There’s a lot of hype going around about ObamaCare, and by now you are probably getting mixed information about what the law actually is and how it will affect you. The purpose of this post is to lay out the basic facts in plain English so you know exactly what to expect as this reform takes effect over the next few years. However, before we get started, allow me to clarify a few very important things about the Patient Protection and Affordable Care Act, otherwise known as “ObamaCare.”
- ObamaCare will not use your tax dollars to fund abortions
- ObamaCare is not and will not lead to a government takeover of health care
- ObamaCare will not increase the national debt or deficit
- ObamaCare does not hurt health insurance companies, but actually increases their business
- ObamaCare is not unconstitutional
- ObamaCare is not socialism
ObamaCare is NOT Government-Run Health Care
This is the biggest, and perhaps most dangerous, misconception about ObamaCare, and I want to debunk this myth from the very beginning. Despite what many Republicans and Tea Party members are claiming, ObamaCare is not government-run health care. The politicians and pundits who are misrepresenting it in this fashion are acting irresponsibly and are purposefully misleading the American public. Government-run health care would involve a health insurance program that is entirely implemented and managed by the government: i.e., Medicare and Medicaid. ObamaCare is actually designed to promote a competitive free market for private insurers to offer their services to the American people, so one could actually argue that this is a highly capitalist endeavor. If ObamaCare fell under the title of government-run health care, then all of us would be getting Medicaid and there would be no option for anything else. That is not what ObamaCare does. Instead, the Patient Protection and Affordable Care Act is a federal mandate (meaning a federal law) that requires all Americans to have health coverage by 2014. Just like you are required to have car insurance to drive, you must now have health insurance to live and work in the United States. Before you get upset or frustrated by this new expense, let me explain how ObamaCare makes this a much more attainable reality for everyone while increasing the quality of available health care and saving billions of dollars in the process.
How Will ObamaCare Affect my Insurance Costs and Available Coverage?
Prior to ObamaCare, your health insurance premiums (the price a company charges you for coverage) were determined by several factors, including age, health, and geographical location. Furthermore, insurance companies could deny anyone coverage due to health status, genetic information, pre-existing conditions, evidence of domestic violence, and essentially any other reason they saw fit. If they believed you would cost them too much money, they would either charge you an outrageous premium or deny you coverage and send you on your way. With ObamaCare, new regulations prohibit such actions. As of September 23, 2010, insurance companies are no longer allowed to deny coverage to children under the age of 19 who have a pre-existing condition. Additionally, insurance companies can no longer place a cap on a child’s lifetime coverage. Prior to ObamaCare, many children who were born with life-threatening illnesses used up their lifetime coverage before the age of ten. Thanks to ObamaCare, insurance companies can no longer end coverage for these children or anyone else by implementing a lifetime cap. Beginning January 1, 2014, these same protections will be extended to all Americans above the age of 19.
Under ObamaCare, premiums will be determined solely by family structure, geographical location, tobacco use, participation in a health promotion program, age (by not more than three to one), and actuarial value. Actuarial value is the percentage of medical expenses covered by the insurance plan. For example, if the actuarial value is 80%, your insurance plan would pay for 80% of your medical costs while you would be responsible for 20%. The higher your actuarial value, the higher your premium. However, you will no longer be charged a higher premium due to your current state of health or pre-existing conditions. Your insurance company can still deny you coverage of a particular treatment, but only if that specific treatment is not offered to anybody enrolled in the plan. For example, if your policy does not cover a specific prescription drug, you will be required to pay out-of-pocket for the medication or seek a different prescription from your doctor. This stipulation cannot single out individual members, and must apply to everyone or no one.
What if I Already Have Health Insurance?
If you already have an insurance plan that you are happy with, then most likely, nothing will change for you. Despite the myths and rumors that might have you worried, you will not be forced to switch or buy a new plan. The Patient Protection and Affordable Care Act was designed to make quality health care affordable and available to everyone, and this simply means that all Americans will now have the ability to purchase health insurance rather than just those who can afford it. However, many of the new policies under the law will apply differently to health plans that existed prior to ObamaCare’s implementation. In other words, these “grandfathered plans” are not required to follow some of the new policies as long as they meet certain requirements. Congress designed the law in this way so that individuals who are satisfied with their current health care plan can keep the coverage they currently have. As it says in the White House Blog, “The bottom line is that under the Affordable Care Act, if you like your doctor and plan, you can keep them. But if you aren’t satisfied with your insurance options today, the Affordable Care Act provides for better, more affordable health care choices through new consumer protections.”
Can I Still Choose My Own Doctor?
Yes. In fact, the new protections under ObamaCare will make it so that you will have access to more doctors and better doctors. If you are enrolled in a health plan that requires you to designate a specific primary care provider, the new law guarantees your right to choose that doctor yourself. The only stipulation is that the doctor must be enrolled in your plan’s provider network and must be accepting new patients at the time. Not all health plans require you to designate a doctor. In those cases, you will be able to visit any doctor who is enrolled in your plan’s provider network.
