How Does Obamacare Work for Me?

Text reads: "how does Obamacare work for me? Expands medicaid; subsidizes prescriptions for those on medicare; children can now stay on their health care plans until age 26; healthcare costs are initially higher but are designed to lower over time; some low-income americans receive preventative care for the first time"

Image by Nusha Ashjaee © The Balance 2020

Former President Obama's health plan, The Affordable Care Act (ACA), works by mandating that everyone have health insurance or be penalized. Also known as "Obamacare", the ACA provides subsidies for middle-income families. Simply put, the ACA expanded Medicaid to more low-income people and helped small businesses offer health insurance.

The Tax Cut and Jobs Act of 2018 repealed the health insurance mandate, requiring that it not be enforced for the 2019 tax year.

How "Obamacare" Worked

The ACA was designed to pay for its subsidies by taxing some health care providers and high-income families. In addition, Medicare began paying doctors for quality-of-care rather than on a fee-for-service basis. As a result, the ACA didn't add to the national debt.

"Obamacare" was designed to both lower health care costs and provide better health care for American society as a whole. The health care system needed these reforms because it was becoming too expensive for consumers to receive care.

Much of the U.S. federal budget was being used to finance care for uninsured Americans. Initially, the ACA may have increased health care costs, but it was designed to reduce them over time. 

The ACA did this in two ways. First, it allowed parents to add children to their policies until age 26. The intent was to have younger healthy people paying premiums. This added revenue for insurance companies and passed money on to the health care system, which reduced prices for everyone else.

Second, Medicaid expansion allowed poorer people to receive treatment for their chronic illnesses instead of using the emergency room. Under the ACA, some low-income Americans received preventive care for the first time.

The ACA subsidized prescriptions for those on Medicare. Seniors would be more able to afford medications, reducing their number of emergency room visits. Given time, the ACA planned to reduce health care costs by increasing participation in the nation's health care system. 

How the Health Insurance Exchanges Work

Health insurance plans are sold on the health insurance exchanges. The enrollment period is November 1, 2018, through December 15, 2018, for coverage in 2019. You can always use the exchanges to compare health plans and find out if you qualify for tax credits or subsidies. You can also use them to see if you are eligible for expanded Medicaid, which you can get any time of the year.

Each exchange uses a four-step process:         

  1. Create an account. The platform asks you several personal questions to verify your identity.
  2. Provide your social security number and income information to see if you qualify for tax credits.
  3. Review plans in four categories. The categories are Bronze, Silver, Gold, and Platinum. Each category has different monthly premiums, deductibles, and copays. Premiums are your monthly payments, deductibles are the amount you have to pay for treatments before your insurance pays, and copays are your portion of a payment for treatment.
  4. Enroll in the plan. 

The federal government manages the exchanges in about half the states. The remaining states have either created their own exchanges or partnered with the federal government. The exchanges allow you to compare physicians, hospitals, and many other services.

How the ACA Affects You

Some people benefit from the ACA's advantages while others get hit with disadvantages. No insurer can turn you away because of health or age, and you'll be able to get financial help if you need it.

Your company's health plan is a valid plan under ACA guidelines. You still may want to comparison shop on the exchanges, because some companies might find it more cost-effective to pay the penalty, knowing their workers can get coverage on the exchanges.

Individual Plans and Catastrophic Insurance

You can purchase individual plans to meet ACA guidelines. Make sure you compare it to the plans on the exchanges to see if you can get better coverage at a lower price. You might also qualify to get subsidies if you buy a policy on the exchange.

Catastrophic insurance is only available in certain circumstances. You may want to shop for a full-coverage plan on the exchange. If you give up your catastrophic insurance you won't be able to get it back. All insurance purchased after January 1, 2014, must meet required minimum benefits to be valid under the ACA.

Medicare, Medicaid, and Other Plans

Military and Military Retiree Tricare, Medicare and Medicaid are all acceptable plans under the ACA. If you have Medicare Part D, the ACA helps pay for your prescription drugs if you fall into the "doughnut hole." The ACA is supposed to eliminate the doughnut hole by 2020.

If You Don't Have Insurance

You are not penalized for not having health insurance, as of 2019. If your income is between 100% and 400% of the federal poverty level (FPL), you qualify for tax credits that will reduce your monthly payments on a Marketplace plan. You may receive reduced copayments and deductibles.

Also, if your income is 138% or less of the federal poverty level, you qualify for Medicaid if your state agreed to expand coverage. If your state didn't offer expanded Medicaid, you wouldn't have to pay the tax.

It is acceptable to have coverage under the Consolidated Omnibus Budget Reconciliation Act. You may want to browse health care exchanges to see if you can get a better deal.

Some younger, healthier people may elect to not have coverage. If you are one of these, you might consider purchasing health insurance. You may not need it at the moment, but an injury can change that quickly. Keep in mind that the average emergency room visit is $1,265, while a broken leg can cost twice as much.

Cancer treatment can cost $30,000. The cost of chemotherapy alone is $7,000. Like homeowner’s or car insurance, health insurance is designed to protect your life savings. These are only a few reasons why health coverage is important.

Small Business Owners

If you have less than 25 employees, you may be eligible for a tax credit of 35% of the insurance you provide. HealthCare.gov can provide more details on the Small Business Health Care Tax Credit. If you have less than 50 employees, you can use the exchange to find the best coverage. 

If you have more than 50 employees, you'll have to provide affordable health insurance that provides minimum value. Otherwise, for all but the first 30 employees, you pay a tax of $2,000 per employee. If a worker finds a lower-cost plan on the exchange, you may be taxed. 

If you offer health insurance as a benefit to early retirees ages 55-64, you can get federal financial assistance. Here are more resources to help small businesses comply with Obamacare. 

Members of Congress and Staff

You must get health insurance through the exchanges. It replaces the government-provided health insurance provided before. The Federal Employees Health Benefits Program was replaced by the D.C. Health Link marketplace in 2013. Members still receive their employer contributions from the government, while enrolling through the exchanges.