How Does ObamaCare Work?

How ObamaCare Works For You, Your Family, and Your Business

We cover everything you need to know about how ObamaCare works for you, your family, and your business.

Below you’ll find overviews of what ObamaCare does, how to use the Health Insurance Marketplace for low-cost coverage, deadlines for getting coverage, and a breakdown of some key benefits under the new law.

How the ObamaCare Basics Work

The first thing you need to know about ObamaCare (the Affordable Care Act) is that,

• From 2014 – 2018, there was a fee for not having health insurance. For those years you needed to maintain coverage (called minimum essential coverage) throughout each year, get an exemption, or pay a “shared responsibility” fee on your year-end Federal taxes for each month you went without coverage. This requirement to get coverage was sometimes called the “individual mandate.”
• For 2019 forward, the fee for not having health insurance has been reduced to $0 (although some states have their own mandate fee). So you don’t need to maintain health insurance or pay a fee for 2019 forward in most states.

The second thing to know is that since 2014, and moving forward each year, the only time you can obtain private major medical health insurance for individuals and families that offers all the benefits, rights, and protections of the Affordable Care Act is during open enrollment; (unless you qualify for special enrollment); other insurance types have unique enrollment periods.

The third thing to know is that, unless your family qualifies for Medicaid or CHIP, only coverage sold on the Health Insurance Marketplace (Healthcare.Gov) qualifies for cost assistance. Those who want coverage should check out the official health insurance marketplace Healthcare.Gov during open enrollment each year to get covered and find out if they qualify for cost assistance.

In short, to get cost assistance and to ensure you have a plan that offers protections like protections from pre-existing conditions, you need to obtain coverage during open enrollment and keep it throughout the year unless you qualify for another coverage type like Medicaid.

With that in mind, the rest of what you need to know is mostly details on getting covered, how cost assistance works, and exactly what protections the ACA includes. We will cover those topics in detail next.

How Getting Health Insurance Works Under ObamaCare

There are lots of ways to get a health plan that counts as minimum essential coverage (a term that denotes coverage that generally offers the benefits, rights, and protections found in the ACA).

Health plans can be purchased through a broker, direct from a provider, obtained through work, obtained through Government healthcare programs like Medicare or Medicaid, or can be bought on your state’s official online health insurance marketplace (also known as a health insurance exchange). With that in mind, each insurance type has its own set of rules for who qualifies.

Generally, individuals and families who want to get coverage in the private market should start by checking out marketplace plans on the official marketplace (as those are the only plans that qualify for cost assistance based on income). With that said, some families and individuals may find they qualify for Medicaid/CHIP and others will find that their employer offers a plan (which likely will prevent them from getting cost assistance on a marketplace plan). Given the different ways this can work, its best to explore your options well before the open enrollment deadline.

• Healthcare.gov is the official marketplace for health insurance and is the only place you can get cost assistance. Some states set up their own official marketplaces, see the state marketplace list. To use the marketplace, you must sign up during the annual open enrollment period.  You can find information about signing up for other insurance types here.
• In states that expanded Medicaid under the ACA, everyone who makes less than 138% of the Federal Poverty Level qualifies for Medicaid.
• Young people can stay on their parent’s plan until 26, and those who can’t stay on their parent’s plan can typically get a marketplace plan for $100 or less after subsidies.  Learn more about how ObamaCare benefits young people.
• A person under 30 who can’t afford health insurance coverage, who doesn’t qualify for Medicaid (like in states that did not expand Medicaid), and has a “hardship” exemption, may be able to get a catastrophic plan.
• ObamaCare’s employer mandate means employers with more than 25 full-time equivalent employees will have to offer coverage to most full-time employees.  If your employer offers coverage, you probably can’t get cost assistance, but you can use the marketplace or buy other private insurance.
• You can shop outside of the marketplace for coverage, but you won’t be eligible for cost assistance outside the marketplace.
• Medicare isn’t part of the marketplace, if you have Medicare, keep it.  You can’t get a non-Medicare plan if you’re over 65, learn more about Medicare and ObamaCare.

