What Is Obamacare Anyway?
Let’s be honest: Nobody really understands Obamacare. The complicated, far-reaching Patient Protection and Affordable Care Act, signed into law on March 23, 2010, supposedly makes health insurance less expensive for all Americans.
It also makes most Americans confused. What is Obamacare, anyway? How does it work? And how does it affect you?
Here’s a bite-sized breakdown of the Affordable Care Act, designed to fill you in on healthcare reform quickly. In a nutshell, this is what you should know about Obamacare.
How Does It Work?
Under Obamacare, everyone can purchase health insurance: Insurance companies aren’t allowed to turn you down if you have pre-existing health conditions, or charge you higher premiums. (Smoking is the only risk factor that may raise your premium rates.) Everyone your age, in your location, can buy a basic insurance policy for the same low price. You’re guaranteed to get approved for health insurance. This concept is known as “guaranteed issue.”
However, that’s not the whole story.
Under Obamacare, everyone HAS to purchase health insurance: If you’re not already covered under a group or company policy, or by Medicare or Medicaid, you’re required to take out an individual health insurance policy, or else pay a stiff penalty.
(The reasons for this requirement are long and complicated. Basically, the government has to make sure healthy people will still purchase insurance policies. Otherwise, now that sick people can take out insurance, everyone will wait to get insurance until they get sick. Insurance companies will have to increase premiums drastically to pay for all the hospital costs, and eventually no one will be able to buy insurance any more, the companies will go bankrupt and the sick people will die. A bleak prospect overall. This is called the “death spiral.”)
So, what do you do if you’re too poor to get insurance?
Obviously, not everyone can afford health insurance. Low-income and under-privileged people still have to comply with the law, but they get government assistance, which of course makes things much simpler for them. Under Obamacare, low-income individuals receive federal subsidies that help them pay for insurance.
The subsidy amount varies depending on the situation. Individuals and families from 100% up to 400% of the federal poverty level will receive federal subsidies on a sliding scale. There’s one catch, though. In order to be eligible for the subsidies, low-income individuals MUST purchase their insurance through a federal health insurance exchange.
And a federal health insurance exchange is….?
Essentially, it’s like a big flea market for insurance. Effective in October 2013, each state will hold a health insurance fair where people can compare insurance plans and policies from different companies, and decide which one they want to purchase. If you’re a low-income individual, you should buy your insurance at one of these exchanges, because then (and only then) will the government help you pay for your policy. (Very small businesses can get subsidies too, as long as they take out their insurance through the federal exchange. So that’s a good deal for them.)
In theory, Obamacare also makes more people eligible for Medicaid: The legislation extends Medicaid to anyone with an income up to 133% of the poverty level. However, some states have decided to opt out of this feature.
Of course, Obamacare is funded by increased taxes: Taxes on businesses, taxes on tanning salons, taxes on individual income….you name it. (And you’ll probably have to pay it, too.)
Is Obamacare worth it? That’s what we’re all asking ourselves.
What Are The Problems with Obamacare?
On the up-side, a wider range of Americans will definitely have access to basic health care. On the down-side, many of us may find ourselves paying for coverage we don’t want or need.
Also, the health care policies we purchase may not come anywhere close to covering our actual medical needs. For a cancer or heart transplant patient, medical costs can run into the multiple thousands. The standard insurance available under the Affordable Care Act will barely scratch the surface of radiation, chemotherapy, travel for treatment or organ transplants. Not to mention the ongoing costs of living, like mortgage payments and childcare.
As Obamacare continues to unfold (the plan should be fully implemented by January 2020), we should explore back-up insurance options in order to stay prepared for the unexpected. A supplemental insurance policy like critical illness insurance or cancer insurance can be a good solution. Supplemental insurance stands alone (it won’t affect your current insurance plan), but it provides an extra financial cushion if you’re diagnosed with a covered critical illness.
With a supplemental insurance plan, you receive a lump sum benefit on first diagnosis of a covered condition. Benefits are available from $10,000 up to $100,000, and can be used for whatever you need: medical expenses, treatments, co-pays or living expenses. Unlike traditional health insurance, a supplemental insurance payout is designed to meet your real-life requirements, not a narrow range of criteria. Cancer insurance and critical illness insurance give you the extra financial confidence you need to face the future.
It’s a lot less confusing than Obamacare.