What is Obama Care and How Does it Affect Us?

President Barrack Obama is perhaps immortalized forever in American history with the passage of Obama Care or “Patient Protection and Affordable Care Act (PPACA)”, much like Bush Jr. , who is now famous for his legendary (perhaps insane) tax cut.

What is Obama Care?

I was recently wondering about it. Scanning through a lot of online material and videos later I somehow cracked Obama care. I am trying to bring my knowledge and judgement about this healthcare reform bill. I hop my ignorance and biased approach (if any) would be pointed out by informed readers.

being born in a country where 98% of population are not insured for health, it’s difficult to fathom a state rule which dictates that every citizen should be covered under health insurance. What is the rationale behind this dictum?

Let’s examine.

We now pay over $7,000 a year for our insurance coverage (with $3,800 out of pocket maximum), even after employer subsidy towards the premium. This is too much money for most, to pay on yearly basis. Why then health insurance should be made mandatory?

The answer lies below.

Recently our close friend had a baby boy who unfortunately had to be placed in NICU for more than a week (the baby is doing absolutely fine now). The cost that the hospital billed their insurance company is staggering $65,000 at the end of it. How many in this country (even though the richest country in the world) could have afford this bill without an insurance?

There’s something seriously wrong in America’s health care system. Obama care is trying to fix some of the flaws. Obama care is an attempt towards making health care affordable to public.

The crux of the law is to set up a health care exchange in every state, where individuals and small businesses can shop for health care policies. Sometimes with government subsidy.

The main constituents of Obama care that directly affects us

1. Every body should be insured or pay the penalty – Those who are not covered by employer sponsored health care plan should arrange for a coverage on their own, except those who have religious believes or living in extreme poverty.

2. Government will subsidize health insurance premiums for some – In case you live under federal poverty line, you will have to pay no more than 2% of your income towards insurance premium.

3. Insurer can’t discriminate people based on past illness – health insurance companies will no longer refuse to renew coverage unless you have committed fraud. They can’t simply drop your insurance or refuse to renew based on your prior year’s medical records. Health insurance providers, under Obama care, can’t have different premiums for people in same age group and living in same geographical place.

4. Your children will be covered till age of 26 – a 4 years more of coverage for them would ensure a longer time for paying off student debt while they will continue to enjoy parent’s insurance policy.

5. Free preventative care – Obama care (PPACA) requires health insurance providers to provide free of cost immunization and preventive care to insurers. No longer paying for flu shots or yearly medical checkup. There will be no co-payment or deductible.

6. Removal of life time maximum limit – If you have an illness for which your insurance provider has a life time maximum limit, there’s a good news for you. Obama care requires insurance providers to completely remove this clause from the policies.

7. Larger Small businesses (who are mostly against PPACAhave to contribute towards employee’s health insurance cost – Firms employing 50 or more people but not offering health insurance will also pay a shared responsibility requirement if the government has had to subsidize an employee’s health care.

Some of this would go in to effect very soon and the majority, including the mandatory coverage clause would come in to effect from 2014 onward.

How would a broke government pay subsidy for insurance premium? Main revenue sources are mentioned below.

  • Increased medicare tax deduction from rich people (joint earning more than $250,000 a year).
  • Increased fee for health insurance providers
  • 40% excise tax on unusually high cost health plans (more than $27,000 a year for family coverage)
  • Reduced limit for HSA contribution, thus reducing tax breaks.
  • Increased fee for Drug manufacturers and importers

I am wondering why cigarette manufacturers are exempted from bearing the burden?

If I were running an insurance company, the first thing I would do is to increase the insurance premium to cover for the potential revenue losses as I would be paying more money to hospitals and doctors towards free preventative care, increased medical coverage and removal of life time maximum and other benefits Obama Care brings in for the people.

So, at the end it’s the poor us who have to bear the burden again.

We will pay more towards higher premium, costlier medicines and lesser tax breaks to fuel better health care coverage.

Actually this is how economies run. It’s our money that come back to us. You pay more money to save money when you would fall sick.

For me, I don’t think this law brings any significant change, unless I develop a serious illness which now has a life time maximum amount set. Every day we hear stories about medical condition related bankruptcy, this could never happen again in post life time maximum era.

People with existing chronic illness would get benefited. Many insurance companies refuse to provide coverage to them now. Refusal would no longer be legally allowed, once the states enact the law.

