Obamacare Basics You Need to Know
Find Out the ACA's Other Important Definitions
Obamacare is the Patient Protection and Affordable Care Act of 2010. It mandates health insurance for all. It expanded subsidies for middle- income families, and taxes healthcare providers and higher-income earners. Obamacare is the most comprehensive piece of legislation since the Social Security Act of 1935. It's named after President Barack Obama, who has championed healthcare reform since running for office in 2008.
To enforce the mandate, a 2.6 percent extra income tax is levied on those without insurance. Find out if you are exempt.
To pay for the subsidies, Obamacare increased some taxes. Those making $200,000 a year ($250,000 for married couples) pay higher income and investment taxes. Many businesses pay more taxes as well.
Obamacare enacted other changes to health insurance such as:
- Insurance companies can't exclude those with pre-existing conditions. They also can't drop anyone when they get sick.
- Parents can put their adult children, up to age 26, on their plans
- The Medicare "doughnut hole" gap in prescription drug coverage will be subsidized, then eliminated by 2020.
The goal of Obamacare is to lower health care costs overall. It includes healthier young people who will be paying premiums though not using the services. It allows people who use expensive hospital emergency room visits to get treated by a doctor before it becomes a crisis. These costs will rise as Trump weakens Obamacare. It would also rise under any of the Congressional plans to replace Obamacare.
In the beginning, the Act increased health care costs. It happened because many previously-undetected illnesses were diagnosed and treated during initial exams.
The downside is that Obamacare may have caused between 3 million to 5 million workers to lose their existing, company-sponsored health insurance. Many businesses found it more cost-effective to pay the penalty for letting their employees buy insurance on the exchanges. Others lost their individual plans because they didn't meet the requirements of the new law.
Other Obamacare Definitions You Need to Know
The Affordable Care Act is so complicated that it's created a lot of other terms. Here's a list of the most important ones and their definitions.
Health Insurance Exchange. These are online shopping sites that allow you to compare and buy health insurance plans. Some states run their own exchanges, though most allow their residents to use the one run by the federal government. Open enrollment ended January 31, 2017. Those who didn't purchase a plan by then can't get insurance through the exchanges. In other words, you must have coverage for at least nine months in 2017, or pay the tax.
Federal Poverty Level. This is the annual income that the federal government uses to determine who is living in poverty. The poverty level tends to increase each year to keep up with inflation. Obamacare expanded Medicaid to include those who make 138 percent or less of the poverty level. It provides tax credits for those whose make 400 percent or less.
Ten Essential Health Benefits. Under Obamacare, all insurance plans must provide services in each of the 10 essential categories. These include:
- Outpatient care
- Emergency room services
- Preventive care, wellness visits, and chronic disease management
- Maternity and newborn care
- Mental and behavioral health treatment
- Prescription drugs
- Services and devices to help people with injuries, disabilities, or chronic conditions
- Lab tests
- Pediatric care
Grandfathered In. This term applies to all health insurance plans that were in existence before March 23, 2010, when the Affordable Care Act was signed. These plans don't have to provide the 10 essential benefits, or comply with many of the other ACA regulations. They may offer both lower coverage and premiums than the plans on the exchanges.
Check to see when your plan was first offered. If you have a grandfathered-in plan, compare it carefully to plans on the exchanges. See if you can get a better deal. Once you let it go, you can't get it back.
For more on how to get a better deal with Obamacare, see my book "The Ultimate Obamacare Handbook."