Will I Still Get Quality Care From Medical Professionals?
Absolutely. In fact, the new law gives doctors more power to make decisions about your treatment than ever before. In the past, doctors were hesitant to utilize certain treatments for fear that insurance companies would target individuals with certain medical conditions and raise their premiums. Under the new law, health insurance companies can no longer discriminate against individuals due to health status or pre-existing conditions, giving doctors the freedom to utilize whatever treatments they see fit.
One of the most important outcomes of the mandate is that hospitals and medical professionals will be better compensated for their services. Hospitals accrue up to $49 billion in unpaid hospital bills from uninsured patients each year. Because they are legally required to treat all patients, hospitals are forced to provide care even when the patient is uninsured and cannot pay their bill. This causes hospitals to increase the costs of their services in order to make up for the money they lose treating uninsured patients. While some of these costs will never be compensated, the federal, state, and local governments currently cover the remainder of these unpaid bills in the form of disproportionate share hospital (DSH) payments. More specifically, the government pays hospitals around $40 billion per year to cover the care provided to uninsured patients who couldn’t or didn’t pay their bill. Because all Americans will be required to have health coverage under ObamaCare, hospitals will be compensated for their care and will no longer need to increase the costs of their services to offset lost income. This will also save the state and federal governments billions of dollars in DSH payments each year.
How Do I Get Coverage, and What if I Can’t Afford It?
First of all, companies with more than 200 employees will be required to automatically enroll new full-time workers in a health plan; however, employees are free to opt out and purchase their own private insurance if they are not satisfied with their employer’s plan. Companies with 50 or more full-time employees will be required to provide them with health coverage or will pay a tax penalty for each employee. Once again, employees are free to opt out if they would like to purchase a better plan than what their employer offers, but they must offer you something, otherwise they will face a penalty of at least $2,000 per employee.
Small businesses with fewer than 25 employees who choose to provide coverage for their workers will be eligible for a tax credit of up to 50% of the employer’s contribution towards employee health premiums after 2014 (the credit is 35% up until 2014 and will increase thereafter). This is because they are not required to provide health coverage under ObamaCare since they have fewer than 50 employees. In other words, the government will reward them for stepping up and providing coverage anyway. See the chart below for more details on employer requirements or move ahead to learn more about private coverage.
Health care exchanges will be set up at either the state or federal level depending on the decisions of each individual state. What this means is that people will be able to go online to these exchanges and shop for a health plan that meets their personal and financial needs. Think of it like Amazon.com for health insurance. Some states have decided to run their own exchanges while others have passed on the responsibility to the federal government. Other states have decided to set up a hybrid exchange that is run by both the state and the federal governments. See the map below to find out how your state has decided to handle their exchange.
People who have income between 100-133% of the federal poverty level will either be exempt from the mandate, or will be automatically enrolled in their state’s Medicaid program. States are allowed to opt out of the Medicaid expansion, and some have already elected to do so. This means that people with incomes at 133% of the federal poverty level or lower will be exempt from the ObamaCare mandate if their state has opted out. They are still free to purchase private health insurance through the exchanges, but they are not legally required to do so. Individuals and families with incomes between 133-400% of the federal poverty level will be eligible for premium and cost-sharing credits that will help pay for their health plans in order to avoid imposing an unfair financial burden on the person or family. These credits will be applied to your federal income tax return each year.
What if I Choose Not to Get Coverage?
If your income is greater than 133% of the federal poverty level and you do not have health coverage (through work, Medicaid, or private insurance) by 2014, you will be charged a penalty tax each year that you are not insured. This penalty tax will be phased in from 2014 to 2016, and will work as follows: you will either pay a flat fee or a percentage of your taxable income, whichever is larger. For children under the age of 18, the penalty will be one-half the amount for adults.
Won’t This Cost the Government A Lot of Money?
Yes, ObamaCare will cost the government a lot of money, but it will end up saving the government far more money than it will actually spend by implementing the mandate (although Republicans will argue against this until they are blue in the face). In fact, Obamacare will save $200 billion in Medicare expenses by 2016 and $208 billion for Medicare patients by 2020. ObamaCare is designed so that the money the federal government invests in the mandate is offset by savings in other areas. For example, as mentioned above, ObamaCare will save the federal government billions of dollars in DHS payments to hospitals each year since they will no longer have to foot the bill for uninsured patients who can’t afford to pay.
While this article covers the basics of ObamaCare, there is far more information available at www.healthcare.gov. I hope this provided you with enough to help you better understand the mandate and how it will affect you as it goes into play over the next few years. Look for more posts in the coming weeks regarding changes to Medicare, costs to businesses, and political arguments regarding this legislation.