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- There will be costs, but these will mostly be paid by government, industry and wealthier Americans. Low-income individuals should see benefits.
- Women and children will see big gains.
- Your access to market-based care is being preserved while many more Americans will be getting coverage.
The Affordable Care Act, also known as Obamacare, is a big change for the American health care industry and for the American health care consumer. The bill and accompanying guidelines are thousands of pages. Understandably, most people are looking for some digest form of information on the bill, and may be wondering if Obamacare is the the best choice for them. Using a comparison tool is a great way to see all your options and what is the most affordable choice for you. Start comparing health insurance providers now by using our FREE tool above!
1. The Costs of Obamacare
Although most people will pay more for health insurance, the average annual increase of private health insurance premiums under Obamacare has proven to be lower than the average annual increase prior to the implementation of this program. In 29 states plus the District of Columbia for which statistics are available, the increase is expected to be 8.2 percent versus the 10 percent historic annual increase typical prior to the passage of the bill.
Additionally, many low-income Americans will qualify for coverage under Medicaid, which is being greatly expanded. This means in real terms, some of the neediest Americans will see a great deal of benefit at little to no cost to themselves. Keeping costs down will require research into which policies best meet their individual needs.
The Manhattan Institute claims their data indicates an actual rate increase of 49 percent in 2014 compared to 2013. This contradicts the data citing an expected 8.2 percent increase.
In absolute terms, because millions more people are being insured, the amount spent on insuring Americans will definitely go up. It simply isn’t possible to make sure millions more people get health coverage without there being some expense incurred. Some of these costs will be covered by the federal government and businesses. Some of these costs will be covered by individuals purchasing coverage for the first time. However, comparison shopping can help specific individuals keep cost increases to a minimum.
2. The Impact on Government Spending
When Americans are not insured, they often do not get the medical care they need. This can result in a downward spiral where they are less productive, their income drops, they end up getting various forms of federal and state aid anyway.
Part of the idea behind Obamacare is that “An ounce of prevention is worth a pound of cure.”
Making sure people can take proper care of their health in a proactive manner is the single best way to keep them able to work full time and able to pay their own bills. Ignoring the need for affordable health care only guarantees that more people will need help from programs like Welfare, Food Stamps, and Medicaid. There are no real savings.
In the short run, federal spending on health care and health care related programs will definitely go up. Some people project that Obamacare will worsen the federal deficit to the tune of more than a hundred billion dollars over its first decade.
- About one-third of the people getting new health coverage are getting it via expanding current government programs, such as Medicaid and CHIP.
- Medicare is also being enhanced to eliminate the existing “doughnut hole” of prescription drug costs.
- The federal government will also incur some costs for taking responsibility for providing an online marketplace for those states that have chosen to not set one up themselves.
3. The Carrot and Stick Approach
Those individuals who are not covered by government programs are going to get private health insurance. For many people, this means shopping around for the best deal, to get that best suits their needs. There are incentives in place to encourage both individuals and businesses to participate in making sure as many people as possible can get affordable coverage.
As much as possible, the government is trying to use carrots — such as tax breaks, subsidies and discounts for both individuals and businesses — to get people to be cooperative and make the program as palatable as possible. Some people even feel the sticks are a positive because they feel the program will be an overall improvement over what was in place prior to the bill and this is a small price to pay for the benefits expected.
Both businesses and individuals are also being pressured to provide coverage for employees or get coverage for themselves and their families. Individuals will need to get coverage or get an exemption or pay a penalty.
Some people decry this as a loss of freedom of choice as well as a financial burden. Some people feel the penalties will be an unreasonable burden, especially on low-income families already struggling to make ends meet.
4. Near-Universal Coverage
The government is making it illegal for insurance companies to deny individuals coverage based on pre-existing conditions. You also cannot get dropped due to getting ill or making an honest mistake on your application. It benefits individuals put constraints on what the insurance industry can do.
The Affordable Care Act is shooting for near universal health coverage for Americans, but the desire is for most of that coverage to be through private health insurance, not through government programs such as Medicare or Medicaid. Therefore, a large part of the bill addresses what insurance companies can and cannot do in order to make sure Americans have access to coverage.
However, both Medicare and Medicaid are being expanded. This will help provide coverage for about one-third of Americans who did not have coverage prior to the passage of the bill. Additionally, children can be covered under their parent’s policy until age 26. This helps provide coverage for college students, adult children still living at home, and adult children with low wage jobs who cannot afford coverage on their own.
The expectation is that this will leave less than 10 percent of Americans without health insurance. Millions of Americans who were previously not covered will gain health coverage.
Although it is good for individuals to be guaranteed coverage, even when sick, it is very likely to increase the cost of insurance for everyone. It is also potentially a problem for the insurance industry.
Insurance is in the “risk management” business. In other words, they work a bit like a casino or lottery in that many people pay a small amount in and most people get even smaller amounts paid back to them. Meanwhile, a few people get big payouts for serious health events. The odds and costs are influenced by the pool of participants.
Historically, insurance expenses were kept down in part by excluding people who were guaranteed to require big payouts due to a known pre-existing — often expensive — condition.
Making sure these people get covered means the insurance industry is guaranteed to have more liability and the cost will have to be covered somehow. The logical outcome is that premiums will go up.
