Obamacare Explained

OK, so the Affordable Care Act, or Obamacare, has been officially ruled constitutional, and the coming election may well hinge on whether Americans welcome the law, or are afraid of its consequences, which is exactly how our democracy should work—IF people actually understand the legislation.  One thing that Obama and the Democrats have not done well, is explain in plain terms how the law works, what’s in it, and what effects it will have on the U.S. healthcare system.  Thus, Chuckingrocks will attempt to do just that—explain and define how the law will effect you and those around you, in as simple and straightforward a way as possible.  Here it goes…

1) How does this all get paid for?  Are my taxes going up? The short answer is, almost certainly, no.  Here are the major provisions that help pay for this legislation:

A) One of the biggest changes is that there will be a 40% excise tax on insurance companies for health insurance plans that cost more than $8,500 for single coverage, and $23,000 for family coverage, after either threshold has been met.  This is meant to keep rates down.  Bottom line: individual Americans will not pay this tax, and it will reduce the cost of providing health care for employers.

B) Fees—annual flat fees are assessed to the following industries by a percentage of their market share: $2.3 billion on the pharmaceutical industry, $2 billion on the medical device manufacturing industry, and $6.7 billion on health insurance providers.  This may seem like a lot of money, until you consider that the pharmaceutical industry, for example, has revenues in excess of at least half a trillion dollars per year.  There are exceptions for smaller businesses within these industries.

C) Reform of Medicare Part D: when Republicans talk about how Obamacare cuts $500 billion dollars from Medicare, this is what they’re talking about.  Basically, this eliminates a huge government giveaway ($500 billion) to the pharmaceutical industry, and it WILL NOT impact Medicare delivery for seniors—it simply means that taxpayers won’t be on the hook for subsidizing the pharmaceutical industry.

D) Five percent excise tax on elective cosmetic surgery.  A boob job costs 5% more than it used to—I’m sure one of the Real Housewives will bitch about it soon.

E) Insurance companies can only deduct $500,000 of executive pay from their taxes.  Perhaps this is because health insurance companies often overpay their executives, like in 2010 when United Health Care paid their CEO $102 million in overall compensation.

2) THE MANDATE: So this is also a tiny part of how the ACA is paid for, but we’ll talk about it specifically since there has been so much controversy about it.  Let’s just clarify that if you ARE COVERED by your employer, Medicaid, Medicare, or some other form of minimum health insurance, you won’t pay any penalty at all.  Thus, the vast majority of Americans won’t be subject to this tax penalty.  If you ARE NOT COVERED, you will pay a penalty on your taxes of $95 in 2014, $350 in 2015, and $750 in 2016 (it is indexed after that point if you want to look it up).  Note that exceptions to this tax include: “religious objectors, those who cannot afford coverage, taxpayers with incomes less than 100 percent FPL (poverty line), Indian tribe members, those who receive a hardship waiver, individuals not lawfully present, incarcerated individuals, and those not covered for less than three months.”  However, instead of having to pay that tax penalty, you could get a huge tax break to buy insurance by participating in a…

3) Health Benefit Exchange: States will set up exchanges that force health insurance companies to offer coverage stating benefits and prices—essentially, forcing there to be a free market for health insurance.  In addition, tax credits will be available for anyone making up to about $90,000 a year.  The maximum amount anyone would have to pay for health insurance premiums is 9.8% of their income, and those right at the poverty line only have to pay 2%.  Also, “out of pocket maximums ($5,950 for individuals and $11,900 for families) are reduced to one third for those with income between 100-200 percent FPL, one half for those with incomes between 200-300 percent FPL, and two thirds for those with income between 300-400 percent FPL.”  Bottom line: the government is making it very affordable for anyone at any income level to buy health insurance, and anyone that does not receive coverage through their employer is eligible to take advantage of the exchange, including early retirees who do not yet qualify for Medicare.  Note: undocumented immigrants are not eligible to take part in the exchange.

4) Expansion of coverage through public programs and employers: so, starting in 2014, Medicaid, the free, public insurance program for people technically living in poverty, will be expanded to include anyone living at 133% of the poverty line or lower (the current federal poverty line is defined at $22,000 a year).  CHIP (the Children’s Health Insurance Program) is also expanded, so starting in 2014, all children in the U.S. will have health insurance.  In addition to this expansion, small employers (under 25 employees) will get tax credits (currently 35%, growing to 50% of premiums in 2014) to cover their employees, AND they will also have access to the state health care exchanges, enabling them to pay insurance rates similar to those enjoyed by larger companies.

5) Other provisions of the bill: There are many other small detailed and specific grants, programs, and changes that will occur based on this legislation.  Many of these are designed to contain costs, or to encourage new, less-expensive forms of health care delivery and innovation.  The crux of these programs is to focus on expanding primary care and prevention, by encouraging and rewarding doctors, physician’s assistants, and nurses who work in this capacity.

There are other provisions within the bill to lower the cost of providing insurance; for example, co-ops can be set up by groups of citizens and are eligible to receive federal loans to get started.  Finally, in 2010 when the ACA was first passed, regulations went into place that would:

A) Eliminate lifetime and unreasonable annual limits on benefits

B) Prohibit rescissions of health insurance policies

C) Provide assistance for those who are uninsured because of a pre-existing condition

D) Require coverage of preventive services and immunizations

E) Extend dependant coverage up to age 26

F) Develop uniform coverage documents so consumers can make apples-to-apples comparisons when shopping for health insurance

G) Cap insurance company non-medical, administrative expenditures at 20%

H) Ensure consumers have access to an effective appeals process and provide consumer a place to turn for assistance navigating the appeals process and accessing their coverage

Sources: So here’s where I got all this…

  1. http://housedocs.house.gov/energycommerce/ppacacon.pdf (Actual Bill)
  2. http://dpc.senate.gov/healthreformbill/healthbill04.pdf (Summary by Senate Democrats)
  3. http://www.healthcare.gov/law/features/index.html (key features as summarized by government)

Finally: http://www.acscan.org/content/affordable-care-actanimation/

This is a link to a very helpful video made by the Kaiser Family Foundation that explains the law pretty well, without being partisan at all.  I definitely recommend sending it to those people that aren’t big readers or have a short attention span.  Hope this explanation helps!

About The Author: Jay Scott

Comments

  • Reply Bob

    Health insurance companies will not write a policy over 6 months with a price guarantee. Policies are increasing 17% twice a year which is an absolute ripoff. The customers are NOT the people using the system it’s the healthy payers paying into the system that pay for it, not your $20 copay. The more patients you put in to this system the higher prices will get. It doesn’t look like Obamacare will fix this since we need price guarantees to lower costs they will just pass along costs to the insured as they are now. The 40% excise tax will not generate anywhere near the projected amount thats claimed besides who has 700.00 a month policy paid thru an employer exept maybe your senator. Other provisions with Obamacare will increase coverage for limited payers, expanding primary care and prevention, the pharmaceutical tax will just drive up prices for drugs while the money will get redistributed to pay for regulation then on to those who cannot pay. Obamacare is no cure for cost control. Again the argument that prevention will save money hasn’t been proven.

  • Reply Nestucca Jackson

    Dumb. Insurance works this way–the more people you have in the system, the cheaper the cost to provide insurance, because the risk is lower. That’s a fact jack, which is why we should have a single payer system. Obamacare tries to make the market work, since it obviously isn’t working now. Again, if you can think of something better, propose the hell out of it–that’s certainly one way Republicans could win my vote, but I refuse to vote for a party that is out of ideas other than to criticize anyone who tries to make a change.

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