What is Obamacare (ACA)?
Passed by Congress in 2010, it is a federal statute that regulates health care. Obamacare is the “nickname” for the Affordable Care Act (ACA). Unfortunately, not many people know that ACA and Obamacare are the same thing. It began going into full effect in 2014. That is the year when people started having access to private health insurance plans purchased on government-run marketplaces (“exchanges”) and the year when all Americans were obligated to have health insurance or pay a tax penalty if not (“individual mandate”).
What are the main components of Obamacare?
- Obamacare is not a specific health insurance. It is simply a law that regulates all health care plans. There are many different types of insurances. The ACA is simply the system that regulates all of these plans. You can still buy private insurance, get insurance through your employer, or get insurance through a government program like Medicaid or Medicare.
- Exchanges: Obamacare added one other way in which people can purchase insurance. These are the state health insurance marketplaces. People and businesses can compare different plans in these marketplaces, as well as receive cost assistance. They are administered by a government agency or non-profit organization. This is basically where you go to shop for plans. There should be at least two different plans on each exchange. At least one plan has to cover abortions beyond those permitted by federal law.
- One of the main goals of the law was to expand access to health care coverage. Last year rate of uninsured was said to be 8.6% for all Americans. This number is at an all-time low. Before the ACA up to 47 million people were uninsured.
- Individual Mandate: U.S. citizens and legal residents are required to have insurance. If not, you have to pay a tax penalty. There are exemptions granted (for example, for financial hardship, religious objections, American Indians, those without insurance for less than three months, and other exceptions).
- Employer Mandate: Employers or businesses with 50 or more full-time employees are required to provide insurance to at least 95% of their employees (and dependents up to age 26) or pay a penalty. There are subsidies available to employers.
- Expansion of Public Programs: Medicaid is federal health care insurance for individuals and families who have limited resources. Medicare is for people who are 65 and older. Not everyone who can’t pay for health care qualifies for Medicaid. For example, before Obamacare, most states only granted Medicaid to pregnant women or parents (and not to individuals without children who could not afford health insurance). Obamacare tried to force states to expand Medicaid and cover more people –thus reducing the “Medicaid gap”– but the Supreme Court ruled in 2012 that forcing states to expand Medicaid was coercive and unconstitutional. Hence, the Medicaid expansion became optional. To date, 32 states have expanded Medicaid under the ACA, which means that more people with low income are eligible for Medicaid assistance.
- Cost-sharing Subsidies: These are subsidies for individuals and families who have limited income.
- Abortion Coverage: Federal dollars or subsidies cannot be used to purchase coverage for abortion if the abortion is not done to save the life of the woman or in cases of rape or incest. This is due to the Hyde amendment, a federal legislation that puts this requirement in place.
- Pre-existing Conditions: Obamacare eliminated discrimination against people with pre-existing conditions. This means that you cannot be denied coverage, or charged more, if you have a pre-existing condition. People can only be “rated” by insurance companies based on their age, premium rating area, family composition, and tobacco use.
- Dependents: Parents can have their children up to age 26 covered in their same insurance.
- Prevention Coverage: Established a national council to coordinate and expand funding for prevention coverage and allowed more preventive care to be covered by health care plans (including Medicaid and Medicare). This is very important, since we all save a lot of money and lives by treating an illness before it fully develops and becomes more serious.
What are the two most hated parts of Obamacare?
- Individual Mandate: Many complain that it is “un-American” to force people to buy health insurance, since this is a constraint on people’s freedom. The problem, however, is that some people don’t realize we will all need health insurance at one point or another in our lives. And if we want to have a health care system that works fairly, the individual mandate is probably necessary.Why? Because without the mandate, healthier and younger individuals will not buy insurance, thinking they don’t currently need it and that they can buy it in the future if they need to. That reasoning is mistaken, since you wouldn’t be able to buy healthcare in the middle of an accident or an emergency, for example. By taking healthy and young people out of the market pool, we end up with a market full of risky consumers (people who are older or have serious illnesses or conditions). This pool of concentrated risk is more expensive to insurance companies. Companies will have to raise costs to compensate for all the risk they are taking on. The result is that the prices go up so high that people will not be able to afford insurance at all. However, with the mandate, costs tend to go down considerably due to the decreased risk concentration.
- The name Obama in Obamacare: People who are not Obama enthusiasts hear his name and immediately associate the ACA with negative thoughts. This association might be done without any logical reasoning, but merely based on political biases. If you find yourself in this category, try the following exercise: Think of your favorite politician. Now imagine that politician is the one behind the ACA. Consider each of the provisions explained above and your experience before and after the enactment of the ACA. Does this change your perspective at all?
What’s up with the new bill?
“Trumpcare,” or the American Health Care Act (AHCA), is a bill that came out this week aiming to repeal Obamacare and replace it with Trumpcare. Most of the changes to the ACA are financial and this bill is still not finalized. Changes will most definitely be made in the near future.
What are some of the big Trumpcare modifications?
- The bill significantly reduces federal funding for illness prevention and prevention coverage. The Prevention and Public Health Fund created by the ACA (see point #11 on Obamacare above) will have huge budget cuts.
- The individual mandate (see point #4 on Obamacare above) tax penalty is eliminated. Hence, individuals who do not have health insurance will not have to pay a tax penalty BUT they technically do have to pay a penalty. In other words, if you stop buying coverage and then decide to buy it again, you will have to pay a penalty for the time you were not covered. This penalty will discourage healthy people from getting health care (because they don’t want to pay the penalty). This would concentrate more risk in the pool of insured people, thus raising health care costs.
- Starting in 2020, subsidies will be given (or “refundable tax credits”) to people based on their age and not their income. This provision is extremely problematic, since people need governmental assistance depending on their income and not their age. There are many older people who can easily purchase insurance and many younger ones who cannot. Governmental assistance should be based on who can or cannot pay, regardless of their age.
- Like with the ACA, insurance companies cannot deny coverage to people with pre-existing conditions. HOWEVER, they could potentially raise the costs for people with pre-existing conditions, making it impossible for many to afford.
- It freezes the Medicaid expansion (see point #6 on Obamacare above). States can expand Medicaid until 2020. A federal match funding program that helps state provide medical assistance for in-home services would be eliminated.
- It reduces the number of people eligible for Medicaid. There are new guidelines established so that states remove from Medicaid assistance people who have some income (but still can’t probably afford healthcare) and people who have won the lottery (yes, the lottery).
- It expands ratios of what people can be charged. The effect of this is that older people can be charged more (especially those who have not yet reached the Medicare eligible age).
- It repeals the ACA’s 10% sales tax on tanning beds.
- It repeals the ACA tax on health insurers profits.
- There is no financial penalty for employers who do not comply with the employer mandate (see point #5 on Obamacare above). So, basically, employers won’t be forced to cover their employees.
- It repeals the ACA 2.3% sales tax on medical devices.
- It defunds Planned Parenthood.
This bill will continue to be changed, as it’s unlikely that it will pass in Congress as it currently stands. Some more conservative Republicans have said they oppose it because it’s basically another version of Obamacare and some more liberal Republicans have said they oppose it because it will not cover enough people (particularly current Medicaid enrollees). This new bill doesn’t expand coverage and will hurt women, older and poor people the most. Middle-class workers taxes will also increase (by allowing the value of employer insurance to be taxable income).