What Is Obamacare?
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Kimberly Amadeo, About.com Guide
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www.Health-Insurance.org Question: What Is Obamacare?
Answer: Obamacare is a name used by critics of
President Obama's efforts to reform health care. It's a common term used to describe the
Patient Protection and Affordable Care Act of 2010. Those who oppose the Act are concerned that it gives the Federal government too much control over personal health care decisions and benefits, forcing a "complex one-size-fits-all health system" onto the states. Those who are in favor of the Act want lower health care costs overall by making it affordable for more people.
Obamacare Pros
The non-partisan Congressional Budget Office lists the advantages of Obamacare:
- The Act was designed to reduce overall health care costs by making services available to the 32 million who currently can't get insurance. They often use a hospital emergency room as their primary care physician, increasing costs for everyone. This starts in 2014.
- For people who can't afford health insurance, the Federal government will pay the states to add them to Medicaid. The income requirement is expanded up to 133% of the Federal poverty level - roughly $29,000 for a family of four.
- Those who don't qualify for the expanded Medicaid will receive tax credits if their income is below 400% of the poverty level ($88,000 for a family of four). States will be required to set up insurance exchanges to make it easier to shop for private health insurance coverage.
- Insurance companies cannot deny children coverage for pre-existing conditions. This benefit applies to everyone in 2014. Insurance companies can no longer drop anyone from coverage once they get sick. If a company denies someone coverage, that person can go to an external appeals process.
- Parents can put their children up to age 26 on their health insurance plans. This will bring more profit for health insurance companies, since they will receive more premiums without higher costs for these healthier individuals. As of 2012, more than three million previously uninsured young people were added. (Source: Department of Health and Human Services)
- The Medicare "donut hole" gap in coverage will be eliminated by 2020.
- People with existing health insurance will keep it. Businesses prefer to offer a tax-free benefit like health insurance to attract good workers. That won't change under Obamacare.
- Obamacare does not apply to businesses with less than 50 employees. Larger businesses are required to offer health insurance, but receive tax credits to help employees pay premiums. In 2014, the tax credit increases to 50%.
- The Act will lower the budget deficit by $143 billion over the next 10 years by raising some taxes and shifting more cost burdens. (Source: CBO CBO Report on Health Care Reform and the Budget; Wall Street Journal, What Health Insurance Ruling Means, June 28, 2012; NPR, Medicaid Expansion, June 27, 2012)
Obamacare Cons
The CBO (and other non-partisan groups, as cited below) also list some disadvantages of the Act.
- Increased coverage may actually raise health care costs. That's because many people will receive preventative care and testing who, fortunately, find out they didn't have that critical illness. However, the CBO found that additional testing, such as cancer screening and cholesteral tests, will lead to higher net medical spending. (Source: CBO,2009 Study on Preventative Health Care, August 7, 2009)
- Those who don't purchase insurance, and don't qualify for Medicaid or subsidies, will be assessed a penalty of $95 (or 1% of income, whichever is higher) in 2014. It increases to $325 (or 2% of income) in 2015, and $695 (or 2.5% of income) in 2016.
- About 4 million people, or 1.2% of the population, will wind up paying the penalty rather than purchase health insurance. The CBO estimates this will total $54 billion in penalties. (Source: Washington Post Factchecker, Tax Breaks vs Tax Hikes, July 6, 2012)
- Taxes will be raised on one million individuals with annual incomes above a threshold of $200,000 and four million couples filing jointly with incomes in excess of $250,000. They would pay 2.35% (up from 1.45%) Medicare taxes on income above the threshold. In addition, they will pay a additional 3.8% Medicare taxes. This would apply to the lesser of income from dividends, capital gains, rent and royalties or income above the threshold. (Source: Smart Money, What Obamacare Means for Taxes, June 28, 2012)
- Pharmaceutical companies will pay an extra $84.8 billion in fees over the next ten years to pay for closing the "donut hole" in Medicare Part D. This could raise drug costs if they pass this onto consumers.
- In 2018, insurance companies will be assessed a 40% excise tax on "Cadillac" health plans. These are plans with annual premiums exceeding $10,200 for individuals or $27,500 for families. Many of these plans are for people in high-risk pools, such as older workers or union workers in high-risk jobs. (Source: Kaiser, Cadillac Tax Explained, March 18, 2010)
- Medical-device manufacturers and importers will pay a 2.3% excise tax. Indoor tanning services already pay a 10% excise tax. This could discourage those businesses from hiring new employees.
- Between 3-5 million people could lose their company-sponsored health care plans. Many businesses will find it more cost-effective to pay the penalty and let their employees purchase their own insurance plans on the exchanges. Other small businesses might find they can get a better plan through the state-run exchanges. (Source: CBO, The Effects of the Affordable Care Act on Employment-Based Health Insurance, March 15, 2012)
- There are 30.1 million people who currently buy their own private health insurance. Many of them may need to get another plan if their insurance doesn't meet the minimum standards -- which haven't yet been established. (Source: Factcheck.org, The Keep Your Plan Promise, June 28, 2012)
- In 2014,those under 65 can only deduct medical expenses if they exceed 10% of income.
In addition, the conservative think tank The Heritage Foundation lists its analysis of the disadvantages of Obamacare. For more, see Heritage Foundation,
Impact of Obamacare.
Is Obamacare Unconstitutional?
On June 28, 2012, the Supreme Court ruled that the Federal government does not have the Constitutional right to mandate that people must buy health insurance from a private company. However, it does have the right to tax those that don't. Therefore, it upheld the Act.
The Court struck down the mandate that states must add people to Medicaid. However, many states will still take advantage of this portion of Obamacare because the Federal government will foot the bill for the first several years. For more, see
What Is the Status of Health Care Reform?.
Obamacare Background
2008: The controversy started during the 2008 Presidential election campaign. One of
Obama's campaign promises was to create a government program, similar to that used by Congress, that would extend health care insurance coverage to everyone. He also wanted a national electronic information exchange system to provide patient care records to any doctor who needed it. Critics called this socialism, since it involved the government in mandatory health care for everyone, similar to countries in Europe and Canada. It was ironic that these same legislators didn't have the same objection to their own government-sponsored health care.
2009: Obamacare critics furthered intensified their attacks when Obama submitted his first
health care reform plan in 2009. In that proposal, Obama kept most of the elements of his campaign pledge. He modeled the government health care plan, known as "Universal Health Care Coverage," to be more like Medicare and Medicaid than the Congressional health care plan.
2010: In 2010, the
Patient Protection and Affordable Care Act was signed into law. It retained a mandate that nearly everyone in the U.S. must have some form of health care insurance by 2014, or be fined by the Federal government. This mandate is the main issue for most of those opposed to Obamacare. Soon after the act was signed into law, Attorneys General in 21 states filed suits to protect their citizens from being forced, in violation of the Constitution, to purchase government-approved health insurance.
2011: The mandate that everyone must get health insurance was ruled unconstitutional by the 11th Circuit Court of Appeal in Atlanta. It stated that this particular mandate falls outside of Congressional authority to regulate interstate commerce. In response, the
Treasury Department petitioned the Supreme Court to hear the case in 2012. This ruling falls within the
2012 Presidential Campaign.
In fact, three of the 2011 Republican Presidential candidates promised to repeal Obamacare.
Mitt Romney was accused of being hypocritical, since he instituted a form of Obamacare when he was Governor of Massachusetts. Some critics called it
Obamneycare. Former candidate
Rick Perry believed that employer-sponsored health care insurance was sufficient. Former candidate
Michele Bachmann filed a bill to repeal Obamacare.
(Article updated July 12, 2012) More on Obamacare
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