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How Does Obamacare Work?

Posted October 9, 2013 | Filed under topic Obamacare

“Obamacare” is the popular nickname for the Affordable Care Act which was signed into law in March of 2010 and mandates that every American must get health insurance in 2014 or be subjected to a tax. It also changes many aspects of health insurance policy and is an attempt by members of Congress and the Obama Administration to reform health care in the United States.

Obamacare is the biggest change to medical coverage since the establishment of Medicare in 1965 and intends to insure the 47 million Americans who are currently without health insurance. As a part of the Act, uninsured Americans are offered government sponsored or subsidized health insurance plans that are intended to be affordable.

The new law requires every American to have a health insurance plan by January 1, 2014 or face an annual penalty. The fine in 2014 is minimal with the penalty being $95 for every adult in the household and $47.50 for every child. The penalty goes up more in 2015 and reaches the maximum level in 2016 at $695 for every adult and $347.50 for every child to a maximum of $2,085 or 2.5% of the household income, whichever is higher.

Obamacare is not intended to penalize people who can’t pay but to offer affordable insurance and mandate that every American have a policy. There is no penalty on people who cannot afford health insurance, such as those who do not earn enough to file income taxes or those whose premium will cost them more than 8% of their income. Tax credits are offered to offset the cost of health insurance and there are various measures to subsidize health insurance and make it affordable. Families that make up to 4 times the poverty level will be eligible for subsidies, reducing their health insurance premiums.

Those who already have health insurance are likely not going to be affected by Obamacare, as long as they maintain their current insurance policy. Some policies will be altered because of the new “minimum level of care” requirement for health insurance plans. This means that some plans that do not meet the minimum level of care mandated by the Affordable Care Act already will need to be adjusted to meet this level.

Insurance companies used to previously deny applicants based on pre-existing conditions, with pregnancy being considered a pre-existing condition. Obamacare discontinued this policy, and private health insurance applicants can no longer be denied based on a pre-existing condition. There were also lifetime insurance limits that Obamacare rescinded. It also allowed young adults up to the age of 26 to continue to be covered under their parents’ plan if they resided at home, and this policy went into effect in 2010.

On January 1, 2014 a large number of Obamacare policies will go into effect including the requirement for state-run health insurance organizations as well as the requirement for everyone in the United States to have health insurance, and it will be the first year that people will be fined for not having health insurance.

It is still not clear how Obamacare will affect health insurance premiums for those who already have insurance. Some states are expected to decrease in premium costs for private insurance and group insurance plans offered through employers, and other states have reported increased costs. The costs will not be clear until 2016 when Obamacare has been fully established and implemented.

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