If you’re an American who is of-age to purchase health insurance, there’s no doubt that you have heard of Obamacare, formally known as the Affordable Care Act (ACA). However, if you’re like many people, you might not know how the ACA works. If so, then you may be like one of the millions of Americans who have decided to forego Obamacare coverage simply because you don’t understand it; or you may assume that it won’t work for you because, well, other people have said that it doesn’t work.
As with anything in life, in order to make an informed decision, you need to have all of the necessary facts. When speaking of health insurance, that means having a firm understanding of the Affordable Care Act. If you’ve heard about the ACA but you’re just not totally sure what it is and how it works, read on for a basic overview of America’s healthcare reform.
What is the Affordable Care Act?
The Affordable Care Act (ACA) is the comprehensive health care reform law that was put into place by President Obama in 2010; hence the reason why it’s often referred to as “Obamacare”. The goal of this healthcare reform law was to provide the following for American citizens:
- Provide more people with affordable health insurance options, which it does by offering subsidies (also known as premium tax credits) that help to reduce the cost of health insurance for individuals who are earning an income that falls between 100 percent and 400 percent of the federal poverty level.
- Extends Medicaid by offering coverage for adults who earn an income that falls 138 percent or lower than the federal poverty level.
- Provide advanced methods of delivering medical care to reduce the expense of health care overall.
Overall, the goal of Obamacare was to provide Americans with more affordable health care and to ensure that they had access to more health care services, regardless of their medical history. In addition to providing discounts for health insurance coverage, it also altered the rules that once governed health insurance. For instance, prior to the ACA, individuals that have pre-existing conditions (cancer, diabetes, etc) could be denied coverage or the cost of your coverage would be driven up. Thanks to Obamacare, that’s no longer the case; anyone can receive coverage, regardless of pre-existing conditions, and the cost of their coverage will not be affected.
How does Obamacare Work?
In order to purchase a health insurance policy through Obamacare, you do so through the Health Insurance Marketplace. If the state you reside in participates in the federal Affordable Care Act program, you can purchase a policy through HealthCare.gov; if it doesn’t, you would purchase a policy through the healthcare website of your state.
It’s important to note that you can only purchase insurance through the ACA during the Open Enrollment Period, which usually runs from November through the end of December of each year (though extensions are often made). If you qualify, you can sign up at any time during what is known as the Special Enrollment Period. Factors that would make you eligible for the Special Enrollment Period include having a baby, getting married, or losing health insurance through your employer.
Whether you are purchasing insurance during the Open Enrollment period or the Special Enrollment Period, you would need to supply the requested information, including your name and your annual income. Based on the information you provide, you would receive access to different types of insurance options that you can purchase. If you qualify, you will receive a discount in the form of a subsidy, or a tax credit; in other words, you’ll receive money back during tax season.
What Happens if You Don’t Qualify for a Discount?
You may make too much to be considered eligible for a tax credit. If that’s the case, you still have the ability to purchase a plan through the federal Health Insurance Marketplace or through your state’s health insurance exchange; however, you won’t receive a discount. But, while you may not be eligible for a discount, you could still land a pretty good price on a health insurance plan.
What Type of Plans are Available?
Health insurance plans are split up into what is referred to as tiers, including Bronze, Silver, Gold, and Platinum. The primary difference between each of these tiers is the pricing and the percentage of cost-sharing. The least expensive plans are Bronze; however, they also offer the least amount of coverage, as they only cover 60 percent of your medical services. Platinum plans, as you can probably guess, are the most expensive; but, they provide the most coverage, as they cover up to 90 percent of the services you receive.
Is there a Penalty?
For the first few years Obamacare was effective, there was a federal penalty in place. Those who did not carry health insurance and purchase it were penalized, and they were required to pay that penalty the next tax season; for example, if they didn’t have coverage for the 2017 year, a penalty had to be paid when 2018 taxes were filed. That’s no longer the case, as the Trump Administration lifted the federal penalty at the beginning of 2019. However, there are some states that have a penalty in place, so while there is no federal penalty in place, if you live in a state where a penalty is in place, you could be charged for not carrying health insurance.
Changes to Obamacare
The Trump administration has made changes to the Affordable Care Act, which has affected the cost of health insurance, driving it up instead of down. At the end of 2017, the tax mandate was repealed, which means that tax credits have been changed. Essentially, the primary goal of Obamacare, which was to lower health insurance, has failed.
The Trump administration claims that they will offer another reform for health care, but it has yet to finalize a solution.
The Bottom Line
You can still purchase health insurance through Obamacare, and there are still affordable options available. If you need assistance with finding a policy, contact a health insurance agent.