ADVICE: To get the right plan for you and your family, you’ll want to understand how health insurance works and how cost assistance works. Take the time to learn about coverage and cost assistance to compare plans like a pro and avoid overbuying or underbuying.

How Marketplace Metal Plans and Cost Assistance Works

In the marketplace, health plans are called “metal plans“: Bronze, Silver, Gold, or Platinum.  As a rule of thumb, the more precious the metal, the better cost-sharing the plan offers and the wider the network will be.  However, higher tier metal plans also tend to have higher premiums. All major medical plans sold after 2014 must have a maximum out-of-pocket cost of no more than the annual limit (see current limits here). In addition, they must provide at least ten essential benefits as part of their covered benefits.

When you fill out an application on your state’s Health Insurance Marketplace or the official federal marketplace HealthCare.gov, you’ll find out if you qualify for cost assistance.  Out-of-pocket assistance, known as a Cost Sharing Reduction (CSR) subsidy, is only offered on Silver plans to those making between 100%-250% of the poverty level. Tax Credits for lower premiums cap the percentage of household income your plan can cost but are based on the second lowest-cost Silver plan (SLCSP) in your state’s marketplace.  Tax Credits can be paid to your insurer in advance to lower your premium or can be a deduction on your Federal income tax returns.

FACT: Cost assistance, exemptions, and taxes are all based on income.  If you make between 100% – 400% of the Federal Poverty Level, you may be eligible for cost assistance.

The following video contains How ObamaCare Works in 2014 and beyond:

Health Insurance Open Enrollment Periods

No matter how you shop, you’ll have to get covered during your insurance type’s open enrollment period.  For private insurance, inside and outside the marketplace, open enrollment is generally at the end of the year (meaning, in general, you sign up for coverage for the year at the end of the previous year; for example, to obtain 2023 coverage you enroll Nov 1, 2022 – Jan 15, 2023; dates change each year and can differ by state).  If you missed open enrollment, you were not able to obtain coverage unless you qualified for a special enrollment period (a time outside of open enrollment where you can enroll in a plan for the year due to qualifying circumstances).  See other open enrollment periods here.

The only time you can enroll in a plan, switch plans, or apply for cost assistance, is during open enrollment.  This is true both inside and outside of the marketplace.  Remember cost assistance is only available through the marketplace.

ObamaCare’s Benefits, Rights, and Protections

The new law also contains some much-needed new benefits, rights, and protections that help consumers. Subsidized health insurance is now available to most Americans who earn under 400% of the Federal Poverty Level. Many states are expanding Medicaid. Americans under the ACA can’t be denied insurance based on health status or be dropped when they are sick. Lifetimes maximums have also been abolished. Large businesses have also been required to insure full-time workers since 2016. Generous tax credits are available to small businesses.

Here are just some of the benefits, rights, and protections the ACA includes:

• Letting young adults stay on their parents’ plan until 26
• Stopping insurance companies from denying you coverage or charging you more based on health status
• Stopping insurance companies from dropping you when you are sick or if you make an honest mistake on your application
• Preventing gender discrimination
• Stopping insurance companies from imposing unjustified rate hikes
• Doing away with lifetime and annual dollar limits
• Giving you the right to a rapid appeal of insurance company decisions
• Expanding coverage to tens of millions by subsidizing health insurance costs through the Health Insurance Marketplaces (HealthCare.Gov and the state-run Marketplaces)
• Expanding Medicaid to millions in states that chose to expand the program
• Providing tax breaks to small businesses for offering health insurance to their employees
• Requiring large businesses to insure employees
• Requiring all insurers to cover people with pre-existing conditions
• Making CHIP easier for kids to get
• Improving Medicare for seniors
• Ensuring all plans cover minimum benefits like limits on cost-sharing and ten essential benefits including free preventive care, OB-GYN services with no referrals, free birth control, and coverage for emergency room visits out-of-network

Of course, the requirement to have insurance and a few key benefits is only a fraction of what the Affordable Care Act (sometimes referred to as ObamaCare) does. Keep reading to find out more about the health care law.

