All About Obamacare

Sec. Sebelius, Kansas misses you.

Obamacare, or the Affordable Care Act (ACA), will probably stand as the most important law passed during President Obama's tenure in office.  It's definitely the most significant overhaul of the U.S. health care system since the creation of Medicare and Medicaid in the 1960s.  And yet there is a lot of confusion and disinformation among the American public about it - polls suggest that up to 40% of Americans don't even know that it's still the law of the land.  So I'm going to try to explain the most important provisions without much in the way of politics, because it's important for everyone to understand just what the ACA does and doesn't do (the politics might come in a later post).  My sources are generally Wikipedia, the Congressional Budget Office, and www.healthcare.gov of the Department of Health and Human Services (a very useful website for more info).

First, let's clear up two misconceptions about what Obamacare is not:

Obamacare is not "socialized medicine."  This would mean that the government would control pretty much every aspect of health care in the country, including the running of hospitals and clinics.  Great Britain has a system like this - the National Health Service.  It's a matter of great pride for the country, so much so that the UK's conservative politicians would never think of dismantling it.  But to even think of implementing such a system nationwide in the U.S. is pointless - it won't happen.  However, the Veterans Administration provides completely socialized medicine to our vets.

Obamacare is also not completely socialized health care.  Countries such as Canada and Australia have a "single payer" health care system, which basically means that the people pay taxes to the government for health care, and the government pays all health care costs.  Health care facilities, however, are still generally private businesses.  Under such a system, your taxes would be higher, but you wouldn't pay insurance premiums, and your out-of-pocket health care expenses would be minimal.  It would also completely separate health insurance from employment - as in it would no longer be a benefit of such.  Many U.S. liberals wanted such a system for America, but, not surprisingly, the insurance companies fiercely resisted such a move.  However, the U.S. does have a form of single-payer health care - it's called Medicare.  Truly socialized health care would simply extend Medicare and Medicaid to cover everyone.  Instead, the ACA represents a step towards socialized health care, the genesis of which was thought up by the conservative think tank Heritage Foundation and - as is widely known - was pioneered in Massachusetts under Governor Mitt Romney.

So what is Obamacare?  It's a middle-of-the-road, heavily compromised attempt to provide every American with health insurance.  Just because it was passed by a Democratic Congress, don't assume it's a liberal's dream bill (that would've been something akin to a single payer system, above).  It still had to be heavily negotiated with insurance companies and other interests.  And, despite the 37  attempts by the GOP House to repeal it (costing US taxpayers $50 million), the ACA is not going away.  The insurance companies are way too heavily invested at this point.  It's the law, and so it's important to know just what's going to happen and when.

Beginning in 2014, the law will require every American to have health insurance - either through their employers or obtained themselves.  Health insurance exchanges are set up in states that will serve as a marketplace for insurance companies to compete for new policyholders.  Subsidies will be available for many people to help afford insurance.  If you don't get insurance, you will have to pay a penalty.  However, numerous other provisions are added to sweeten the deal for those insured.  Insurance companies will not be able to refuse policies due to any pre-existing conditions.  They will not be able to impose lifetime or annual spending limits.  Premiums will be capped.  Many preventive care services must be provided completely free of charge (no co-payments).  All children, regardless of status, will be able to remain on their parents' insurance plan until their 26th birthday.  For a bit more detail, here is a timeline:

Key Provisions of the ACA and Their Effective Dates

Effective September 23, 2010

• Children may remain on their parents' insurance plan until their 26th birthday.  This includes children who no longer live with their parents, are not claimed as dependents on tax returns, are no longer students, and are married.
• Insurers must cover certain preventive care and may not charge co-payments or other fees for such.  For example, you can generally see a doctor for a checkup completely for free, probably once a year.
• Insurers may not exclude pre-existing conditions on insurance plans for children under 19.
• All new insurance plans must cover childhood and adult vaccinations without co-payments or other fees.
• Insurers may not impose lifetime dollar limits for essential benefits under newly issued policies.
• Insurers may not drop policyholders when they get sick.

