ObamaCare (the Patient Protection and Affordable Care Act)

ObamaCare Summary

ObamaCare (the Patient Protection and Affordable Care Act) is a healthcare reform law signed by President Barack Obama on March 23, 2010. It requires all Americans to have health insurance, offers cost assistance through exchanges, implements new consumer protections, regulates the health insurance industry, and helps curb healthcare spending.

Getting into every detail about the Affordable Care Act, or ACA as we call it for short, is more information than the average person needs to (or will want to) handle. Given this, you’ll find only the most important information below:

What is ObamaCare?

The term “ObamaCare” was originally used as a pejorative term by opponents of the bill meant to associate healthcare reform with President Obama to reduce it’s popularity. However, both the term and the bill stuck. Today, the Affordable Care Act is “the law of the land” and Barack Obama embraces the term “ObamaCare” saying “he does care.”

The official name for ObamaCare is the Patient Protection and Affordable Care Act (PPACA), but it’s sometimes called the Affordable Care Act (ACA). What we think of as the law also includes the healthcare-related sections of the Health Care and Education Reconciliation Act of 2010. You can read the whole law: the Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 here.

ObamaCare’s Requirement to Have Insurance, the Fee, and Exemptions

• Under the Affordable Care Act, a health insurance policy can only be purchased during that type of policy’s open enrollment period.
• All Americans must obtain and maintain coverage known as minimum essential coverage throughout the year, get an exemption, or pay a fee.
• The fee for 2015 is $325 per person and $162.50 per child, per year (family max $975) | or 2% of your household income that is above the tax return filing threshold for your filing status (whichever is greater). The fee increases each year.
• There are almost 20 exemptions from the fee including:
  • Getting covered during open enrollment either inside or outside the Marketplace
  • Going less than three months without coverage
  • Not having to file taxes because your income is below the tax filing threshold
  • Coverage costing more than 8% of household income per person (or an arrogate of 8% for two or more people on a family plan)
  • Getting denied Medicaid or CHIP in a state that didn’t expand Medicaid
• For the most part, you can claim exemptions at tax time on form 8965. However, some exemptions require you to apply to HealthCare.Gov and receive an Electronic Confirmation Number (ECN) first.

Getting Cost Assistance Through ObamaCare

There are a few different types of cost assistance offered by the Affordable Care Act: Premium Tax Credits, Cost Sharing Reduction Subsidies, Medicaid, and Expanded Employer Coverage. We touch on each type below, but first let’s look at the Federal Poverty Level and Household Income (as that is what all cost assistance is based off of).

Federal Poverty Guidelines and Household Income

• The Federal Poverty Level Guidelines (shown below) are used to see what percentage of the 100% Federal Poverty Level your families household income falls under. If a family’s household income is between 100% and 400% of the Federal Poverty Level, the family qualifies for cost assistance.
• Household or family income for the purposes of the ACA is the MAGI of the head of household (and spouse if filing jointly) plus the AGI of anyone claimed as a dependent. MAGI is short for Modified Adjusted Gross Income. On that same note, AGI is Adjusted Gross Income and can be found on line 37 of your 1040. Simply though, it’s claimed income after deductions.
• Modified Adjusted Gross Income (MAGI) includes Adjusted Gross Income on your federal income tax return plus any excluded foreign income, nontaxable Social Security benefits (including tier 1 railroad retirement benefits), Supplemental Security Income (SSI), and tax-exempt interest received or accrued during the taxable year.

Federal Poverty Guidelines 2014 – Continental U.S.

HealthCare.Gov, Premium Tax Credits, and Cost Sharing Reduction Subsidies

• HealthCare.Gov is the official “Health Insurance Marketplace.” A Health Insurance Marketplace is a state or federal health insurance exchange (depending upon your state). Consumers can use the Health Insurance Marketplace to shop for insurance.
• The Marketplace offers four tiers of plans called “metal plans.” They are bronze, silver, gold, and platinum. They all offer the same basic protections but have different networks, cost sharing, and benefits beyond the basics. Typically, the more precious the metal, the better the plan. However, your specific needs, the provider, and cost assistance options can sometimes give cheaper plans a better value then higher-end plans.
• Those with estimated household incomes for the upcoming year of between 100% – 400% of the Federal Poverty Level can use these exchanges to get cost assistance on premiums. That cost assistance is known as Premium Tax Credits.
• You can get Advanced Premium Tax Credits up-front based on your projected household income, or you can claim the credits in part or in whole at the end of the year based on the actual annual household income you claim. Whether you get them upfront or not, they will have to be adjusted on form 8962 – Premium Tax Credit when you file your taxes. If you take too many credits up-front, you could end up having to repay them up to the repayment limit; keep this in mind when deciding how many credits to take up-front!

