This comparison discusses changes to the U.S. healthcare system after the Patient Protection and Affordable Care Act (PPACA, more popularly known as Obamacare) went into effect.
Obamacare is a significant regulatory overhaul of the healthcare system. It institutes mandates, subsidies, and insurance exchanges aimed to increase the quality, scope, and affordability of healthcare in the mixed market system currently utilized in the United States.
The current healthcare system in the United States takes a mixed market approach, which relies heavily on private health insurance for the general populace and public programs like Medicare for senior and disabled citizens. Current health insurance policies evolved from traditional liability insurance, which existed at a time when medical expenses followed a fee-for-service business model. The rise of hospitals offering services on a pre-paid basis led to the development of modern healthcare insurers. Regulation of insurers largely falls to individual state-level departments.
|Affordable Care Act||Old Healthcare System|
|Introduction (Wikipedia)||The Affordable Care Act (ACA) or Obamacare is a federal statute signed into law by President Barack Obama on March 23, 2010||Health care in the United States is provided by many distinct organizations. Health care facilities are largely owned and operated by private sector businesses. 62% of hospitals are non-profit, 20% are government owned, 18% are for-profit.|
|Objective||Aims to increase the quality and affordability of health insurance, expand public & private coverage, and reduce the costs of healthcare for individuals and the government. It uses mandates, subsidies, and insurance exchanges to increase coverage.||Employs a mixed market system that splits health care expenditures between the government and the private sector. The United States is currently alone among developed nations in not providing a universal health care system covering all citizens.|
|Coverage for Pre-existing Conditions||Yes, the law requires insurers to cover all pre-existing conditions.||Insurers not required to cover.|
|Preventative Care||Free (covered by premium)||Co-pay / Deductibles in addition to premium|
|Age Limit for Children Under Parents’ Plan||Children stay on parents' plan until the age of 26||Many insurers remove children from their parents’ plan upon reaching the age of majority (21 years)|
|Contraception||Included under free preventative care||Not included|
|Individual Mandate||Yes. Individuals are required to buy health insurance for themselves and their dependents. If they don't, they pay a penalty when they file their taxes.||No|
|Employer Mandate||Yes, companies with 50+ employees required to provide healthcare coverage to at least 95% of their workforce. Coverage must be affordable (cost <10% household income) and provide minimum value.||No|
|Effective Date||March 23, 2010; most major provisions took effect in January 2014; phase in through to 2020 for remaining provisions.||N/A (in effect until primary implementation of the PPACA in January 2014).|
Who will be affected by Obamacare?
The changes made by Obamacare affect U.S. Citizens currently without health insurance, amounting to roughly 48 million people or 15.4% of the population. Those insured under the current healthcare system will not be affected, though some may be able to obtain more cost-effective insurance plans – offering lower premiums, greater coverage, or both – on the exchanges than they already possess. Obamacare will change the current state of U.S. healthcare primarily by instituting nine national regulatory measures, enumerated below following this lucid video explanation of Obamacare:
Obamacare prohibits insurers from denying coverage to individuals with pre-existing conditions.
Most insurers in the current system do not provide coverage to individuals with pre-existing conditions, as that would encourage individuals to not buy insurance unless an illness crops up.
The ACA requires that they offer the same premium price to all applicants of the same age and geographical location.
Currently, individual premium depends on the age, sex, income, location and other factors. Age groups susceptible to more health issues are charged a higher premium.
Obamacare establishes some minimum standards for insurance policies. Some of these standards are specified in the law, and some have been established by the Secretary of Health and Human Services. These cover a lot more conditions than the current system, and mandate that essential health benefits, preventive care, contraceptives, childhood immunizations and adult vaccinations, and medical screenings will be covered by an insurance plan's premiums. There will not be co-pays and deductibles.
