No health care law has stirred up as much animosity as the Affordable Care Act, or Obamacare, as it’s more commonly referred to. Despite its best intentions—to increase affordability and accessibility to health insurance for millions of Americans—the law has been heavily criticized by both the right and the left. But why?
Many conservatives view Obamacare as a costly overreach of the federal government that will lead to job shortages. While Democrats tend to be more supportive of the law, there are still many liberals who wish it went further and instituted single payer health insurance for all—a system many other industrialized nations have established.
There’s plenty of confusion around Obamacare, too. Let’s review what the law actually does, who’s affected, what it’s accomplished so far, and why you should care in the first place.
Why America needed health care insurance reform
First things first: the law is not actually called “Obamacare.” In 2010, it was introduced as the Patient Protection and Affordable Care Act, but is now often referred to as the Affordable Care Act(or the ACA). The nation’s health insurance system is expensive and inefficient. In 2011, Americans were spending a combined $2.7 trillion, or over 17% of GDP on healthcare. And despite these vast expenditures, an estimated 46 million people still lacked health insurance.
A lack of health insurance didn’t save people money. The uninsured were less likely to seek preventative care, which means they were more likely to get sick. In an emergency situation, hospitals couldn’t turn the uninsured away because of their inability to pay, so the patients incurred vast debts. Many uninsured people were forced into bankruptcy by medical bills.
Even if they could afford health insurance, many insurers would find pre-existing conditions that they could use as an excuse to deny these people coverage. Something needed to be done to get more Americans insured, and the 2010 passing of Obamacare was Congress’s solution to this nation-wide problem.
What has Obamacare accomplished so far?
In terms of increasing Americans healthcare coverage, Obamacare accomplished this goal.
- By 2014, an estimated 10 million people had health insurance who likely wouldn’t have had it without Obamacare.
- In states that have accepted the federal government’s Medicaid expansion for low-income residents, uninsured rates have fallen by as much as 40%.
- It’s estimated that the number of uninsured in the U.S. could be reduced to 30 million by 2019.
Health insurance companies can no longer deny coverage based on pre-existing conditions, or charge higher premiums because of these maladies, which helps with accessibility. Premiums are affected by age, location, smoking status, and income.
But rising costs are a concern. While health insurance prices have remained relatively steady in recent years, there are now rumblings that insurers initially priced their post-Obamacare plans too low, and double-digit premium increases could be on the way in 2017 for everyone. Of course, these high premium increases were not unheard of before the ACA came into effect, either.
How does Obamacare affect me?
Obamacare primarily targets three different groups: health insurers, individuals, and employers. We’ve already talked a bit about the new requirements that the law has imposed on insurers above. Essentially, everyone shares the cost of health insurance, even if they refuse to get it.
What Obamacare means to individuals
Obamacare contains what’s known as an “individual mandate” to purchase health insurance. If people refuse to obtain health insurance, they must pay a tax penalty. Currently, this penalty is 2.5% of household income up to the average yearly cost of premium for a Bronze plan, available through the federal government’s health insurance exchange. The only exception is for people whose income falls below a certain threshold.
Regardless of how the penalty is calculated, it still comes to several thousand dollars that’s taken out of their tax return or added to their tax bill every year.
The implications of Obamacare on your business
Less understood is the more complicated “shared responsibility payment” for employers. This is similar to the individual mandate, but applies only to businesses.
As of 2015, if your company employs 50 full-time employees, then you must offer employees health insurance coverage that meets minimum federal guidelines, or pay the IRS a penalty.
That’s the simple part. Exactly how all of that is calculated gets trickier.
The ACA defines full-time employees as those who work an average of 30 hours a week. Using any combination of part-time and full-time employees, that amounts to 50 full-time employees can put a company under the provisions of the ACA.
The fine for not providing health insurance coverage, or providing it to less than 95% of full-time employees is $2,000 per employee.
The first 30 full-time employees are exempt from this fine, meaning that if your company has 50 full-time employees and doesn’t offer health insurance, you’ll only have to pay a $40,000 penalty that covers 20 of them.
If you offer health insurance to more than 95% of your full-time employees, yet at least one full-time employee receives a premium tax credit to help them afford health insurance, then the penalty rises to $3,000 for each employee that receives a tax credit and is assessed monthly.
The bottom line: is Obamacare good, bad, or more of the same?
Obamacare was created with the goal of providing affordable healthcare to all Americans. The result has been that (more or less) everyone pays for healthcare, and everyone receives health care. For individuals, this means coverage is up and medical bankruptcies are down. But the extreme complexity of the bill has made the system difficult to understand and implement for businesses, HR departments, and individuals.
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