Don’t just assume you like or dislike the Affordable Care Act based on what other people say. Find out the facts about how ObamaCare works for you, your family, and your business.

This image shows statistics from 2014, they are roughly comparable to 2017 (although the uninsured rate has decreased and the non-group, Medicaid, and employer enrollment numbers have increased due to the Affordable Care Act).

What Does ObamaCare Mean for Me? Do I Have to Buy Health Insurance?

Today almost 90% of Americans already have health insurance and won’t have to do much of anything under the Affordable Care Act (except re-enroll in their health plan or switch health plans). If you have Medicare, Medicaid, ACA-compliant private insurance, or are one of the nearly 50% of Americans who get their coverage through their employer, you have coverage that complies with current laws.

Meanwhile, the 10% or so of Americans who don’t currently have health insurance have more options under the Affordable Care Act.

The major changes noted above started in 2014. The estimated rate as of uninsured Americans as of 4/28/2014 stood at 12.9% of the population, by 2017 it was closer to 9% (see a breakdown of uninsured rates for more specific numbers and methodology). This figure had been nearing 18% before the Affordable Care Act. The figure of course changes every year, especially as changes are made to the law.

To enjoy the benefits of the ACA, you’ll need a type of coverage deemed minimum essential coverage. Keep in mind short term plans and other supplemental insurance plans are not always considered minimum essential coverage.

Getting Assistance Through ObamaCare

Many people who get insurance under ObamaCare will find they qualify for Medicaid, cost assistance through the marketplace, or will be offered insurance through an employer due to the 2015/2016-employer mandate.  Others will be covered by small business employers because of the tax credits offered to small businesses that provide coverage to employees.

About half of uninsured Americans will be able to get cost assistance subsidies for lower premiums and lower out-of-pocket costs or Medicaid using their States’ health insurance marketplace, and some who find coverage costing more than roughly 8% of their families income after subsidies will be exempt due to cost.

In 2015 (pushed back to 2016 in some cases), all large employers had to provide their workers with ACA-compliant health insurance (see employer mandate). If you work for a large employer with 50 or more full-time equivalent employees and don’t currently have health coverage, make sure to check out the marketplace to see your options in the meantime. NOTE: Many employers have elected to offer benefits as a response to the looming mandate. Please note, if you or a family member is covered through an employer, you can’t get cost assistance through the marketplace. However, these savings may be offset by your employer’s contribution toward your plan.

The law affects everyone differently. If you would like to understand your specific situation better, find out “how will ObamaCare affect me?”

Over 87% of Americans who already have insurance won’t have to do anything in regards to ObamaCare, but they will be able to enjoy most of ObamaCare’s new benefits, rights, and protections.

When Does ObamaCare Start?

ObamaCare was signed into law in March of 2010 and required you to have insurance starting in 2014. It expanded Medicaid in 2014, and required large employers to insure full-time workers by 2015/2016. Moving forward, open enrollment each year starts on November 1st and ends January 15th in most states (dates subject to change each year). If you miss open enrollment you won’t be able to obtain coverage unless you qualified for a special enrollment period.

Apply to the marketplace early and see if you qualify for subsidies, shopping around is the only way you’ll ensure you are getting the best plan for your needs.

When Can I Sign Up For ObamaCare?

In general, you must obtain coverage during the annual open enrollment period. Moving forward if you sign up for coverage in the first half of the month your insurance will start on the 1st of the next month after you pay your premium. If you sign up during the second half of the month, your coverage won’t start until the 1st of the second month.

Learn about special enrollment for those who miss the ObamaCare deadline.

