How Obamacare Affects Consumers

How Obamacare Affects Consumers

When you discovered that Obamacare was going to provide health insurance to millions of Americans, what was your reaction?

Did you:

  • Celebrate the positive effect the plan was projected to have on society?
  • Feel concerned over how the country would fund the program?
  • Enroll yourself & your family, giving a great sigh of relief?

Let’s try to assess the effects of Obamacare on consumers, weighing a few of the pros and cons of the 2014 Affordable Health Care (ACA) rollout.

Subsidies were funded in part by wealthy Americans.

A major critique of Obamacare has always been the long-term effect of providing subsidies for monthly premium coverage to the poor. These subsidies are funded by increased Medicare payroll taxes of households earning more than $250,000 / year.

Additional taxes were also applied to medical device makers and drug companies. When all is said and done, thanks to an overage in funds, these additional taxes should reduce the deficit in the federal budget by about a billion dollars a year.

Shifting costs should decline substantially, evening out health plan premiums.

One in six adult Americans was uninsured prior to the launch of the ACA. This totaled about 50 million people. When a person without health insurance seeks treatment, those bills have to go somewhere.

Oftentimes, the healthcare provider was left responsible for trying to find ways to cover these costs; they, presumably, had no choice but to increase rates. This concept was referred to as cost shifting.

The second (of a long list of cost-shifting scenarios) was when Medicaid, CHIP or other government services did not pay enough to healthcare providers to cover the cost of the care (i.e. what was paid out by insurance did not equal what was charged.)

Since more people now have healthcare coverage, rates paid to hospitals should become more standardized across the board. Other sources are working to debunk the concept that cost shifting meant insurance companies also had to then charge larger premiums, potentially evening out premium rate hikes for the foreseeable future.

Millions of Americans were required to replace their healthcare coverage.

Some consumers did lose their healthcare coverage when Obamacare took effect. Under the ACA several high-deductible plans (HDHP) did not qualify as acceptable medical coverage.

These people had the choice to:

  • Shift to a new, sometimes higher cost, medical plan
  • Pay a penalty for being uninsured ($95 per adult)

Some consumers end up paying more for their coverage, especially those earning a substantial salary that didn’t necessarily want full coverage. This is the argument most often used by Republicans (that Obamacare forces coverage on those who not want it) as to why reform is needed.

Pre-existing condition clauses were eliminated.

Under the previous healthcare model, individual policies were priced by pre-existing conditions as well as the age of the insured. For some with chronic ailments monthly costs could be formidable.

Obamacare switched to a group-based model whereby a person’s age and income is what determines their monthly premium. Enrollees can also choose from several policies – Bronze, Silver or Gold levels – and pay more (or less) for the services they want.

Which consumers did this directly affect? In companies with only a few employees, seasonal employees, etc. health insurance is not required to be offered as part of their job benefits packages. Likewise for contractors or 1099s.

For example, a freelance creative professional may earn their income as a 1099. They pay their own taxes, as well. They had to find coverage via an individual plan. Under the old system of health insurance, rates were based on health status.

Obamacare made coverage accessible to everyone who did not have an alternate means of health insurance coverage and used a group pricing policy.

Many of these professionals now pay a rate similar to employer sponsored group coverage and/or comparable to their old rates if their adjusted gross income is higher than $47,000 / year or 400% above the Federal Poverty Level.

Low-income adults still face a coverage gap.

In states where Medicaid benefits were not expanded, about 3 million Americans fall into a coverage gap. These families earn below the threshold to qualify for Medicaid and below the income qualifications for an Obamacare subsidy.

To put this in perspective, the minimum income level to qualify for Obamacare subsidies is $11, 770. Since other numbers vary by state, it’s impossible to do exact projections based on the poverty limit and number of people in a household, but you can see how the issue requires mentioning.

The coverage gap affects 3.1 million Americans and options for these low-income adults remain somewhat limited.

What does Obamacare mean for consumers?

In essence, if you do not have access to other health insurance coverage, Obamacare gives consumers the coverage they need to receive reasonably priced healthcare plans.

Like most government-supported programs, it has received both positive & negative critiques based on the pros and cons of the system. Understanding what it means for you and your family is the first step to developing your own opinions on the program.

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