Cost Sharing Reduction Subsidies to Lower Out-of-pocket Costs

Those making between 100% – 250% of the Federal Poverty Level can get out-of-pocket assistance to lower their cost-sharing amounts. This type of cost assistance is known as Cost Sharing Reduction Subsidies (CSR). This is only offered on Silver plans sold on the Marketplace. If your income is around this amount, then a Silver plan will typically offer the best value. Unlike with premium tax credits, you don’t have to repay out-of-pocket cost assistance.

Medicaid Expansion

• One of the most important things the Affordable Care Act did was expand Medicaid to all adults making 138% of the Federal Poverty Level. Before the ACA, many states didn’t provide coverage to single adults, or had narrow eligibility guidelines. This left a gap called the “Medicaid Gap,” which left tens of millions without coverage.
• A 2012 supreme court case changed the law and made it so that states could opt-out of Medicaid. As of February 2015, only 28 states and DC have expanded Medicaid. Eligibility remains narrow in the other states. Below is an updated map of where the states stand on Medicaid. Moving forward, more states are expected to expand.
• Under the ACA, CHIP is also expanded and then was expanded again under The Medicare Access and CHIP Reauthorization Act of 2015.
• Low-income kids can be enrolled a health plan 365 days a year via CHIP, and all qualifying adults can enroll in a health plan 365 days a year via Medicaid. In some instances, parents can join CHIP as well.

Via: The Advisory Board Company

Expanding Employer Coverage

While cost assistance for private coverage and Medicaid are important parts of the ACA and are instrumental in covering the 40 million or so without coverage, almost 50% of Americans get their coverage through their employer. Given this, the employer mandate (which requires firms with 50 or more full-time equivalent employees) and the SHOP (which offers tax credits to small businesses who insure their employees) are some of the most impactful provisions in the ACA.

• Starting in 2016, employers with 50 or more full-time equivalent employees must offer coverage at least 95% of full-time employees or pay a fee.
• Under the ACA, for the purposes of complying with the employer mandate, full-time workers are defined as anyone who works an average of 30 hours or more.
• Small businesses with fewer than 25 full-time equivalent employees making less than $50,000 in average annual wages can get tax credits to help reduce the cost of employee premiums

Benefits Rights and Protections

Aside from expanded coverage, cost assistance, and the requirement to get covered, the next most important aspect of the ACA to understand is its set of new benefits, rights, and protections that expand consumer protections. These range from bans on discrimination due to health or gender, to new minimum cost sharing and benefits on all plans.

The new benefits, rights, and Protections under ObamaCare include:

• Letting young adults stay on their parents’ plan until 26
• Stopping insurance companies from denying you coverage or charging you more based on health status
• Stopping insurance companies from dropping you when you are sick or if you make an honest mistake on your application
• Preventing gender discrimination
• Stopping insurance companies from making unjustified rate hikes
• Doing away with life-time and annual dollar limits
• Giving you the right to a rapid appeal of insurance company decisions
• Expanding coverage to tens of millions by subsidizing health insurance costs through the Health Insurance Marketplaces (HealthCare.Gov and the state-run Marketplaces)
• Expanding Medicaid to millions in states that chose to expand the program
• Providing tax breaks to small businesses
• Requiring large businesses to insure employees
• Requiring all insurers to cover people with pre-existing conditions
• Making CHIP easier for kids to get
• Improving Medicare for seniors
• Ensuring all plans cover minimum benefits

It’s important to understand that plans established before March 23rd, 2010, are considered grandfathered plans. Grandfathered plans don’t have to adhere to any of the above rules. Both individual and group plans can be grandfathered. It’s also important to understand that only private health plans for individuals and families and small group plans that count as minimum essential coverage have all the benefits, rights, and protections.

Improvements to Medicare

The ACA cuts wasteful spending from Medicare, closes the Part D donut hole, and gives seniors more benefits, rights, and protections (including a free preventive visit each year).

While the ACA does a lot for patients, the main goal of Medicare reforms (aside from improving patient care) is in curbing Medicare spending. Under the ACA, new programs like the Medicare Shared Savings Program are helping to reduce the deficit.