Individuals are mandated under Obamacare to obtain insurance, or pay a tax penalty of $95 per or 1% of taxable income - whichever is greater - per uninsured adult. This is known as the individual mandate. The penalty will increase to $695, or 2.5 percent of income, by 2016.
The current system does not have a law requiring an individual to have insurance.
Businesses employing 50 or more people are mandated to provide insurance to their employees or pay a tax penalty. If they do not, they must pay a penalty of $2,000 per employee.
Currently, there is no such law requiring employers to provide insurance to employees.
Government subsidies will be provided on a sliding scale for low-income households and small businesses to anyone who earns up to 400% of the federal poverty level. The subsidy will be inversely proportional to an individual’s annual income. Those from 133% to 150% of the poverty level will be subsidized to reduce their premium costs to 3% to 4% of their income. This video explains in detail how these subsidies work:
Health insurance exchanges
Health insurance exchanges will be opened up in every state. These exchanges will function as online marketplaces where individuals and small businesses are able to evaluate and purchase insurance. For the first year of operation, open enrollment on these exchanges run from October 1, 2013 to March 31, 2014. In subsequent years, open enrollment will run from October 15th to December 7th.
Obamacare extends Medicare eligibility to include households with incomes of up to 133% of the federal poverty level. Those eligible would include adults without disabilities or dependent children. Following the Supreme Court’s ruling in National Federation of Independent Business v. Sebelius, however, states have the option of opting out of this expansion, and several states have done so.
While current Medicaid criteria vary from state to state, beneficiaries of the program must have less than $1000 in liquid assets. The income restriction also varies, for example in New York those earning less than $700 a month are eligible. However, poverty is not the only eligibility criteria. For example, children living with guardians can avail of Medicaid.
Obamacare also restructures Medicare reimbursements from fee-for-service to bundled payments. This would provide a single payment to a hospital or physician group for a defined episode of care instead of individual payments to distinct service providers as before.
Obamacare in Recent News
The most widely opposed provision of Obamacare was the individual mandate. Libertarians and conservatives oppose the government intrusion in what they regard as a personal, commercial decision. In fact, conservative groups challenged the law's constitutionality and the US Supreme Court ruled that the individual mandate was constitutional i.e., the federal government was within its rights to require individuals to obtain health insurance.
Another point of criticism was the employer mandate; conservative critics argued that requiring small businesses with over 50 employees to provide health insurance coverage would place an undue burden on them and hurt their competitiveness.
A third argument against Obamacare was the requirement that health insurers cover everyone, regardless of pre-existing conditions. Since this could potentially increase costs for insurers, it was feared that insurance premiums would rise for everyone. The individual mandate was essential to ensure this doesn't happen; the idea is to not let individuals free-ride (not get coverage when they are young and/or healthy, then buy insurance when they need access to healthcare services).
Finally, critics are concerned about the cost of Obamacare to the federal government. Similar legislation in Massachusetts (sometimes called Romneycare) proved to be very expensive, with the cost being shared between the federal government and the commonwealth of Massachusetts. Federal subsidies to individuals for buying health insurance, as well as the expansion of Medicaid are some of the expensive provisions of the PPACA. The technology infrastructure to facilitate health insurance exchanges in each state, and individuals purchasing insurance on the exchange, is also significant. On October 10, 2013, Digital Trends reported that over half a billion taxpayer dollars had been spent on health insurance exchange websites such as Healthcare.gov, but the sites weren't working and in the first 10 days of launch, the total number of people who had been able to successfully buy insurance was in the single digits.
- Penalty for Individual Mandate - Healthcare.gov
- Employer Responsibility Under the Affordable Care Act - Kaiser Family Foundation
- Fact Sheet: Young Adults and the Affordable Care Act - U.S. Department of Labor
- Obamacare: What it can and can't do for you - CBS News
- Wikipedia: Patient Protection and Affordable Care Act
- Wikipedia: Health care in the United States
- Wikipedia: Health_insurance#United States
- Wikipedia: Health_systems_by_country#United_States