How Do I Sign Up for ObamaCare?

There are three ways to sign up for private insurance under the Affordable Care Act: 1) the marketplace 2) a broker 3) direct from the provider. You can sign up for ObamaCare’s marketplaces by finding your State’s health insurance marketplace or going directly to healthcare.gov. Each method will have its advantages. All qualified health plans sold after 2014 will be held to the same standards of quality. Although only marketplace plans offer subsidies, they won’t always be the cheapest. In the marketplace, cost depends on income. NOTE: HHS approved insurers can enroll you in a marketplace plan during each year’s open enrollment.

Also, see our Medicare enrollment page for information on enrolling in Medicare. Medicare isn’t part of the marketplace.

TIP: Short term health plans don’t count as qualified coverage, they don’t have to follow the benefits rules and protections as the affordable care act.

Avoiding the ObamaCare Fee

NOTE: The fee only applied to years 2014 – 2018. The fee for not having coverage is $0 for 2019 forward for states that don’t have their own mandate/fee.

Marketplace insurance starting after 2014 is required to offer all the new benefits, rights and protections of the law and counts as minimum essential coverage (i.e. you won’t owe the per-month fee for not having coverage). Public health options, like Medicaid, CHIP and Medicare, employer insurance, and other insurance types like TRICARE, all count as minimum essential coverage and will help you avoid the fee.

Meanwhile, temporary health insurance, supplemental insurance, and fixed benefit plans won’t exempt you from the fee for not having insurance as they do not count as minimum essential coverage.

All ACA-compliant insurance provides all the new benefits, rights and protections offered by the Affordable Care Act, regardless of the plans cost. Please see our section on minimum essential coverage to understand what types of insurance comply with the law.

How Does Health Insurance Work?

Health insurance works like this: you pay a monthly premium for every month you have coverage. The higher the premium, generally the less out-of-pocket expenses you are responsible for and the larger network of doctors and providers you can utilize. All plans starting after 2014, were required to offer the same minimum benefits, rights and protections including at least ten essential health benefits, and limits to out-of-pocket maximums.  Starting in 2014, people could usually get lower costs on coverage through the health insurance marketplace and were required to obtain and maintain coverage.  Aside from that and a few other improvements, not much changed in regards to the way health insurance works under ObamaCare.

Understanding Your Health Insurance Options

Some insurance companies were canceling plans or raising prices due to the changes in the Affordable Care Act. New rules allow insurance companies to extend non-grandfathered plans until 2017, and many consumer protections were put in place to guard you against unjustified rate hikes.  However, nothing is truly stopping your insurance company from trying to get an “upsell” in over the confusion of the law and make extra profits. If you got a letter telling you about a drastic rate increase, your insurance company might not have been telling you the whole story. By shopping the marketplace, talking to brokers, and speaking directly with providers, you can “shop around” for the best insurance option for you and your family.

Americans making less than $51,040 as individuals, or $104,800 as a family of 4 (400% of the 2020 Federal Poverty Level; this increases slightly each year), may be eligible for free or low-cost health insurance. This is because of cost assistance subsidies, like tax credits, which reduce premium costs; and cost-sharing reduction subsidies, that lower cost-sharing on copays, coinsurance, and deductibles. You can only get cost assistance through your State’s Health Insurance Marketplace. Note: In some States brokers and providers can sign you up for a subsidized marketplace plan.

Use the tool below to get an idea of what marketplace plans cost after subsidies in your State’s marketplace and to request quotes from a variety of qualified providers and brokers.

Learn more about how to buy health insurance.

What Does ObamaCare Cover?

All health plans, starting after 2014, cover a number of essential health benefits and free preventative services. All plans also have to offer all of the protections contained in the ACA’s provisions. This includes the requirement to cover people with preexisting conditions and eliminate lifetime maximums.

Get a full breakdown of ObamaCare’s benefits, rights and protections and find out how they apply to your health insurance plan.

