Definition and Example of Obamacare

Obamacare is the Patient Protection and Affordable Care Act (ACA). Most people think it only affects health insurance, but it has changed the way the U.S. delivers healthcare overall. The term "Obamacare" was first coined by critics of the former president's efforts to reform healthcare, but the name stuck.

The ACA made important changes to the way many people are able to access healthcare. For example, before the ACA, insurance companies could exclude people with pre-existing conditions. As a result, the people with the greatest health expenses sometimes had to go without insurance or settle for a policy that did not cover their condition. Because they couldn't afford regular doctor visits, they often ended up in hospital emergency rooms, unable to contribute to the expense of their treatments.

The accessibility of Obamacare allows people with pre-existing conditions to afford preventive care, thus reducing hospital visits and slowing the rise of healthcare costs.

How Obamacare Works

The ACA’s primary goal was to slow the rising cost of healthcare by taking steps to make health insurance more available and more affordable to those who need it the most. The act also required everyone to carry health insurance or pay a tax penalty, but that provision ended in 2019.

The ACA also aims to make health insurance more affordable for those with the lowest incomes by subsidizing the cost. Medicaid was extended to those who earn up to 138% of the federal poverty level, but as of 2021, 12 states have elected to not expand Medicaid, limiting accessibility for their residents. Located mostly in the South, the states are:

  • Alabama
  • Florida
  • Georgia
  • Kansas
  • Mississippi
  • North Carolina
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Wisconsin
  • Wyoming

The poverty level usually increases each year to keep up with inflation. Those who earn too much for Medicaid receive tax credits if their income is less than 400% of the poverty level. The credit is applied monthly rather than as an annual tax rebate. They also pay reduced co-payments and deductibles.

Do I Need to Pay a Penalty?

To ensure that insurance companies could afford to add patients with pre-existing conditions, the ACA initially required everyone to have health insurance for at least nine months out of every 12 or be subject to a tax.

In December 2017, Congress repealed the penalty, effective in 2019, with the Tax Cuts and Jobs Act. Even before that happened, many groups had successfully petitioned Congress so they could be exempt from Obamacare. 

By removing the mandate, Congress effectively required insurance companies to take patients with pre-existing conditions while potentially removing healthier patients, thus increasing costs for the insurance companies. Since the subsidies remain in place, Congress also made sure the government would pick up a percentage of the rising costs.

How Much Are Obamacare Taxes?

Even though the mandate no longer applies, there are still some taxes related to Obamacare:

  • If you make more than $200,000 per year: Taxes increased in 2013 for individuals making more than $200,000 per year or $250,000 for married couples, some healthcare providers, and other health-related businesses.
  • If you're a business owner: If you have 50 or more employees, you must provide insurance to at least 95% of full-time employees or pay a fine.

How to Get Obamacare

Even though Congress cut off one of the legs supporting the ACA, you still can take advantage of the parts that work.

Health Insurance Exchanges

The health insurance exchanges are open for enrollment between November 1 and December 15 each year. If you miss the window, you still can use the exchanges to buy interim private insurance or apply for Medicaid. You also can use them to compare plans for the future.

Some exchanges are run by states, and some by the federal government. It is important to compare all costs, including monthly premiums, annual deductibles, percentages covered, and copayments.

What Does Obamacare Cover?

Under the ACA, insurance plans must allow parents to include their children on their plans up to age 26 and provide 10 essential services:

  1. Preventive and wellness visits, including chronic disease management
  2. Maternity and newborn care
  3. Mental and behavioral health treatment
  4. Services and devices to help people with injuries, disabilities, or chronic conditions
  5. Lab tests
  6. Pediatric care
  7. Prescription drugs
  8. Outpatient care
  9. Emergency room services
  10. Hospitalization

Notable Happenings

Although Congress has made major changes to Obamacare, the ACA still remains in place.

President Trump managed to eliminate individual mandate, so U.S. residents without health insurance no longer have to pay a penalty fee. He also encouraged states to ask for "work requirements" before providing Medicaid. Beneficiaries must show proof that they're either employed or in school. However, many of the work-requirement waivers are pending litigation as of December 2021.

A new rule took effect on January 1, 2021, which requires hospital groups to disclose these prices to patients.

Republicans would like to completely repeal and replace Obamacare, but whether that will happen is still to be seen. In June of 2020, the Trump administration asked the Supreme Court to overturn Obamacare. The Supreme Court left the law in place.

Key Takeaways

  • "Obamacare" is an alternative term for the Patient Protection and Affordable Care Act (ACA) of 2010.
  • The plan's aim was to make healthcare more affordable for everyone by lowering costs for those who can't afford them.
  • Under the ACA, the law required parents to include their children on their plans, up to age 26.
  • The ACA mandated that insurance companies include 10 necessary benefits.