A Quick Summary of ObamaCare and How it Works
The following ObamaCare Summary offers a quick overview of what you need to know about health care reform under the Affordable Care Act.
The summary includes a breakdown of how ObamaCare works, how to get covered under the new system, how to get cost assistance, the history of the law, and more.
ObamaCare in a Sentence or Two
The Affordable Care Act (ACA or “ObamaCare”) is healthcare legislation signed by President Obama in 2010. It aims to expand access to affordable quality health care via rules for insurers and the healthcare industry, cost assistance for those with lower incomes, the expansion of public programs like Medicaid, protections for consumers, and some new taxes (mostly on higher earners).
We cover each of those points below in more detail.
A Summary of What You Need to Know About the Affordable Care Act (ObamaCare)
ObamaCare, officially called the Patient Protection and Affordable Care Act (PPACA), but more often called the Affordable Care Act (ACA) for short, reforms the health insurance industry and the American health care system as a whole.
The law contains over a thousand pages of provisions that give Americans more rights and protections and expand access to affordable quality health care to tens of millions of uninsured.
So, for example, it makes it so insurers can’t charge more for preexisting conditions, offers cost assistance for health insurance based on income, and expands Medicaid.
Here is a list of some of the key benefit rights and protections (many of which we’ll discuss more below):
- 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
Learn more about the PPACA by reading our Summary of Provisions of the Patient Protection and Affordable Care Act.
With the above noted, there have been some changes to the ACA since it was signed into March 23rd, 2010. For example, a 2012 supreme court ruling resulted in states being able to opt-out of expanding access to Medicaid and in 2019 the Trump administration reduced the fee for not having coverage to $0 on a federal level (some states still have their own fee).
With that above said, although ObamaCare did offer new protections and added some rules, it didn’t do much to change the way insurance is obtained. Under the ACA can still buy private insurance, get employer-based insurance, or get insurance through a government program like Medicaid or Medicare.
Although ObamaCare didn’t change the way insurance is obtained, it add a new way to purchase insurance. Insurance can now be purchased through state Health Insurance Marketplaces where shoppers can receive cost assistance and get apples-to-apples comparisons of plans. The official marketplace is called HealthCare.Gov.
Please take into account that each insurance type has its open enrollment period unless you qualify for a special enrollment period. Therefore, certain types of insurance can only be purchased during certain times of the year.
- Open enrollment for 2020 plans for individuals and families starts November 1st, 2019 and ends December 15, 2019.
- Medicaid / CHIP can be enrolled in year round.
- Other coverage types like Medicare and employer coverage have their own enrollment periods.
FACT: If you have a marketplace plan from the previous year, you’ll need to verify your plan and cost assistance during open enrollment, and preferably before December 15th each year.
A Summary of ObamaCare and Insurance
The Affordable Care Act initially required that all Americans obtain coverage, get an exemption, or pay a tax penalty on their federal income taxes (see ObamaCare’s Individual Mandate for more details). However the fee was reduced to $0 in most states in 2019.
With that said, Americans who cannot afford health insurance on their own will in many cases either qualify for Medicare, Medicaid, CHIP or get assistance in the form of tax credits or assistance with up-front costs through their state’s Health Insurance Exchanges (AKA Marketplace).
FACT: For more reading, this PDF from the Institute of medicine gives a comprehensive overview of what you need to know to get insurance under the Affordable Care Act.
FACT: Under the ACA many Americans will keep their employer-based or current insurance, others were able to get covered through work due to the new rules that large employers had to provide coverage to full-time workers (and small employers got a tax break if they did), while low-to-middle income Americans will be able to purchase federally regulated and subsidized insurance through online health insurance exchanges.
A Summary of ObamaCare and Cost Assistance
A Summary of ObamaCare New Benefits
The law also implements new benefits, rights and protections leading to better quality and more affordable health insurance. New provisions to protect consumers include insurance companies no longer being able to deny individuals for preexisting conditions or being able to drop their coverage for being sick, free preventive treatments, and the elimination of discrimination, and annual and lifetime limits on essential health benefits. All plans sold on or off the insurance exchange must now include ten essential benefits and have a minimum actuarial value.
ObamaCare Coverage Summary
Regardless of what you pay, ObamaCare improves the health care industry including the minimum standards of what health insurance must cover. 44 million Americans who did not have not have health insurance before the ACA were projected to be covered over time, although due to changes in the law it is likely not all will be unless there are additional changes (such as the expansion of Medicaid in all states).
Other coverage milestones include better preventive care, women’s health services, better care for seniors and expanded coverage of our nation’s poorest.
Other important notes here are that there are new metal plans that correlate to cost sharing and cost assistance options on exchanges, and as noted above coverage was expanded to workers due to a new requirement for large employers with over 50 full-time workers to cover their employees.
FACT: Did you know that ObamaCare technically included the biggest middle-class tax cut for health care in America’s history due to cost assistance which comes in the form of tax credits? ObamaCare saves low to middle-income families and small businesses billions of dollars by providing reduced costs and reduced premiums to millions of Americans through marketplace subsidies. Not everyone will get cheaper health insurance, but many making less than 400% of the Federal Poverty Level will.
A Summary of Health Insurance Exchanges / Marketplaces
The new health care law makes Health insurance available to most uninsured low and middle-income individuals through a health insurance exchange also known as a health insurance marketplace.
The exchanges are state or federally run online marketplaces where customers can shop for affordable quality health insurance.