How Does ObamaCare Affect Health Insurance

ObamaCare doesn’t create health insurance, it regulates private health insurance, increasing the benefits, rights and protections offered by insurers.

• The ACA expands access to quality insurance through Federally regulated and subsided health insurance marketplaces and by expanding Medicaid to over 15 million men, women, and children who could not otherwise afford coverage.

• Marketplaces are price comparison websites that individuals, families, and small businesses can use to buy subsidized health plans that meet all of ObamaCare’s standards like 100% coverage for pre-existing conditions at no extra cost.

• Due to the marketplaces Americans now have three options to buy private health plans 1) the marketplace 2) a broker 3) direct from the provider. You can still sign up for public healthcare programs like Medicare and Medicaid through the official .gov sites or obtain coverage through your employer if they offer it. Find out more about minimum essential coverage required after 2014 by learning about the Individual Mandate.

• ObamaCare also improves the quality of Medicare and CHIP.

• Insurance companies can no longer charge you more or deny you health insurance based on your health status or gender.

• ObamaCare does away with annual and lifetime limits on coverage.

• Americans making less than 400% of the Federal Poverty Level can use the health insurance marketplaces to get reduced premiums and lower out of pocket costs on health insurance for 2016.

• All employers with over 50 full-time equivalent employees had to insure their employees by 2016.

• Small businesses with fewer than 25 full-time equivalent employees can get tax breaks of up to 50% of their employees’ premium on the marketplace.

NOTE: this page discusses how ObamaCare works in regards to individuals and families, please check the left side navigation to learn about other aspects of the Affordable Care Act, such as how it will affect small businesses.

How Does ObamaCare Work: How to Get Health Insurance

By now it should be obvious that all Americans will benefit from the new benefits, rights, and protections and many will now have access to quality affordable health insurance. Let’s do a quick overview of how ObamaCare works, for those of us without insurance, and discuss the health insurance marketplace.

• Everyone without health coverage must obtain coverage by January 1st of each year (starting in 2014) if they can afford to, get an exemption, or pay a per-month fee.

• The fee has been repealed for 2019 forward, so you won’t have to worry about paying a fee for not having coverage. Learn more about the Individual Mandate and get the specific numbers for this year.

• Each State created a Health Insurance Marketplace where uninsured Americans can buy health insurance and may receive cost assistance. Find your State’s Health Insurance Marketplace now.

• You can only use the marketplace during open enrollment.  If you had a plan and/or cost assistance from the year before you’ll need to verify your information during open enrollment, preferably before January 15th, to ensure you get the right plan and cost assistance for the next year.

• If you already have health insurance or have insurance through your employer, then you can keep it. You’ll still enjoy all the rights and protections offered by ObamaCare, like the elimination of pre-existing conditions. Please note, if you have a plan that was issued before 2010 (a plan with Grandfathered status), you may not be offered all of the new rights and protections. Find out more about your Healthcare Rights and Protections.

• There are four types of plans you can buy on the marketplace. They are bronze, silver, gold and platinum. The platinum plan has the highest premiums, or monthly costs, while the bronze plan has the lowest premiums. The higher of the premium cost, the lower the out-of-pocket costs and copays.

• The cost of plans sold on the marketplace works on a sliding scale. Low-income Americans may get free or low-cost plans, those paying full price will pay more and may find their best deal by shopping outside of the marketplace.

• Remember, if you make less than 400% of the Federal Poverty Level you and your family may be eligible for reduced premium rates and lower out-of-pocket costs through the marketplace.

• Those who aren’t covered under the marketplace can buy coverage outside the marketplace, get coverage through work, get Medicaid or Medicare if they qualify, or may be eligible for another type of major medical insurance.  Make sure to get covered during your insurance types open enrollment period.

Am I Eligible for ObamaCare?