Our insurance does provide all preventative care for free, many are not that fortunate. They pay out of their pocket for yearly check up and immunization, etc. Obama Care solves this problem.

Obama care also is a ray of hope for people with cancer, infertility, mental disorder, joint dysfunction, etc. as post 2014 there will not be a lifetime maximum limit for these treatments. I have seen policies where total medical benefit were also subjected to lifetime maximum.

What do you think readers? Would Obama Care bring better health care solution? Are you seeing any benefit for yourself? Share your opinion freely by commenting below.

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  1. says

    Interesting analysis and accurate for the most part. My major beef with the legislation is the invidual mandate…government forcing it’s people to buy a product just because they are breathing…the very opposite of individual freedom and liberty.

    • says

      I see your point but, isn’t it true that every line of law is against our liberty and freedom? We can’t lift items from shops even when we like it so much…

      • says

        “We can’t lift items from shops even when we like it so much”

        Unless the “we” is government officials? Let’s end the hypocrisy by making it our goal to gradually privatize (funding by voluntary customers) all currently force-funded services. First, strip government down to only interfacing with us when we infringe on other people’s property and lives (national defense, police, courts), and maybe roads and environmental issues that are apparently easier to manage centralized. The more we can directly communicate our needs with one another (through internet and now smartphone apps), the less we have any need for a group of popularity contest winners determining what is best for us. If healthcare and insurance had as much freedom as the computer industry, we’d have similar innovation and continual reduction in cost and increase in quality over time. Let’s abolish laws which prevent us from getting insurance from out-of-state companies, for starters. For more ideas, read this (“A free market can fix health care): http://www.cato.org/pubs/pas/html/pa650/pa650index.html

    • PB @ EconomicallyHumble.com says

      I’m sure you use services that I pay for (water, flushing toilets, education, military, CDC, commerce, printing of money, FDIC insurance, etc.)…. and its okay ’cause sharing the costs of all of this makes our country healthier and more productive.

      • says

        I pay for my water and flush toilet and you pay for yours, so its not shared. Our education system is horrible. The military is in our constitution, so is commerce, and printing money.

        • PB @ EconomicallyHumble.com says

          But our pipes and water purification systems are shared…. the amount you pay, or the amount I pay, is certainly not enough to make it affordable. But together we have a great crap removal system!

  2. says

    If the Federal Government can force you to buy something then FREEDOM is gone. You can always find a good reason to give up freedom for “security” but in the end you have tyranny. Since when has anything the government touched not turned into a boondoggle of gross incompetence, waste, soaring costs, and inefficiencies.
    Those who are willing to give up freedom for security deserve neither.
    Benjamin Franklin

    • PB @ EconomicallyHumble.com says

      But we already “buy” education, roads, water, a military, etc. I don’t agree with all of the expenditures but thats part of a civil society. We already pay for the healthcare of others because it makes the entire US healthier and more productive… I’m talking about emergency room visits, child health care, elder health care, maternal health care, etc. By bringing more people into the insurance system it brings the costs WAAAAAAAAY down, right?

      • says

        Then why not a government-run meal service before health insurance? Food seems far more important than health insurance. I *choose* not to have health insurance because I eat healthy and exercise. If I did want insurance, I’d only want emergency insurance, since I’m willing to take the risk and keep the savings in the mean time.

        “By bringing more people into the insurance system it brings the costs WAAAAAAAAY down, right?”

        No. Insurance pools reduce costs only if the new people would be less likely to result in a claim. Obama would force insurance companies to include individuals with pre-existing conditions that absolutely increase the cost of care for everyone else. This forced charity violates our right to the pursuit of happiness, and forces us to labor for someone. Charity is voluntary, or it is called slavery. You can’t force people to give charity at gunpoint. I’ll leave you with a few quotes by the founders, who were 100% against the modern bastardization of the general welfare clause, the basis of most of the “New Deal”, “Great Society” and current ObamaCare changes. Most economists now understand that FDR’s big govt policies extended the depression, the War on Poverty created more poverty, and ObamaCare would probably result in the same shortages and wait lines as Canada experiences. We already have far too much centralized bureaucratic government involvement in health services. Let’s take away the power from the few bureaucrats, and restore it to the free market, the people.

