How Does Obamacare Work? 11 Questions, 11 Unbiased Answers

You may receive a penalty if not insured by March 31, 2014. If you are required to purchase health insurance and have not done so by March 31, 2014, you will receive a penalty on your 2014 tax return (filed in 2015). The penalty in 2014 is $95 per adult and $47.50 per child, and the fee is capped at $285 or 1 percent of household income. Each year the penalty increases; in 2016, the fine rises to $695 per adult and will be capped at $2,085 or 2.5 percent of income. There is no penalty for a gap in coverage for less than three months.

When will it actually kick in? Who qualifies for a subsidy? And what does it mean for indoor tanning addicts? We have answers from Kamy Akhavan, president of ProCon.

July 26, 2013 

Minyanville - If you’re still scratching your head about what the Affordable Care Act means or doesn’t mean or does or doesn’t do, you’re far from alone. With so many cherry-picking pundits, politicians, and media sources perpetuating the spinsanity, it’s hard to know how to get agenda-free information. Depending on where you get your news, opinions about Obamacare run the gamut from a step in the right direction to the savior of the American economy to the complete unraveling of democracy to the second coming of Karl Marx.

When Minyanville was searching for an unbiased take on this labyrinth of a law, we turned to an organization with only one dog in the health-care fight: the truth. ProCon is an award-winning nonprofit charity that operates with the explicit purpose of helping the public make informed decisions about complex social issues. For its 15.7 million readers, ProCon pores through volumes of legislation (in Obamacare’s case, 900 pages worth) and weighs -- in equal measure -- the pros and cons from experts on both sides of the political aisle.

We spoke with Kamy Akhavan, the president and managing editor of ProCon to see what he found out when his reference site posed the core question: Is the Patient Protection and Affordable Care Act good for America?

The answer is a resolute, unequivocal, and thundering... “Eh, we don’t know.”

Unfortunately, the jury is still out on certain nuts and bolts of the bill. Some questions about Obamacare fall into ProCon’s “debated” territory and will likely remain in a sort of speculative limbo until the law’s final implementation. Only then, when it’s laid bare before us in full effect, will we be able to dig in with that scalpel, dissect all its parts, and -- depending on our respective political bents -- either marvel at the innards or run for the restroom.

The good news is, ProCon does have definitive answers right now to many of our burning queries. Following are a sampling with clear-cut yes or no replies that we thought most relevant to Minyanville readers.

1. Can this thing still be repealed?

The big challenge to this came from the constitutional question -- which was answered 5-4 -- so it’s not going to get repealed by the Supreme Court. The other place it could’ve been axed was in Congress. The House of Representatives has voted over 30 times to get rid of Obamacare but it’ll never happen without passing the [Democrat-controlled] Senate. And even if it did pass the Senate, there’s no way Obama would sign it. So, between the Supreme Court, the legislature, and then the president all saying “no,” it looks like Obamacare is here to stay.

2. What parts of the Affordable Care Act have already taken effect?

In September of 2010 we started having coverage for young adults up to age 26 on their parents’ plan. We’ve had free preventative care for services such as mammograms and colonoscopies, being done without a deductible, copay, or coinsurance. Insurance companies can’t rescind your coverage if you make some kind of technical mistake on your form (like forgetting to put your middle initial). If your insurer says, “We don’t approve your new heart valve, our policy doesn’t cover it” you can appeal that. The lifetime limits on insurance coverage were lifted. And this is all nationwide, as federal law. In 2011 we started seeing more services for senior citizens. They can now get free wellness visits and free personalized prevention plans on Medicare.

Also, insurance premium rebates took effect if health insurers profit by more than 15%; so at least 85% of all the premium dollars they collect have to be spent on health-care services and health-care quality improvement. If they spend less than that they have to give back rebates to their members. Here at ProCon, we have received checks from our insurer because they were compelled to do so as a result of the Affordable Care Act.

3. So what’s left to kick in?

January 1, 2014 is when a lot of the meat of Obamacare takes effect. The big ones are the establishment of state-run health insurance exchanges and the individual insurance mandate that requires every single person in the United States to have insurance coverage. If you’re not insured, you have to pay a fine.

4. Is anyone off the hook for buying coverage?

There are literally some exceptions to the mandate. If someone already has insurance through Medicaid, Medicare, an employer, or a veterans health program, they don’t have to buy insurance because they already have it.

Prisoners, undocumented immigrants, some religious groups -- those who have been historically exempt from the Social Security system such as the Old Order Amish and religious groups whose members pay for one another’s health care. Also, if you’re an American Indian and subject to the sovereign laws of your tribal community.

5. How will the fines work for not buying coverage?

It’s a little bit complicated. First, they give you a year and they shake their finger at you. [Referencing the Cleveland Plain Dealer] in 2014, the penalty is either $95 for every adult and $47.50 for every child under the age of 18 in the household, or 1% of taxable income for the household, whichever is larger. And then it gets worse.

In 2015, they start shaking their fist. It's $325 for every adult and $162.50 for every child (up to $975 for a family), or 2% of taxable income, whichever is larger.

In 2016, that fist turns into a foot and it goes up to $695 for every adult and $347.50 for every child (up to $2,085 for a family), or 2.5% of income, whichever is higher. After 2016, the penalty increases annually by the cost-of-living adjustment.

6. How will the subsidies work for those who can’t afford coverage, and what kind of criteria need to be met to qualify?

There will be no penalty for those who can't afford insurance, including those who don't make enough to file federal taxes or whose insurance premiums will cost more than 8% of their household income. The government will help them pay for it and try to do what it can to make that insurance affordable.