Additionally, some individuals who historically declined coverage because they were basically healthy are being forced to get coverage or pay a penalty. This is something many people are not happy about. They feel they should have the choice to opt out without having to answer to the government about it.
5. The Market-Based System
Obamacare largely preserves the market-based health care system we currently have. This will ease the transition to near universal coverage. It would be much harder to transition from our current system to state-provided universal coverage.
This approach to health care reform preserves our ability to choose among insurance companies and types of policies as we see fit. The free market is something many Americans value and see as critical to their freedom of choice and other freedoms. Most Americans prefer to do some comparison shopping and to decide for ourselves what best suits our needs without having a one-size-fits-all government solution dictated.
The market-based system requires that all parts of the system make a profit. Since government programs like Medicare and Medicaid are a large piece of the puzzle, we do not have truly privatized system of coverage anyway.
Therefore, some people feel that moving to a government provided universal coverage would make more sense. They feel it would cost less and provide genuine universal coverage rather than a patched together near universal coverage with multiple different competing systems, depending upon where you live, how old you are, your level of income and other factors.
6. There Will Be More Bureaucratic Oversight
Among other things, Obamacare stipulates that there shall be an Independent Payment Advisory Board and that businesses over a certain size shall provide insurance. These changes are expected to provide much-needed protections to the American health care consumer, such as access to coverage even if they have a pre-existing condition, the curbing of health care costs generally, and more access to employer-provided health insurance. The rules were written because what we were doing wasn’t working:
- People were not getting what they needed.
- Employers were not doing enough for their workers when left to their own devices.
- Insurance companies were not covering the people who most needed coverage.
Obamacare is intended to provide oversight and rules to correct those tendencies so that the American people can get what they need.
Bureaucratic processes add layers of expense and complication that can often be a headache. Many people question whether the oversight and protections provided will be worth the extra expenses, paperwork, and hoops that must be jumped through to make it happen. Some people feel strongly that less government is generally better than more government.
7. Impact on Women
The Hyde Amendment allows for abortion using federal funds in cases of rape, incest or to save a life. It is not being extended to non-federal programs. Insurance companies can no longer charge women more than men.
The mandate requires that certain services for women have no out of pocket expenses.
It expands contraception coverage for women so they have more control over an issue that has an outsized impact on the lives of women compared to that of men: The conception of a child. Since women are the ones who get pregnant, this much more directly impacts a woman’s health than a man’s. It also impacts their lives significantly in a multitude of other ways.
It is expected that Obamacare will result in an additional 47 million women getting coverage. Additionally, because single parents are more likely to be women, not men, expanded coverage for children under CHIP (Children’s Health Insurance Program) will likely benefit many women who are currently single mothers. It will help them take better care of their children, increase the amount of resources of the family in real terms, and make their lives less stressful
The Hyde Amendment places strict limitations on the use of federal funds, supporting abortion only in cases of rape, incest or to save a life. Depending upon their views, some people see some of the provisions for women as cons, not pros, such as increased access to contraception.
In part because birth control is a controversial topic, there are many complex stipulations concerning birth related to birth control methods. On the one hand, each marketplace must offer plans with certain options. It must also offer plans that lack certain options. This will make it necessary for the end consumer seriously research this aspect of all policies.
8. Impact on Health Care Resources
There is expected to be an uptick in demand for physician services, particularly primary care services. Some people believe that the need for emergency care should go down as people stop putting off getting the care they need until it is simply unavoidable. Increased demand for services should make it easier for hospitals to plan for providing expanded services.
At least in the short term, there has been a report of an increase in emergency room visits. This may be due to people finally having coverage after years of not having coverage. The increased demand for physician services is expected to cause longer wait times to get an appointment and some people are predicting physician shortages.
9. The 50 States
Every state will have an online marketplace where consumers can comparison shop for coverage. States will have some degree of choice as to what parts of the program they desire to participate in. States may opt out of certain aspects of the program.
Some states are declining to create their own. So, in reality, some state marketplaces are really being run by the federal government. Some states are also opting out of things like expanded Medicaid coverage. This means that individuals cannot assume that everything described under Obamacare actually applies to them. It will vary some by state. Individuals will need to educate themselves about how this plays out in the state they live in.
10. The Employer Mandate
The employer mandate will require companies with 50 or more full-time workers to offer health insurance coverage through the employer. This is expected to expand availability of health insurance to low income workers who do not qualify for government programs, such as Medicaid.
Such coverage is typically subsidized by the employer. In other words, the employer pays a portion of the cost. It does not all come out of the employee’s pocket.
It has been reported that some companies have shifted some of their workers from full-time status to part-time status in order to sidestep the mandate. If they manage to reduce the number of full-time workers below the cut-off point of 50, it no longer applies to them.
Even in cases where employers are trying to do the right thing and comply with both the letter and the spirit of the law, some businesses are seeing very low rates of participation. Many low-income workers feel they simply cannot afford the insurance.
In conclusion, Obamacare is:
- expected to provide coverage to most Americans who were previously not covered.
- expected to especially benefit many low-income Americans, including seniors, women, and children, three groups who very often aren’t getting enough of what they need.
- expected to incur costs for wealthier Americans, the government, and the insurance industry.
The exact impact on specific individuals will vary, depending in part on which state they live in, their employment status and other factors. If you want to know more about rates use a comparison tool to help determine whether Obamacare is the best option for your needs. Enter your zip code in our FREE tool below to compare health insurance providers now!