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How Does Obamacare Work?

Find Out How It Works for You

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How Obamacare Works

Obamacare works for everyone differently.

Photo: Joe Raedle/ Getty Images
doctor with patient

Many people found their plan was cancelled by their insurance company when it no longer complied.

Credit: Joe Raedle/Getty Images
health worker exam

Obamacare provides free preventive exams.

Credit: David McNew/Getty Images

Obamacare, otherwise known as the Patient Protection and Affordable Care Act, works by mandating that everyone get health insurance in 2014 or pay a tax. It provides subsidies for moderate income families and small businesses by taxing some health care providers and high income families. It changes how doctors are reimbursed by insurance companies, from a fee-for-service basis to a quality-for-care basis. The overall goal is to lower health care costs, and provide better health care, for society at large. Here's Why Health Care Needed to Be Reformed.

Obamacare lowers premiums over time by reducing health care and insurance costs. It requires everyone to have insurance, and allows parents to add their children up to age 26. As a result, more young, healthy people pay premiums but don't use the system, adding to health insurance companies' profits. The competitive insurance marketplace provides more incentive for companies to pass on these savings to customers through lower premiums.

Similarly, Obamacare subsidizes prescriptions for those on Medicare. This allows seniors to continue taking medications and prevent emergency room visits. Find out How Much Will Obamacare Cost Me?

How Do the Health Insurance Exchanges Work?

Health insurance plans are being sold on the health insurance exchanges as of October 1, 2013. You can compare health plans, find out if you qualify for tax credits or subsidies, and purchase your insurance.

Each exchange uses a four-step process:

  1. Create an account. It will ask you several personal questions to verify your identity.
  2. Provide Social Security and income information to see if you qualify for tax credits.
  3. Review plans in the four categories (Bronze, Silver, Gold and Platinum). Each category has different monthly premiums, deductibles and copays.
  4. Enroll in the plan. Investigate the exchanges now.

The exchanges in most states are run by the Federal government. These exchanges were difficult to get into at first, but are much better now. Seventeen states and the District of Columbia are managing their own exchanges, while seven states are partnering with the Federal government. Find out your state's status. (Source: Washington Post, The Feds Will Run Most Exchanges, February 18, 2013)

The exchanges allow you to compare physicians, hospitals, nursing homes, home health agencies and dialysis services. Compare providers now.

Of course, most people won't need to the use the exchanges, as they already have coverage. In fact, the Affordable Care Act affects everyone differently. You can quickly scan down to find your situation, and learn about the next steps you can take to make sure Obamacare works for you.

I Have Insurance

Obamacare allows you to keep your existing plan even if it doesn't comply. However, your plan may be canceled by the insurance company itself, or by your employer.  Obamacare’s real promise is that if you lose your health-care plan, you can get a new one. No insurer can turn you away because of health or age, and you'll be able to get financial help if you need it.  Your plan may not have the 10 essential benefits if it was in existence before March 23, 2010. Many of those plans were "grandfathered in," and are exempt from Obamacare. Here's where to start.

I Have a Company Plan - You can keep it. You may want to comparison shop on the exchanges, anyway. Some companies might find it more cost-effective to pay the penalty, knowing their workers can get coverage on the exchanges. In fact, 3-5 million employees might lose their existing plans for this reason. (Source: CBO, The Effects of the Affordable Care Act on Employment-Based Health Insurance, March 15, 2012)

I Have Privately-Bought Insurance - If it's an individual plan you bought yourself, you can keep it. However, compare it to the plans on the exchanges to see if you can get better coverage at a lower price. You might also qualify to get subsidies if you buy a plan on the exchange.

I Have a Discount Plan, Vision Care or Dental Discount Plan, or Workers' Comp - You need to buy insurance on the exchange. These plans are not the same as health insurance. Find out How to Get Obamacare.

I Have Catastrophic Insurance - You can keep it. You may want to shop for a full-coverage plan on the exchange. However, if you give it up you won't be able to go back. All insurance purchased after January 1, 2014, must have minimum benefits. Catastrophic insurance will only be available in certain circumstances.

I Have Medicare - You can stay on Medicare. If you have Medicare Part D, Obamacare helps pay for you prescription drugs if you fall into the "donut hole." For more, see Drug Discounts. By 2020, the donut hole will be eliminated.

I Have Medicaid - You can stay on Medicaid.

I Have Other Insurance - You can keep most other plans, including retiree plans, CHIP, TRICARE and other veterans health care programs, and Peace Corps Volunteer plans. See qualifying health plans here.

I Don't Have Insurance

You must get insurance by March 31, 2014 or pay extra on your income tax. It will be 1% of your adjusted gross income (AGI), but never more than the cost of the "bronze" health insurance plan on the exchanges. It will never be less than a minimum flat tax of $95 per adult plus $47.50 per child, up to $285 per household. The tax will increase each year. For more, see Obamacare Taxes.

I Can't Afford Insurance - If your income is 133% or less of the Federal poverty level (roughly $15,281 for an individual, or $31,321 for a family of four), you qualify for Medicaid if your state agreed to expanded Medicare coverage. If your state didn't, you still won't have to pay the tax. Find out more about Medicaid. See if you qualify for Medicaid.

If your income is under 400% of the poverty level (roughly $45,960 for an individual, or $94,200 for a family of four), you can get a tax credit each month, and possibly reduced copayments and deductibles. Find out more.

I'm Unemployed - If you have COBRA, you can keep it. However, you may want to shop the health care exchanges to see if you can get a better deal. Find out more. If you have no insurance, you may qualify for Medicaid or subsidies, depending on your family's income.

I Don't Need Insurance - If you are healthy, you may find it less expensive to pay the tax, depending on your income. Find out about low-cost community health centers in your area.

I Don't Want Insurance - You must pay the tax, as well as any health care costs. If you remain healthy, that's great. However, keep in mind that the average emergency room visit is $1,265, while a broken leg can cost twice as much. Cancer treatment can cost $30,000 ($7,000 for chemotherapy alone). Like homeowners or car insurance, health insurance is designed to protect your life savings. See Why Should I Have Health Coverage?

I Need Insurance Now - The exchanges can help you shop for medical care providers and insurance now. However, plans you buy aren't required to have the essential benefits. You won't be eligible for subsidies or tax credits until 2014. Compare plans now.

I'm a Small Business Owner

25 employees or less - You may already be eligible for a tax credit of 35% of the insurance you provide. Find out here.

50 employees or less - You can use the exchange to find the best insurance starting November 1, 2013. Find out more.

50 or more employees - Starting in January 2015, you must provide affordable health insurance that provides minimum value or pay a tax of $2,000 per employee (for all but the first 30 employees). If a worker finds a lower-cost plan on the exchange, you may be taxed. Find out more about the tax and about what you need to know.

If you offer health insurance as a benefit to early retirees 55-64, you can get Federal financial assistance. Find out how at ERRP. For more resources to help small businesses comply with Obamacare. (Source: Healthcare.gov, The Healthcare Law and You)

I'm a Member or Staff of Congress

You must get health insurance through the exchanges, instead of the government-provided health insurance you get now. However, you will continue to receive $4,900 ($10,000 for family) to help pay for your coverage. (Source: WSJ, Members Only, August 8, 2013; Affordable Care Act) Article updated December 19, 2013

More on Obamacare

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