Almost every legal resident of the U.S. is eligible to shop for health insurance on their State’s Health Insurance Exchange Marketplace and most Americans with non-grandfathered health plans are eligible for ObamaCare’s new rights and protections. However, only those meeting certain eligibility requirements can receive subsidies through the marketplace. The following video explains ObamaCare eligibility:

How Does ObamaCare Affect Which Doctor I Can See?

No matter what type of health insurance you have, from subsidized health plans on the marketplace to high-end insurance plans, your access to a doctor doesn’t change under ObamaCare. Your choice of doctors is still based on provider networks, just as it was before. As a rule of thumb, the smaller the network, the fewer choices of doctor you have. However, competition on ObamaCare’s marketplace may result in a more aggressive marketing of plans; low-priced plans may have wider networks moving forward.

ObamaCare and Taxes

We won’t go over all the new taxes on this page. Most of the taxes that affect the majority of Americans like tax credits and the mandates are already covered. You can find the rest of the new taxes (almost all of which exclusively affect the healthcare industry and large firms on our ObamaCare taxes page.)

What If I Can’t Afford Health Insurance?

Americans making less than 400% of the Federal Poverty Level will be eligible for cost assistance through the marketplace. In other words, if you truly feel you can’t afford health insurance, you are probably right and will be likely to qualify for lower premiums and out-of-pocket costs. Learn more about exemptions due to cost and cost assistance subsidies on the marketplace.

The Health Insurance Marketplace

Health insurance is made available through the ObamaCare Health Insurance Exchange Pool, commonly known as the Health Insurance Marketplace (healthcare.gov). The exchange is a group of health insurance providers that offer coverage. Insurance can be purchased using tax credits that work on a sliding scale depending on your taxable income. You choose the provider you want for you, your family or business based on which one offers the most attractive package in regards to affordability and quality of coverage.

The marketplace is meant to be competitive to help drive the quality up and cost down. Tax credits and up-front assistance are available to low and middle-income Americans and small businesses through the Small Business Health Insurance Program (SHOP).

Please see our page on the ObamaCare Health Insurance Exchange for more detail on how the exchanges work.

How the ObamaCare Online Marketplace Works

• You can easily compare and purchase health plans offered by private insurers and, in some states, co-ops of doctors and nonprofit organizations that meet state insurance regulations. You can choose among plans with higher or lower deductibles and co-pays, and higher or lower premiums.

• A streamlined “one-stop” process lets you fill out one application to find out if you qualify for premium discounts, subsidies for out-of-pocket expenses, or coverage under programs such as Medicare or Medicaid. Please note: Medicare isn’t part of the marketplace, but you’ll be told if you qualify when you apply on the marketplace.

• In many cases, in a single session, you can receive an eligibility determination and enroll in a health insurance plan that’s right for you or your family.

• You can update any changes that might affect your eligibility (including marriage, divorce or a job change) and to keep your coverage from year to year through the exchange.

How To Buy ObamaCare Subsidized Insurance

You can buy subsidized health insurance using the State-based health insurance marketplaces, which are also called exchanges, at any time during open enrollment. There are two big advantages to using the online marketplace:

Firstly, you can make side-by-side, “apples-to-apples” comparisons of all the available plans, and use an online calculator to find the best buy.

The second advantage is that you may qualify for an up-front discount in the form of a tax credit to help pay for your premiums. You might also get help with your out-of-pocket costs.

Anyone without insurance through work can purchase private health insurance from the insurers participating in your state marketplace. You can also use subsidies if employee-only coverage costs you more than 9.5 percent of your family’s income, or if your employer’s plan does not meet the law’s minimum standards.

The online marketplaces opened for business on October 1, 2013, offering coverage that started as early as January 1, 2014.  You can enroll during each year’s open enrollment period. Find out what to do if you miss the deadline.

Sign Up for Health Insurance

We’ve answered the question, “How Does ObamaCare Work?” You can either keep learning more about the program or apply for your state’s health insurance marketplace today.

How ObamaCare Works for You and Your Family