How Does Obamacare Work?

September 3, 2021

obama care

The Patient Protection and Affordable Care Act, also known as Obamacare or the Affordable Care Act (ACA), is a sweeping piece of legislation that was signed into law by President Obama in 2010. The ACA considerably changed the healthcare system in the US by reducing the amount that patients paid for uncompensated care.

Obamacare aims to improve the overall quality and affordability of healthcare insurance in the country by making it mandatory for every person to have a health insurance plan as well as to provide assistance to those people who cannot afford health insurance.

The legislation consists of 1,000 pages ensuring that coverage is made accessible and affordable for the millions of Americans who find it difficult to pay for individual coverage. The law also provides coverage to those people who previously could not buy any insurance plan due to a pre-existing medical condition.

The ACA sharply reduced the number of Americans without any insurance coverage. Even though the rate of uninsured people increased under the Trump administration, enrollment reached an all-time high in 2021. In this article, we look at the major facts about Obamacare and bust some common myths about the legislation.

Overview

There is no denying the fact that the ACA has benefitted millions of Americans in getting insurance coverage. Many of these people are unemployed and have low incomes, and some were not able to get decent health insurance before due to a pre-existing condition. Obamacare made sure that everyone gets medical coverage, no matter the condition.

Nevertheless, the ACA has been the target of objections from conservatives due to the higher insurance premiums and tax increments for the rich. So much that the legislation soon was overcome with negative publicity and people were soon asking: What was bad about Obamacare?

In the next sections, we take a look at how the ACA works, facts about the legislature and the pros and cons associated with it.

How was Obamacare supposed to work?

The ACA legislature is based on three goals:

  • To make health insurance affordable and available to more people. For people with lower incomes, the legislature provides subsidies to make it easier for them to get insurance.
  • Expand the Medicaid program to cover all adults with income below 138% of the FPL. (Not all states have expanded their Medicaid programs.)
  • Encourage innovative medical delivery methods that are designed to reduce the general cost of health care.

The primary goal of the Affordable Care Act was to make health insurance available to most people, especially those who need it the most. A highlight of the law was that it made it compulsory for everyone to buy health insurance or pay a tax penalty.

How the ACA Tax Penalty Works?

The tax penalty was introduced in the ACA to ensure that insurance companies could afford to add patients with preexisting conditions, requiring everyone to have health insurance for at least nine months. Failing to do so would subject you to additional tax.

Later, in 2019, the Congress eliminated the penalty by introducing the Tax Cuts and Jobs Act. Even before the bill, people had found ways to be exempted from the ACA tax penalty.

Facts about Obamacare

Whether or not you have purchased Obamacare insurance or not, the legislature has ways of affecting you that you might not even have imagined. Here are some facts that can help you further understand the truth about Obamacare:

Primary goal of the ACA was to Lower the Cost of Medicaid and Medicare

The annual healthcare budget surpasses $1.4 trillion, which means that the federal government spends more on healthcare than any other item in the budget. The amount is divided to cover the benefits that the government provides for Medicaid and Medicare.

The huge amount of spending on health care is expected to grow even more, leaving little to spend on other things. It was imperative, therefore, to bring major reforms in health care and hence the ACA was born.

Changing the Healthcare Landscape

Obamacare is not just about everyone getting health insurance; in fact, it aimed to revolutionize how healthcare is delivered. The act mandated that doctors, hospitals and pharmacists should work together throughout the process with proper documentation required. The ACA also formalized the recording of medical electronics electronically rather than on paper.

Obamacare Benefits the Middle-Class More than Anyone Else

Obamacare subsidies for those who sign up on the health insurance exchanges will cost the federal government $1.039 trillion between 2015 and 2024. It spends 30 percent less or $792 billion on expanded Medicaid and on the Children’s Health Insurance Program.

The ACA subsidies go to families that earn roughly between $47,000 and $94,000 a year or 400 percent of the federal poverty level. The median family income in the United States for a family of four was $79,698, a figure that’s smack dab in the middle.  

Obamacare Adds Benefits to Those on Medicare

If you have Medicare, the “doughnut hole” gap in coverage is being subsidized. There are many other ways that Obamacare affects people differently depending on their situation.

Obamacare Does Not Cover Illegal Immigrants

Immigrants who are residing in the US illegally are not covered by the ACA. However, the act does allow community health clinics to serve them. Why? So that they can get preventive care and avoid any major health issue or a chronic illness, lowering the health care costs for everyone.

Pros

More people have health insurance: It is reported that over 16 Americans were able to get health insurance coverage in the initial 5 years of Obamacare. A large percentage of these newly insured people were young adults.

  • Affordability: Because of Obamacare, insurance companies must spend at least 80 percent of the insurance premiums they receive on medical care. This way, insurance companies could not make unreasonable money from unspent premiums. Obamacare also prevented insurers from making unreasonable rate increases.
  • Coverage for people with preexisting conditions: Before the Obamacare legislature, it was very difficult for people with a preexisting condition, like cancer, to get a decent health insurance plan. Under the ACA, you can’t be denied coverage because of a pre existing health problem.
  • No limits: It was common before for patients with chronic health issues to run out of insurance coverage. This was because the insurance companies had defined limits for the amount of money that they could spend on a patient at most. With Obamacare, insurance companies can no longer set a preset dollar limit on the coverage.
  • More screenings: The Affordable Care Act offers a number of preventive services and screenings at low deductibles and copays in a hope that people can be more proactive in their healthcare, and hence identify any underlying health condition that can get worse later.

Why Obamacare is Bad?

Even though the ACA had revolutionary effects on the healthcare industry, it was still subjected to criticism and opposition. Here are some of the more controversial factors from the Obamacare:

  • Higher premiums for some people: Insurance companies now provide a wider range of benefits and cover people with preexisting conditions. This has caused premiums to rise for a lot of people who already had health insurance.
  • Additional fines: The goal of ACA is that everyone is insured around the year. If you are uninsured for no particular reason, the ACA imposes a modest fine. This was an unpopular fine, and was eliminated by the Congress in 2019.
  • More Taxes: To aid the Obamacare act, the government passed additional taxes in pharmaceutical and medical device sales. People with high incomes were also subjected to more taxes.

Conclusion

The Affordable Care Act is subject to changes every year. Since it is a piece of law, it is regularly amended and altered based on the budget decisions. With such a dynamic healthcare industry as well as the changing political arena of presidential administrations and Congress, one thing is for sure: Obamacare will continue to evolve for years to come.

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