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What Exactly is Obamacare and How Does it Affect You?
We’ve all heard the term. It’s been bantered about now for many months ever since President Obama’s health care plan was passed into law. But do we really know what this all means? What exactly is Obamacare all about?
When you hear politicians talking about Obamacare what they are really talking about is the Patient Protection and Affordable Care Act, otherwise known as PPACA. This federal health care statute was signed into law on March 23, 2010, by President Obama and was designed to decrease the number of uninsured Americans. It was the most significant overhaul to the US healthcare system since the inception of Medicare back in 1965.
The PPACA contains numerous provisions that will take effect over several years. Some of the provisions were effective beginning in 2010 but many don’t become effective until 2014 and beyond.
At a very macro, high level, the PPACA was designed to do two things. The primary objective was to reduce the number of uninsured Americans while reducing the cost of health care in this country
So what exactly is in this law and how does it affect you and me? This can be a tough question to answer as this bill is very long, over 300,000 words long. While this may seem excessive, apparently most bills in Washington are lengthy. Without trying to delve into every detail of this bill I thought I’d try to give a summary of the highlights and when they take effect.
- United States Department of Health and Human Services
Insurance and health care information for consumers and small businesses.
- The Health Care Law & You - HealthCare.gov
PPACA website providing insurance and health care information for consumers and small businesses
Already in Effect:
- The Food and Drug Administration is now allowed to approve more generic drugs in an effort to increase competition and lower prices.
- The rebate that drug manufactures pay to the states has increased to 23.1%. This is on brand named drugs.
- Establishes a non-profit group called the PCORI, or Patient-Centered Outcomes Research Institute. This group, which is to remain independent from the government, is tasked with evaluating different medical treatments and studying their effectiveness. Their findings may be used by Medicare in determining what treatments to cover.
- The bill will now require fast food restaurants to display how many calories are contained in the food that they serve. They are also required to provide, upon request, information such as sodium content, saturated fat, and carbohydrate levels.
- It creates a temporary high-risk pool for adults who have a pre-existing condition, and have been uninsured for the past six months or longer. This part of the bill is designed to slowly get rid of the “pre-existing condition” penalty altogether by 2014 when everyone will be charged the same for insurance regardless of their past medical history.
- The bill prevents Insurance companies from imposing lifetime limits on benefits. Many Insurance Companies have million dollar lifetime limits which will no longer apply. If you have insurance they cannot deny you due to a lifetime limit.
- Allows kids to be covered by their parent’s insurance plan up to age 26, even if they no longer live at home or are not students.
- For children under the age of 19, Insurers are prohibited from excluding “pre-existing conditions”
- Insurance companies can no longer drop a customer once they get sick.
- Insurance companies must have or implement an appeals process so that customers have some form of recourse if a procedure is turned down.
- The bill creates a new 10% tax to be applied to indoor tanning booths.
- Extends Medicare coverage to smaller, rural hospitals.
- Requires Medicare patients with a chronic illness to be evaluated more thoroughly on a three month basis.
- Establishes a new website to provide consumers and small businesses with insurance and health care information. See link below.
- Requires all new insurance plans to cover preventive care procedures such as colonoscopies and mammograms without any co-payments or deductible payments.
- The bill requires insurance companies to spend at least 85% (80% for individual or small group insurers) of the premium dollars charged on health care costs and claims. What this means is that only 15% to 20% of the premium can go towards profits and administrative costs?
- Flexible spending accounts and health savings accounts can no longer be used to purchase over the counter drugs.
- Employers are now required to disclose on the employee’s annual W-2 Form the value of the benefits that they provide.
Now for some of the phased in changes:
- If you make over $200,000 annually, $250,000 for married couples filing jointly, you will see a small tax increase of .9%
- Pre-tax contributions to your flexible spending account will now be limited to $2,500 per year.
Health Care Exchanges:
This area of the Bill deserves some further detail so I'll try to explain this in as simple terms as possible.
The health care exchanges will be state run and will provide a one-stop location for comparing private health plans. These health plans will be offered in four tiers: bronze, silver, gold, and platinum. The levels differ in the percentage of the cost that is covered and start at 60% for the bronze and go up to 90% for the platinum in 10% increments.
All of the plans in the different tiers will offer some minimum benefits deemed essential and no one can be denied coverage due to a pre-exisiting condition.
For those of you covered by employer provided health care coverage you may be "grandfathered" in to a plan that you can keep.
- The elimination of pre-existing medical conditions. Insurance companies can no longer charge you a higher rate due to your medical history.
- A fee or penalty will be imposed on those individuals who are not covered by an acceptable insurance plan. The only exemptions allowed to the coverage provision and penalty are for religious reasons or if you cannot afford one. The affordability test is if the least expensive policy exceeds 8% of your income.
- Medicaid will be available to more people. Individuals with incomes up to 133% of the poverty level will now be Medicaid eligible.
- Some small businesses will get tax credits for two years.
- Employers with over fifty employees must offer their full-time workers health insurance or pay a $2,000 penalty per employee.
- The bill will place limits on the maximum annual deductible that insurance companies can charge.
- The bill establishes what is known as health insurance exchanges so that low and middle class families (up to 400% of the poverty level) will have an access to affordable insurance plans. The exchange is basically a state run health plan that is eligible for federal subsidies in the form of tax credits.
- Members of Congress will no longer be offered insurance through the Federal Employees Benefits Program but will instead have to choose from plans offered through the insurance exchanges.
- A new tax will go into effect on pharmaceutical companies and will be based on their market share.
- A new tax of 2.3% will go into effect on the purchase of medical equipment.
- The Schedule A or itemized deductions level for deducting medical expenses will increase from 7.5% to 10% of your earned income.
Physicians who provide consistent high quality care will receive larger payments from CMS (Centers for Medicare and Medicaid Services). This one is difficult to envision as how to measure the quality of health care is a very debatable issue.
The itemized medical threshold for seniors rises from 7.5% to 10%.
States may apply for a waiver to the PPACA if they can come up with their own health plan, which meets certain criteria. The request will be made to the Secretary of Health and Human Resources and the state plan should be able to provide the same level of care and affordability as that provided by the PPACA.
- All existing health care plans, not just the new ones, must cover preventative care without co-payments.
- A new 40% excise tax will be imposed on so-called “Cadillac” insurance plans. These are very expensive health care plans that cost in excess of $27,500 for a family plan and $10,200 for an individual plan.
The bill would provide and extension of Medicaid coverage to former foster care children who were in foster care a minimum of six months and are under 25 years of age.
A complete elimination of the Medicare Part D coverage gap.
The PPACA is good for America?
That’s it. Hopefully this provided a quick and concise summary of exactly what Obamacare is and how it is going to affect all of us. There certainly is a lot to this bill and it is undoubtedly going to alter health care in the United States.
I should add a disclaimer here that publication of this PPACA Summary in no way reflects any personal opinion or stance that the author may have on this issue. This was simply an effort to educate myself and any potential readers about a topic that will affect all of us.
For a look at the entire PPACA follow this link:
- United States Department of Health and Human Services
Insurance and health care information for consumers and small businesses
© 2012 Bill De Giulio