Although the Affordable Care Act was signed into law in 2010, the full effects of the legislation have yet to trickle down to ordinary health insurance policies. The main principles behind so-called 'Obama Care' are the reduction of healthcare costs and the efforts to ensure that all Americans have access to affordable health insurance. The act has also been designed to widen the scope of Medicaid and ensure that the estimated 33 million Americans without insurance can purchase affordable policies. However, this legislation is complicated, so breaking it down into its main points is the best way to fully understand it.
What Are the Main Points Of 'ObamaCare'?
1. A Sliding Scale of Maximum Premiums - A family of four earning a combined annual income of $29,000 or less will be eligible for Medicaid. Families earning between 133% and 400% of the national poverty line will receive tax credits to assist in the purchase of private insurance. Insurance premiums will be subject to a cap of 6.3% for a household that has a combined income that falls between 150% and 200% of the official poverty line. Premiums will be capped at 9.5% of household incomes when those incomes are between 200% and 400% of the poverty line.
2. Financial Penalties for Those Who Don't Purchase Insurance - The act defines the affordability of insurance as a policy that does not exceed 8% of a person's income. Those who can afford to buy health insurance but refuse to do so will be ordered to pay a 'fine' of $695 or 2.5% - whichever is greater.
3. Discriminatory Practices Will Be Banned - Insurance companies will not be allowed to increase premiums or refuse coverage on the basis of pre-existing conditions except in a few circumstances, such as coverage for the elderly or for smokers. However, restrictions are in place to limit discriminatory premium increases to a ratio of 3 to 1.
4. Creation of a More Competitive Market - From 2018, a 35% tax will be imposed on employee health insurance plans in excess of $10,200 for one year of individual coverage. It is hoped that this will force employees to shop around for the cheapest policies possible, thus forcing insurance companies to keep their prices low. Online healthcare exchanges will be state or federally-operated marketplaces for the purchase of health insurance policies. It is hoped that, over time, giving people the chance to compare policies on an equal basis will drive prices down.
5. Tighter Regulation for Insurance Companies - Insurance companies now have to spend between 80% and 85% of the income they receive from premium payments on medical care. This legislation is designed to limit spending on executive bonuses, administration and marketing. Companies that underspend on healthcare expenses will be forced to give their customers rebates. Both drug manufacturers and insurance companies will be faced with a substantial annual bill in order to finance this overhaul in America's healthcare system.
It is too early to tell whether or not these changes will result in lower premiums for the American people. 'Obama Care' will provide the insurance industry with 32 million new paying customers, but insurers will be forced to spend more money on care, provide cover for anyone who wants it and provide coverage without discrimination. Insurers may also be forced to provide preventive care in many situations. Increased and more transparent competition could drive prices downwards over time. However, experts and analysts currently have very different views on whether 'Obama Care' will lead to price reductions in the long-term.
This is a complicated issue, but if you feel you need to seek advice from a market expert, give us a call at 866-933-6691. We are here to explain your options and guide you through the relevant changes in the law. You can also get an online Tampa health insurance quote.