What Is Obamacare? The ACA and What You Need to Know

Happy female doctor and nurse discussing with male patient in clinic
Obamacare allows millions to get health insurance and get treated for their pre-existing conditions. Photo:Hero Images/Getty Images

Obamacare is the Patient Protection and Affordable Care Act of 2010. Most people think it only affects insurance, but it has already changed the way healthcare is being delivered. Find out more in Obamacare Facts: 9 ACA Facts That You Don't Know.

The most important part of this Act requires you to have health insurance for at least nine months out of every twelve or be subject to a tax. The tax is 2.5 percent of your income unless certain conditions apply.

This mandate and the tax will be eliminated if Trump repeals and replaces Obamacare. Find out if you are exempt from Obamacare

The name was created by critics of President Obama's efforts to reform healthcare, but it stuck. Even the President likes it because he says it shows he does care.  

How It Affects You

The health insurance exchanges are open for enrollment until January 31, 2017. If you miss the window, you still use the exchanges to buy interim private insurance or apply for Medicaid. You can also use them to compare plans for the future. Some exchanges are run by states, and some by the Federal government. Keep in mind to compare, not just your monthly premium, but your anticipated overall healthcare costs. That includes the annual deductible, percentage covered, and copayments. See When Does Obamacare Start?

If you already have insurance, you can keep it IF: 

  1. It was in existence before March 23, 2010. In that case, it's been grandfathered in.
  1. Your employer keeps its plans. However, many companies are using this opportunity to drop covers, or change how they provide it.
  2. Your insurance company keeps your plan. Many have canceled plans that don't meet the minimum requirements, as detailed in the first section below. 

Here's more on what Obamacare is, customized to your personal situation:

If You Already Have Insurance - All insurance plans must provide services in 10 essential health benefits categories. Also, those with pre-existing conditions can no longer be excluded (children in 2010, adults in 2014). Health insurance companies can no longer drop those who get sick. Parents can put their children, up to age 26, on their plans. However, if your plan began before March 23, 2010, then it might be "grandfathered in," and not have to provide all these benefits. Therefore, even if you have insurance, it will be worth your time to review it and compare it to those on the exchanges.

If you have Medicare, the "donut hole" gap in coverage will be eliminated by 2020.

If You Can't Afford Insurance - Medicaid was extended to those who earn up to 138 percent of the Federal poverty level. However, not all states have elected to expand Medicaid, even though the Federal government will subsidize it. If you live in a state where you are eligible for Medicaid, but the state won't give you coverage, you won't have to pay the tax if you can't get insurance. The poverty level usually increases each year to keep up with inflation. Those who earn too much for Medicaid will receive tax credits if their income is below 400 percent of the poverty level.

The credit is applied monthly, rather than as an annual tax rebate. There are also reduced copayments and deductibles. To find the most recent income brackets, see How Much Will Obamacare Cost Me?  Find out How to Get Obamacare.

If You Don't Get Insurance

The exchanges are open until January 30, 2017. (Find out about special circumstances here.) You must have coverage for at least nine months out of twelve to avoid the tax. You can still get sign up for private insurance or Medicaid, and you can use the exchanges to begin researching plans for next year. 

The Supreme Court ruling allows the IRS to tax you 2.5 percent of your income.

There are minimums and maximums that apply, so make sure you read Obamacare Taxes.

If You Make More Than $200,000 a Year - Taxes increased in 2013 for individuals making more than $200,000 a year ($250,000 for married couples), some healthcare providers, and other health-related businesses. For more, see Obamacare Taxes.

If You're a Business Owner - The mandate to provide health insurance for your employees was postponed to January 1, 2016, if you have 50-99 employees. That may be good news for you because many of your employees may have already found insurance on the exchanges by then, lowering your costs. If you have 100 or more employees, you must provide insurance to at least 70 percent of full-time employees by 2015 or pay a fine. That increased to 95 percent of your employees in 2016. For more, see Treasury Press Release.

If you have 50 or fewer employees, you are eligible to look for better employee coverage on the SHOP exchange. For more about how the Act affects you, depending on which group you're in, see How Will Obamacare Affect Me? 

Obamacare In-Depth

For more on Obamacare, see my book The Ultimate Obamacare Handbook (2015 - 2016).