ensure that:
- Everyone should have access to health insurance
- Health insurance should be more affordable
- Health insurance benefits should be improved
- There are defined enrollment periods
- There are penalties for going uninsured
Understanding each of these ideas will take you a long way toward answering the question, What is Obamacare? Let’s look at them in more detail:
What is Obamacare? The idea that everyone should have access to health insurance.
Under Obamacare, most people need to have health insurance or face possible tax penalties. If you don’t already have “minimum essential coverage” through an employer-based health insurance plan or through a government program like Medicare, Medicaid, or military benefits, Obamacare generally obliges you to purchase health insurance for yourself or your family on your own.
Prior to the implementation of Obamacare, a significant percentage of the American population was without health insurance. In 2010 when Obamacare became law it was estimated that about 50 million Americans were uninsured*. Since then more than 11 million Americans have signed up for Obamacare coverage**.
One of the things that put health insurance out of reach for many Americans prior to the implementation of Obamacare was the fact that it was possible to have your health insurance application declined due to pre-existing medical conditions. In other words, if you were asthmatic or diabetic or had some other medical diagnosis, it was possible for the health insurance companies to turn you down because you were too much of a risk. Obamacare changed that by making it impossible for insurance companies to decline you based on pre-existing medical conditions.
Under Obamacare, most mid-sized and larger companies are required to offer health insurance to their employees. Smaller businesses that employ fewer than fifty full-time workers (or the equivalent in part-time workers) are not obliged to offer health insurance under Obamacare. Nonetheless, special tax breaks may be available to small businesses that do offer coverage.
Another way that Obamacare makes coverage available to more Americans is by expanding the reach and scope of Medicaid. Under Obamacare, states were offered additional federal money to help them get more poor Americans enrolled in Medicaid. Some states opted not to accept these additional federal dollars. As such, Obamacare’s expansion of Medicaid coverage is not available to consumers in every state.
What is Obamacare? The idea that health insurance should be more affordable.
The primary way that Obamacare seeks to make health insurance more affordable is by offering subsidies to qualifying American consumers. To really understand the details here and how they may apply to you, you may need a math degree, but here’s a brief summary.
If you purchase health insurance on your own and you earn less than 400% of the federal poverty level (that is, up to about $47,000 per year for a single person or $97,000 for a family of four in 2016), you may qualify for government subsidies, also known as premium tax credits. The dollar value of your subsidies may vary based on exactly how much you earn and on the plan you’ve selected to enroll in, but at the most your subsidy will prevent you from spending any more than about 9% of your taxable income on monthly health insurance premiums.
Most people who receive subsidies have them applied on a month-to-month basis, to keep their premiums as low as possible – though it’s also possible to have your subsidies applied when you complete your federal tax return. Subsidies are based on your estimated income for the current year, which means that if you earn more than expected you may be required to pay back some or all of the subsidy dollars you received.
For people earning less than 250% of the federal poverty level, additional subsidies are available that may limit your out-of-pocket costs – that is, expenses for the deductible, copayments, or coinsurance you may be subject to under your health plan.
What is Obamacare? The idea that health benefits should be improved.
Prior to the implementation of the Affordable Care Act, there was a lot of variation in the benefits offered by different health insurance plans. Obamacare sought to standardize and improve the benefits offered by individual and family health insurance.
Obamacare says that all major medical health insurance plans must provide coverage for “10 essential health benefits.” These include the following:
- Outpatient care: This is the sort of medical care you receive at the doctor’s office or clinic, without being admitted to the hospital.
- Inpatient care: Medical care provided in a hospital setting after you’ve been admitted for an illness or injury.
- Emergency room care: Health plans must provide coverage for unexpected visits to the ER for medical emergencies.
- Preventive care: This includes checkups, plus certain health screenings and immunizations. Many kinds of preventive care are covered at no out-of-pocket cost to you under Obamacare.
- Maternity care: Medical care for pregnant women prior to and after a baby is born.
- Pediatric care: That is, any standard medical care rendered to infants and children.
- Mental health and substance abuse care: This includes counseling and behavioral therapy.
- Prescription drugs: All major medical plans are required to offer coverage for Rx, though your out-of-pocket costs may vary from one plan to another.
- Laboratory tests. Lab tests and services ordered by a doctor must be covered, though your out-of-pocket costs may vary.
- Rehabilitative services: This may include such things as physical or occupational therapy, among other things.
What is Obamacare? The idea of defined health insurance enrollment periods.
If you’ve ever had health insurance through an employer, you’re probably familiar with open enrollment season. That’s when you get a chance to change your health insurance selections for the coming year. The Obamacare law brought something like this to the self-purchased individual and family health insurance market as well.
Under Obamacare, there are two kinds of enrollment periods:
- A nationwide open enrollment period
- Special enrollment periods
The nationwide open enrollment period for Obamacare health insurance plans usually occurs in the late fall and runs through the first month or so of the new year. This is the once-per-year opportunity when any eligible consumer can apply for government subsidies and enroll in an individual or family health insurance plan for the year. It’s a good idea to review your coverage options every open enrollment period, to make sure you’re still getting the right coverage for your personal needs and budget.
If you miss the annual open enrollment period, you may be stuck with your current health insurance plan – or uninsured – until the next open enrollment period, or until you get employer-based coverage or experience a qualifying life event making you eligible for a special enrollment period.
Special enrollment periods are based on events in your life. If you have what is known as a “qualifying life event” you may trigger a personal special enrollment period of sixty days. During your special enrollment period you may apply for subsidies and enroll in an Obamacare health insurance plan of your choice. Qualifying life events include such things as:
- Marriage or divorce
- The birth or adoption of a child
- Moving to a new coverage area
- The loss of employer-based health insurance
- Major changes to your income
What is Obamacare? The idea of tax penalties for going uninsured.
The overall goal of Obamacare is to get more people insured. Obamacare encourages more people to get health insurance by providing subsidies to make it more affordable, but it also discourages people from going without health insurance by putting them at risk of possible tax penalties when they go uninsured.
If you earn enough money to file a federal tax return and you do not have “minimum essential coverage” under the law, you may be subject to a penalty. What that means is that people who are not enrolled in coverage of their own, or through employers, or through a government program like Medicare or Medicaid, may be subject to a penalty on taxes.
The penalty takes effect on your federal tax return. Tax penalties under Obamacare have increased each year since 2014. For 2016, the Obamacare tax penalty (known as a “shared responsibility payment” on your tax form) is the greater of either:
- 5% of your taxable household income, or
- $695 per adult and $347.50 per child
What is Obamacare? Now you know
We hope this article helps you feel more confident in your understanding of the basics of Obamacare. Needless to say, there’s a lot more to learn. And while the Obamacare law has survived several legal challenges to date, a change in the political leadership of the United States could result in additional changes to Obamacare.
* Source: http://khn.org/morning-breakout/census-numbers-2/
** Source: https://www.washingtonpost.com/news/to-your-health/wp/2016/01/07/more-than-11-3-million-americans-signed-up-for-obamacare-report-says/