Obamacare and the Affordable Care Act Explained
Obamacare is the Patient Protection and Affordable Care Act (ACA). Most people think it only affects health insurance, but it has changed the way the U.S. delivers health care overall. The term "Obamacare" first was coined by critics of the former president's efforts to reform health care, but the name stuck.
The ACA's primary goal was to slow the rising cost of health care by taking steps to make health insurance more available and more affordable to those who need it the most. The act also required everyone to carry health insurance or pay a tax penalty.
What Is Obamacare?
Obamacare is an alternative term for the Patient Protection and Affordable Care Act of 2010. It makes health care more affordable for everyone by lowering costs for those who can't afford them.
Before the ACA, insurance companies could exclude people with preexisting conditions. As a result, the people with the greatest health expenses sometimes had to go without insurance or settle for a policy that did not cover a preexisting condition. Because they couldn't afford regular doctor visits, they often ended up in hospital emergency rooms and unable to contribute to the expense of their treatments.
The accessibility of Obamacare allows people with preexisting conditions to afford preventive care, reducing hospital visits, and slowing the rise of health care costs.
The ACA also aims to make health insurance more affordable for those with the lowest incomes by subsidizing the cost. Medicaid was extended to those who earn up to 138% of the federal poverty level. But, as of 2020, 14 states have elected to not expand Medicaid, limiting accessibility for their residents. Mostly in the South, the states are:
- North Carolina
- South Carolina
- South Dakota
The poverty level usually increases each year to keep up with inflation. Those who earn too much for Medicaid receive tax credits if their income is less than 400% of the poverty level. The credit is applied monthly, rather than as an annual tax rebate. They also pay reduced co-payments and deductibles.
How the Obamacare Mandate and Tax Penalty Worked
To make sure insurance companies could afford to add patients with preexisting conditions, the ACA initially required everyone to have health insurance for at least nine months out of every 12, or be subject to a tax.
In December 2017, Congress repealed the penalty, effective in 2019, with the Tax Cuts and Jobs Act. Even before that happened, many groups had successfully petitioned Congress so they could be exempt from Obamacare.
By removing the mandate, Congress effectively required insurance companies to take patients with preexisting conditions while potentially removing healthier patients, thus increasing costs for the insurance companies. Since the subsidies remain in place, it also made sure the government would pick up a percentage of the rising costs.
Obamacare Taxes Still in Effect
Even though the mandate no longer applies, there are still some taxes related to Obamacare:
- If you make more than $200,000 a year: Taxes increased in 2013 for individuals making more than $200,000 a year or $250,000 for married couples, some health care providers, and other health-related businesses.
- If you're a business owner: If you have 50 or more employees, you must provide insurance to at least 95% of full-time employees or pay a fine.
How Obamacare Impacts You
Even though Congress cut off one of the legs supporting the ACA, you still can take advantage of the parts that work.
Health Insurance Exchanges
The health insurance exchanges are open for enrollment between Nov. 1 and Dec. 15 each year. If you miss the window, you still can use the exchanges to buy interim private insurance or apply for Medicaid. You also can use them to compare plans for the future.
Some exchanges are run by states and some by the federal government. It is important to compare all costs, including monthly premiums, annual deductibles, percentages covered, and copayments.
Obamacare Essential Services
Under the ACA, insurance plans must allow parents to include their children on their plans up to age 26 and provide 10 essential services:
- Preventive and wellness visits, including chronic disease management
- Maternity and newborn care
- Mental and behavioral health treatment
- Services and devices to help people with injuries, disabilities, or chronic conditions
- Lab tests
- Pediatric care
- Prescription drugs
- Outpatient care
- Emergency room services
The Bottom Line
Obamacare was promulgated to provide medical insurance coverage to many uninsured Americans. It included those previously not eligible for coverage, especially persons with preexisting conditions. It also mandated that insurance companies include 10 essential benefits.
The ACA’s primary goal was to mitigate the rising cost of health care. It allowed people to afford reasonable preventive care rather than wait for expensive emergency services to befall them. It also sought to help low-income earners by expanding Medicaid eligibility.
Although Congress made major changes to Obamacare, the ACA still remains strongly in place. President Trump could still repeal it, though he has not yet presented a viable health care replacement.
U.S. Centers for Medicare & Medicaid Services. "At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans." Accessed June 17, 2020.
U.S. Centers for Medicare & Medicaid Services. "Medicaid Expansion & What It Means for You." Accessed June 17, 2020.
Kaiser Family Foundation. "Status of State Medicaid Expansion Decisions: Interactive Map." Accessed June 17, 2020.
U.S. Centers for Medicare & Medicaid Services. "No Health Insurance? See If You'll Owe a Fee." Accessed June 1, 2020.
IRS. "Individual Shared Responsibility Provision." Accessed June 17, 2020.
IRS. "Affordable Care Act Tax Provisions: Additional Medicare Tax." Accessed June 17, 2020.
IRS. "Employer Shared Responsibility Provisions." Accessed June 17, 2020.
U.S. Centers for Medicare & Medicaid Services. "When Can I Enroll In a 2020 Marketplace Plan?" Accessed June 17, 2020.
U.S. Centers for Medicare & Medicaid Services. "How to Get or Stay on a Parent’s Plan." Accessed June 17, 2020.
U.S. Centers for Medicare & Medicaid Services. "What Marketplace Health Insurance Plans Cover." Accessed June 17.