Effective January 1, 2011

• Insurers must spend at least 80% of premium dollars on actual health care costs; anything below this must be returned as rebates to policyholders.

Effective August 1, 2012

• Insurance plans must cover many women's preventive services without cost-sharing.  This includes FDA-approved contraception, which has been controversial with some employers (too much politics to get into more detail here).

Effective by October 1, 2013

• Individuals who do not have health insurance may begin to enroll in state-run insurance exchanges (more below).

Effective by January 1, 2014   (the big day)

• Insurers may not discriminate or charge higher premiums for anyone based on gender or pre-existing medical conditions.  This is a very popular provision - more popular than the ACA as a whole - but keep in mind the insurance companies only agreed to it because requiring everyone to have health insurance makes the pool of risk broad enough to allow for such a provision.
• Insurers are prohibited from establishing annual spending caps.
• Health insurance exchanges are established.  These are state-by-state marketplaces where individuals without insurance may buy it from competing companies.  Subsidies will be given to individuals to buy a plan on the exchange if their income is between 133% and 400% of the federal poverty level.  Premium caps are established based on the insured's income level.
• In participating states, Medicaid will be expanded to cover those who earn up to 133% of the federal poverty level (covering everybody below the rate to buy on an insurance exchange).  Note that the Supreme Court ruled that states could opt out of this provision, and several Republican-run states have (including many that would have large populations with increased eligibility...but I digress.)
• Individuals without health insurance will be assessed a penalty, which starts out at $95 (more with higher income), and rises to $695 minimum in 2016.
• Two years of tax credits are offered to eligible small businesses as insurance premium subsidies.
• Employers with more than 50 employees must offer insurance plans to their full-time workers (more than 30 hours / week) or face a $2,000 / employee penalty.  This will undoubtedly cause some employers to limit full-time hours - we've already seen this happening - and is one of the drawbacks of continuing to tie health insurance to employment for many people.

There are more provisions that take effect in later years (through 2020) but for average consumers, these are the key items to know now.

How the ACA is Funded: Major Revenue Sources

• Increase the Medicare tax on incomes over $200,000 (individual) and $250,000 (joint) by 0.9%.  So this is a tax increase, but only for top earners.
• Annual fee levied on health insurance providers
• 40% excise tax on so-called "Cadillac" health insurance policies.  These are very high-cost plans, with annual premiums over $10,500 for individuals or $27,500 for families.  Critics argue these plans encourage overuse of medical services because they have very low co-payments and deductibles, which drives up costs for everybody else - thus necessitating a tax. 
• Annual fee on manufacturers and importers of branded (not generic) drugs
• Offsets resulting from cost-saving changes to traditional Medicare programs

Much more information is out there, but those are the basics.  Is the ACA a perfect law?  Hardly, but no compromise legislation that actually gets passed is.  Likewise, there will probably be some rough spots when more-or-less full implementation occurs next year.  Expect these, and don't immediately assume it is broken.  Some states are really taking the initiative in establishing their health insurance exchanges - here is a good article about Oregon's efforts.  Keep in mind that rather than rampant socialism, these exchanges are based on the fundamental principle of free-market economics - companies competing for business lower their prices to attract customers.  And two companies in Oregon appear to be doing just that.

As 2014 nears, stay informed with what's going on.  The HHS website will be a good place to go - yes, it is part of the Obama administration, but they're not going to lie about the basics of the law that anyone could look up.  I only ask, as usual, that you don't get your information from Fox News.  Remember that the GOP's mission (and therefore Fox's) is to destroy the Affordable Care Act before it gets off the ground.  That's not me being political - it is their stated goal (see aforementioned repeals).  Every other industrialized country in the world has some kind of socialized health care system.  Their societies have survived, with first-rate health care intact.  In the end, Obamacare may prove to be a verifiable failure.  But as a first shot at providing every American with the health care they need, I think it's worth a try.