The White House says broadly that there will be tax credits for middle class families, small businesses, and millions of Americans will soon be eligible for tax credits, and if you can’t afford insurance, it basically says don’t worry about it, we’ll help you.

The way Consumer Reports describes it, if you buy insurance on an exchange as an individual, you may qualify for a subsidy in the form of a tax credit if your household income is between 100% and 400% of the federal poverty level.

7. How does the mandate work for employers?

The way the Affordable Care Act is written, the term “applicable large employer” means a company that employed an average of at least 50 workers during the preceding calendar year. They’ll have to pay a fine of $2,000 per full-time worker if any of their employees turn around and get premium tax credits through the new health insurance exchanges. So if the small business has 51 workers and one of those workers gets a tax credit to help them buy insurance, even though they’re already getting insured through their company, then the business has to pay a $2,000 fine per employee, per year.

8. So the mandate doesn’t apply at all to companies with under 50 employees?

No, and there’s no debate.

9. Can you keep your current coverage?

The White House says yes, and the answer is technically true, but -- and this is a big but -- a lot of the insurance providers will no longer be offering the exact plan. Part of the reason is that Obamacare mandates a certain level of quality and a certain number of services to be offered in their insurance packages. So if the insurance package you currently have doesn’t perform a certain service that Obamacare requires, that insurance plan will likely become a different plan. So your exact same plan may no longer exist because now they have to comply with some of the requirements of Obamacare, which are the ones intended to increase quality coverage.

Whether the forced, low-tier plans will cost more is still subject to debate because -- and this is one of the main theories of the Affordable Care Act -- by mandating that everyone get insurance, they are creating this big carrot for the insurance company. They’re saying we’ll give you 30 million more customers and that will help your bottom line. In exchange for doing that, we’re going to ask that you provide them a little more coverage. And in effect we hope that, on net, it’s a plus for all because more people are insured, you have more customers, they are still profitable, everyone’s happy. That’s the theory.

Whether it increases premiums or not, we won’t know until the mandate has kicked in. I can tell you that [at ProCon] for our particular company plan, our premiums have not gone up. In fact we’ve received rebates. Other people will say the opposite, that their premiums have gone up. So the bottom line is to be determined on that one.

10. Will Obamacare raise my taxes?

There will be 19 new taxes in the form of brand new taxes, fees, and penalties that have never existed and in the elimination of tax deductions. For example, we’ll see a $50,000 tax penalty on charitable hospitals that fail to meet five new requirements, a 2.3% excise tax on medical device manufacturers, and a removal of executive salary tax deductions for health insurance companies that compensate executives over 500,000 a year.

For individuals and families, an increased penalty of 20% will apply to early withdrawals from health or medical savings accounts, and people who buy indoor tanning products will incur a 10% excise tax.

11. What if I have [insert chronic disease]? Will I get to participate in the exchange? Will there be a limit on how much carriers can increase my premium, and how can they afford to cover me anyway?

A press release from the Department of Health and Human Services said that under the Affordable Care Act , in 2014, Americans with preexisting conditions cannot be denied coverage, cannot be charged significantly higher premiums, be subject to an extended waiting period, or have their benefits curtailed by an insurance company.

There’s specific language to the effect that increases have to be reasonable. The government will help subsidize what it calls “high-risk pools” so that it is not as cost-prohibitive for the insurers to offer those types of plans. But the law is very specific in that it says they cannot be denied coverage for a preexisting condition. No debate.

What have we learned today?

For starters, those of us carelessly carting around health insurance ID cards with no middle initial have been getting away with murder. So let’s all breathe a collective “Whew!” for that unwitting feat.

Although tan mom will certainly take a hit from Obamacare, even those among us without home tanning beds can likely expect raised taxes passed down from the companies and hospitals, directly incurring the $1 trillion increase between the 2013 and 2022 budget periods. We also know much of the revenue will be squeezed out of a 0.9% payroll tax and a 3.8% tax on investment income for couples earning over $250,000 and individuals making more than $200,000.

Some health-care companies are expected to benefit from the act, however, including the nation's largest hospital operator, HCA Holdings (NYSE:HCA), the largest insurer, UnitedHealthGroup (NYSE:UNH), drug companies like Merck (NYSE:MRK) and pharmacy manager Express Scripts (NASDAQ:ESRX), and drug retailers like CVS (NYSE:CVS) and Walgreen (NYSE:WAG).

Fingers crossed, you’re not doing as well, financially, as you thought. Check out the Department of Health and Human Services poverty level guidelines. If you’re a single earning $44,680, a couple earning $60,520, or a family of four earning $92,200, congratulations, the government thinks you’re just poor enough for a subsidy!

The rise and/or fall of insurance premiums under Obama’s signature law varies by state. New York Governor Andrew Cuomo says New Yorkers will see their premiums drop by 50%. So, if rates where you live go up, just move to New York. There’s plenty of room.

Since companies with less than 50 employees are exempt from the mandate, Michael Moore may soon have new fodder for a Downsize This! sequel.

If repealing Obamacare is a matter left to the legislative and executive branches, it seems anti-health-care reformers needn’t despair just yet. The 2014 midterm elections -- when all 435 seats in the House and 33 in the Senate go up for grabs -- are a mere doctor’s checkup away. A mammogram or prostate exam later, and America will have a brand-new president.

And if the White House’s own decision to delay the employer mandate provision is any indication, it may very well be the Obamacare enthusiasts who are left waiting.

Finally, the success of the Affordable Care Act hinges on the participation of the young and the healthy. If this demographic opts out and instead takes the penalty, insurance companies won’t be able to mitigate the cost of the “high-risk pools,” and we can basically count this whole thing as kaput.