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How Does Obamacare Work and What Does it Mean for You?

How does Obamacare work and what does it mean for you? Obamacare (a nickname for the law known as the Affordable Care Act) was designed to help more people get covered with major medical health insurance. This law is intended to make health insurance and health care more affordable for everyone, but also to make it available for those who are sick, older, or who were unable to get insurance on their own before the Obamacare law was implemented.

Obamacare works by requiring that most everyone has health insurance and pays into the health insurance risk pool so that health insurance companies can keep monthly premiums affordable.  Sick people and older people tend to need more medical care, and tend to cost more to insure. But sooner or later everyone gets sick. By bringing more people into the insurance market, Obamacare’s goal was to create a balance between healthy people and sick people to even out the overall costs of health insurance coverage.


How does Obamacare work for all Americans?

Before Obamacare was enacted, a person could be denied health insurance coverage due to pre-existing medical conditions such as diabetes, heart disease, cancer, pregnancy, migraines, and a whole host of other issues. The list of pre-existing conditions was so broad that huge numbers of Americans ran the risk of having their applications declined. In the days before Obamacare, these folks were often denied coverage outright, or in some cases they were approved but required to pay high health insurance rates.

How does Obamacare work for people with complicated medical histories?

Under Obamacare now, insurance companies cannot deny you coverage if you have pre-existing medical conditions. In fact, most people are required to have health insurance, or face a tax penalty on their federal returns. The tax penalty is Obamacare’s way of attempting to bring more healthy people into the market for health coverage.

To provide equal coverage for all, Obamacare works by requiring all major medical health plans include coverage for 10 essential benefits, including:

  • Preventive & wellness services & chronic disease management
  • Pediatric services, including oral & vision Care
  • Emergency services
  • Prescriptions drugs
  • Hospitalization
  • Ambulatory patient services
  • Laboratory services
  • Rehabilitative & habilitative services & devices
  • Maternity & newborn care
  • Mental Health & substance use disorder services

While the Obamacare law may bring more robust and better quality health insurance, it does increase the cost of having health coverage. It now costs more money to get more benefits. So how does Obamacare work to control costs? It attempts to control costs by making Obamacare subsidies (also known as premium tax credits) available to those who qualify (generally, those earning no more than 400% of the federal poverty level).

Under Obamacare, it’s recommended that you apply for subsidy each year, based on your family income, the plan you’re looking to buy, and your family size. If you qualify for subsidies, you could receive a significant discount on your monthly health insurance premium.

How does Obamacare work when shopping for a health plan?

The calendar year is now divided into two buying seasons:

1) The nationwide open enrollment period: Open enrollment is a time when everyone can shop for health insurance. It has run for three months of each year. The Obamacare open enrollment period for 2016 health insurance plans ran between November 1st, 2015 and January 31st, 2016. The open enrollment period for 2017 coverage is scheduled to begin on November 1, 2016.

2) The rest of the year: Outside of open enrollment, you may qualify for a special enrollment period if you experience a qualifying life event. Qualifying life events include things like:

  • Getting married or divorced
  • Having a child or adopting a child
  • Losing your employer-based health insurance coverage
  • Using up your COBRA health insurance coverage
  • Major changes to your income that may affect your eligibility for subsidies
  • Moving to a new coverage area where your old plan doesn’t work

If you have a qualifying life event, you want to be sure to enroll in a new Obamacare health plan within 60 days of your event. That’s how long most special enrollment periods last.

Moving into a new home or settling in with a new addition to the family may be a busy time, but remember that if you wait until the 61st day after your qualifying life event, you may not be able to shop for health insurance again until you experience another qualifying life event or until the next Obamacare open enrollment period starts.

How does Obamacare work for lower-income Americans?

In addition to making health insurance market accessible to most Americans, Obamacare also sought to expand the Medicaid programs in many states. Thanks to federal grants provided through Obamacare, some states simplified Medicaid enrollment guidelines, so that more people can be covered.

When you enter your income and family size information into the application for a subsidy you will find out if you qualify for the expanded Medicaid program or a subsidy. Medicaid programs are generally made available at a very low cost or at no cost to you. Note that some states have opted not to accept additional federal dollars for the expansion of Medicaid.

How does Obamacare work for low-to-middle income Americans?

Obamacare works to help qualifying Americans pay for their monthly premiums through government subsidies. Generally speaking, subsidies are available to you as long as you don’t earn more than 400% of the federal poverty level. Basically, that’s $47,000 for a single person or $97,000 for a family of four in 2016. Obamacare subsidies work to make your health insurance more affordable by reducing your monthly premiums.

If you receive subsidies, you need to understand that they are based on your estimated income for the year you are receiving coverage. They are not based on your prior year’s income. That means, if you earn more than expected over the course of the year, your eligibility for subsidies may change. It’s possible that you could be required to pay back a portion or all of the subsidy dollars you received if you got more subsidy dollars than you were finally eligible for, based on your taxable household income for the year.

How does Obamacare work for middle-to-upper income Americans?

While consumers who earn more money each year still enjoy many of the provisions of Obamacare, they may not qualify for subsidies. If you earn more than 400% of the federal poverty level, it’s likely that you will have to pay full price for your health insurance premiums. Keep in mind you are still required to have health insurance. If you choose to go without health insurance, you could face a tax penalty come tax time.

How does Obamacare work for young adults?

With Obamacare you can stay on your parent’s health insurance plan when you’re under 26 years old (as long as your parents agree). If that is not an option, and you are not claimed as a dependent on your parent’s taxes, then you can apply for coverage, and government subsidies, or Medicaid on your own. If you are under 30 years of age, you may be eligible for a lower-priced catastrophic plan. This is how Obamacare works to help you save money as a young adult.

How does Obamacare work for small businesses?

Contrary to popular misconceptions, small businesses with fewer than 50 full-time workers (or the equivalent in part-time workers) are not required to offer health insurance coverage to employees under Obamacare. However, when small businesses do offer health insurance, they may qualify for special tax breaks.

Small Business Health Options Program SHOP exchanges were created under Obamacare to provide small businesses with easy access to group health insurance plans and tax credits if they have fewer than 100 employees. This may give smaller businesses some of the same financial advantages that large businesses have.

In summary, how does Obamacare work for you?

  • Obamacare works for you by making sure you cannot be declined coverage based on your medical history.
  • Obamacare works by making sure that all health insurance plans provide coverage with 10 essential health benefits defined by the law.
  • Obamacare works to help qualifying Americans pay for their monthly premium payments through subsidies on a month-to-month basis.
  • Obamacare works by requiring most Americans to have health insurance or face a potential tax penalty.
  • The tax penalty is how Obamacare tries to motivate more people to get health insurance.
  • Obamacare works by allowing you to enroll in a new health plan and apply for government subsidies during the nationwide Obamacare open enrollment period or during a special enrollment period that is triggered when you experience a qualifying life event.