The federal marketplace is called HealthCare.gov. If you go to HealthCare.Gov you can find state-based exchanges too by entering your state.
A Summary of Small Business Exchanges
Since November 15th, 2014 small businesses with less than 100 full-time employees can also use the exchange to purchase insurance for their employees (the small business marketplace is called the SHOP exchange).
Small businesses can earn tax breaks for up to 35% of premiums (amount subject to change and based on factors such as profits and full-time equivalent employees). The Health Insurance Marketplace is closed outside of open enrollment.
(ObamaCare Summary Image is public domain)
Medicaid and Medicare Reform Summary
ObamaCare also expands Medicaid to provide health coverage to at what was one point estimated at 15.9 million uninsured Americans who were falling in between the cracks of being able to afford insurance and qualifying for Medicaid. Obama’s health care plan overhauls Medicare as well adding new benefits, expanding coverage, fighting fraud, cutting costs, and improving care for patients. The expansion would have covered more Americans, but many states opted out of expansion. This created a “Medicaid gap.”
ObamaCare Overall Cost Summary
The cost of ObamaCare was originally projected to be around $1.1 trillion over the 10 year period following its implementation. This number has changed over the years, but generally the total spending is offset but cuts to wasteful spending and new taxes (with the grand result being that the ACA doesn’t add much to the budget; although this could change over time depending on the future of healthcare reform in general).
Summarizing the cost of ObamaCare for the nation is tricky due to all the moving parts, but summarizing the costs for individuals and families can be even trickier. In general, those who make over 400% of the poverty line may pay about what they did before the law (taking into account that premium costs rise annually), while those under will often pay less due to financial assistance.
Many uninsured young adults can get a plan for $100 or less. However, some previously insured people who had been getting covered at low rates saw notable premium increases in the years the Affordable Care Act’s main protections went into effect. Those numbers were meant to stabilize over time, but a heated battle in Congress and the Supreme Court over the law has created a somewhat uncertain environment that has caused prices not to stabilize as of 2017.
TIP: Given that the ACA embraces the free market (it is a “mixed market” policy), and given that it is based on income and region, everyone pays something different (within the current allowed range in terms of affordability exemptions and caps on out-of-pocket maximums and such) for their needs and specific situation. Learn more about ObamaCare’s Costs (they are complex to discuss, thus we can’t say everything here in a summary).
A Summary of ObamaCare and Small Business
Small businesses with under the equivalent of 50 full-time equivalent employees and who make less than $250,000 began to reap the benefits of ObamaCare getting better access to more affordable quality insurance. Those with over 50 full-time equivalent employees or those who make over $250,000 faced the “employer mandate” beginning in 2015 and a Medicare Part A increase. Small businesses under 25 full-time employees who chose to insure employees received tax breaks of up to 35% for 2013 and 50% for 2014 through the SHOP.
While specifics of the plan adjust each year, the general concept is large business have to cover full-time employees, and small businesses get tax breaks for covering employees if they choose.
FACT: The online portion of the SHOP didn’t open until November 2014, but small businesses could still use an agent to help them claim tax credits.
NOTE: Some people say this will hinder job growth and hiring. This has been proven true at many companies who are cutting worker hours to part-time to avoid insuring workers. On the other side of the coin, ObamaCare creates tens of thousands of healthcare and Government jobs, and some who moved to part-time are simply choosing not to work (before the ACA employer coverage was the only option for many families, thus some staid at jobs they wouldn’t have otherwise stayed at in the past).
Find out what ObamaCare means to businesses and their employees.
A Summary of How ObamaCare is Paid For
In summary, ObamaCare will be paid for through budget cuts, taxes, and government funding. This includes a .9% Medicare tax and unearned income tax on income over $200/$250k, cuts to wasteful spending, a tax on insurance companies and a tax on employers with over 50 full-time employees who do not supply their employees with affordable quality health care. This is just a summary of how ObamaCare is funded. Learn More about ObamaCare Taxes.
It’s important to note that the taxes work on a sliding scale, so the more you make, the more you pay. Nearly 99% of families and 97% of small businesses will benefit from ObamaCare. While over 70% will save money and have better coverage by being able to purchase their healthcare through a competitive insurance exchange or qualify for Government program.
NOTE: The fee for not having insurance was also used to pay for the ACA’s spending, however as noted that has been reduced to $0.
Health Care Reform Summary
ObamaCare reforms everything from practices of insurance companies to ensuring better quality health care for all Americans. A summary of all the reforms within ObamaCare is available here at our Health Care Reform Timeline.
We have only touched upon some of the benefits of the Affordable Care Act in this ObamaCare summary. The law itself is an accumulation of many different reforms that improve our healthcare system and provide affordable health insurance to all Americans. Read more about the specifics of ObamaCare or read a more detailed overview of what the ObamaCare has to offer in our Affordable Care Act Summary.
For more information:
- Check out a detailed ObamaCare Facts timeline of every protection, benefit, and a tax laid out by the Affordable Care Act from 2010 to 2022. See what is really in the law for yourself using our Health Care Reform Timeline.
- Check out our Summary of Titles in the Affordable Care Act for an overview of each title contained within the law.
- Check out our Summary of Provisions of the Patient Protection and Affordable Care Act for a summary of each section of each title for a more complete and detailed read.
- Or, for the very brave and interested, you can check out the Full Text of the Patient Protection and Affordable Care Act.
Obama Health Care Summary – Costs, Coverage and More.