President Barack Obama’s signature health care law has been around since March 2010, but even if you know the Affordable Care Act by its nickname, “Obamacare,” you might not know how it affects you.
So what is “Obamacare”? The goals of the law were to increase access to health care, lower the overall cost of care, and improve consumer protections and the quality of medical care nationwide. Whether it has succeeded is a debate for another blog, but we can help you understand what’s in the law and what it means for you.
You may be familiar with a few tenets of the law, such as the requirement that all legal residents have health insurance or pay a penalty, or that businesses employing 50 or more people provide health insurance for employees. However, the law is thousands of pages long and likely includes rules and protections you don’t know about. Here’s a primer.
New rules that affect health care consumers
The health care law includes so many rules that a complete list would be dizzying, but many consumers remain relatively unaffected. “A lot of these provisions were already in place, not by law but by large employer plans” that most people already had, says Gerald Kominski, director of the UCLA Center for Health Policy Research. Examples include things like providing insurance plans for all employees and including free preventive care in plans.
Still, some parts of the law, like a ban on pricing based on gender or pre-existing conditions, made big waves when introduced. Whether they represent big changes or small ones, these are the key provisions of the Affordable Care Act that affect consumers the most:
- The individual mandate: With some exceptions, U.S. civilians must have health insurance that meets minimum requirements or else pay a tax penalty.
- Insurance plans are now grouped into four tiers — bronze, silver, gold and platinum — which determine pricing and generosity of coverage.
- Insurers must provide health plan information — including the tier, deductibles and coverage rules — to all consumers to help them comparison shop.
- Consumers can use an established process to appeal a health insurer’s decisions on claims.
- Insurers must provide certain preventive services for free.
- Insurers are not allowed to deny coverage or set premium prices based on gender or pre-existing conditions.
- Young adults are allowed to stay on their parents’ health plans until age 26.
- Businesses with 50 workers or more must offer health insurance to employees or pay a penalty.
- Insurers must spend 80% to 85% of premiums on health care services and innovations to improve quality of care, or give rebates to consumers.
- Hospitals, doctors’ offices and other medical care facilities must use electronic medical records, making it easier for doctors and patients to access records to improve quality of care.
These rules are now law. Other rules have yet to go into effect, including a “Cadillac tax” on the most expensive employer health plans, delayed by Congress until 2018.
The Federal Marketplace and protections for marketplace consumers
President Obama’s health care law also established a way for consumers without employer health plans to purchase and afford coverage.
States were allowed to create online health insurance marketplaces for their residents. Consumers in states that did not create one use the Federal Marketplace to purchase coverage. People shopping on state or federal marketplaces are the only consumers who can qualify for tax breaks or subsidies if they meet income requirements.
The Affordable Care Act targeted people who didn’t have insurance because it wasn’t affordable and who had private insurance because they were self-employed, Kominski says. Despite a famously glitchy rollout in 2013, the marketplaces have helped 4.1 million people gain insurance to date, according to a Rand Corp. study. The law itself has resulted in 16.9 million newly insured, according to the same study, partly through Medicaid expansion.
Changes to Medicare and Medicaid
Many parts of the law are specific to those receiving Medicare or Medicaid benefits. Medicare is a federally sponsored health plan for seniors; people become eligible at age 65. Medicaid is similar, but for low-income people.
One major change is Medicaid expansion, which took effect in 31 states. Nineteen states opted out. One part of the expansion is that Medicaid beneficiaries formerly had to have a qualifying condition to get coverage, whereas now there are no conditions — just an income requirement, which has also changed.
“Whereas before, every state could set its own income threshold, now there’s a single, uniform standard” in those 31 states, Kominski says. The threshold is 133% of the poverty level, “but is closer to 138% because the Medicaid program allows you to have a 5% income offset,” Kominski adds.
Changes were made to Medicare to reduce medical costs for the elderly, and include:
- By 2020, the Medicare doughnut hole must be closed, ensuring more affordable prescriptions for many seniors.
- Medicare is allowed to conceive of and implement new ways to charge for care, including bundling payments for costly knee and hip surgeries to reduce spending.
- Medicare can reduce payments to hospitals that have high readmission rates and find ways to pay hospitals based on quality of care and patient outcomes.
- Medicare can reimburse for personalized preventive care, based on each beneficiary’s health needs, as outlined by a primary care physician.
What it means for you
Whew, that was a lot! But we’re not done yet, because not everybody has to follow all those rules. For starters, businesses with fewer than 50 employees are exempt from having to provide health insurance to their workers. Some larger employers don’t have to provide health plans that include contraception, which is one of the free preventive services provided to women, if the employers are opposed to birth control based on a religious view.
And there are several exemptions from the individual mandate, the rule that everyone must have health insurance. They include incarceration and low income or financial hardship. For more on exemptions or to see if you qualify, check here.
If those exemptions don’t apply to you, the main way the health care law affects your life is by requiring you to have insurance or else pay a tax penalty. It also likely requires your employer to provide health insurance you can afford, but if your employer is exempt you might be eligible for tax subsidies on the marketplace. Lastly, your coverage must meet certain minimum requirements, which is your insurer’s responsibility. If you have all that, you’re covered.
Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: lacie@nerdwallet.com. Twitter: @LacieWrites.
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