        “With respect to the two words ‘general welfare,’ I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.”
        –James Madison in letter to James Robertson

        “The powers delegated by the proposed Constitution to the federal government are few and defined… to be exercised principally on external objects, as war, peace, negotiation, and foreign commerce.”
        -James Madison, Federalist 45

        “If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions.”
        -James Madison, 1792

        “The Constitution allows only the means which are ‘necessary,’ not those which are merely ‘convenient,’ for effecting the enumerated powers. If such a latitude of construction be allowed to this phrase as to give any non-enumerated power, it will go to every one, for there is not one which ingenuity may not torture into a convenience in some instance or other, to some one of so long a list of enumerated powers. It would swallow up all the delegated powers, and reduce the whole to one power, as before observed”
        -Thomas Jefferson, 1791

        “Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated.”
        -Thomas Jefferson, 1798

        • J says

          If the mandate is struck down, then hospitals should also be free to deny emergency services if someone has chosen not to purchase insurance especially if they could have afforded it and chose not to do so. They can also get emergency services if they can pay for it out of pocket as well. If they cannot pay for the care then the hospital should be able to attempt to collect their money and taxpayers should not be left paying for the emergency care.

          Continuing the meal example in the above post, restaurants are not mandated to feed starving people.

        • PB @ EconomicallyHumble.com says

          Thats a good questions — Why not a government-run meal service before health insurance? Plan (A national food system, more than the one we have for children, elders and poor individuals, sounds interesting. why not have that?).

          You may choose not to buy health insurance, but if you are hit by a car while on a walk, for example, you have no choice but to enter the health system. In other words, by living in a society where we take care of our neighbors, you have chosen to participate in health systems. Its the insurance companies that muck things up.

          I looked up the congressional budget office estimates at http://www.cbo.gov/topics/health-care (which are crazy! really smart people must do those) and they say it would bring costs down… but I have to trust them since I’m not an economist….. are you? Can you share a reputable source on the costs? I’m also not a constitutional lawyer and so have no idea how to interpret the quotes. Can you explain how they matte in this discussion? (and I’m not being fascicious, I really don’t know … ). I thought the Supreme Court was researching the interstate commerce clause?

          This is tough stuff. I think I’ll do some research and write a blog post on the subject. How do we take care of our citizens while also taking care of our right? Steve, any thoughts?

          • says

            Agreed. And when you get hit by that car do you have to savings to pay all of your medical bills? I guess that’s where the emergency insurance comes it. Because that’s what’s screwing the system up. People entering ERs and not being able to pay. The hospital has to make up that revenue somewhere, so they start charging more for their services that get passed along to the insurance companies. The insurance companies in turn have to raise their premiums. Which means more people can’t afford their coverage anymore. So they drop it and then either get hit by a bus or incur an illness that could have easily been identified and treated by preventative care, but they didn’t get preventative care because they didn’t have insurance. So they wait until it gets life threatening and then they end up in the ER. They aren’t able to pay their bill. And the cycle starts all over again and progressively gets worse.

            The part about children being covered under parents until age 26 is already in effect. And state insurance is available to those with pre existing conditions at a pseudo…not reasonable, but not outrageous premium if you have a decent income.

            As someone with a pre existing condition, I’d like to address the issue of “charity.” My issue is not life-threatening at this point in my life, but may be when I am older. Especially if I don’t keep an eye on it. And I’m not going to be able to keep an eye on it if I don’t have insurance. And I can’t get insurance. Unless my employer decides to provide it. I’ll end up being one of those people in the ER. Because I promise you I’d rather die in debt than simply roll over and die. Would you like to pay for the charity-case that is me now or later through your insurance premiums? I understand you don’t have any, but bringing healthy people like yourself into the pool lowers the risk and therefore the cost for everyone.

            I don’t like the individual mandate. I wish the original plan had gone through and everyone could have gov’t sponsored insurance. It’s not the best health care. But it’s something. And if individuals had wanted to purchase better plans they could have.

  3. PB @ EconomicallyHumble.com says

    Since everyone uses healthcare, the idea behind the mandates is that by bringing everyone into insurance the costs of healthcare are reduced BIG time. And remember, medical bankruptcy is the #1 cause of bankruptcy. Its sucks, but if you have basic insurance or no insurance an then get sick, you won’t be able to afford it.

    So far we have seen a few benefits:

    – 2.5 million young adults under the age of 26 have health insurance because they could stay on their parents’ plan.
    – 105 million Americans no longer have lifetime dollar limits on their coverage.
    – More than 17.6 million children with pre-existing conditions can no longer be denied coverage.
    – Insurers now must cover a range of evidence-based preventive health services without charging co-pays or deductibles.

    FYI Ken, as citizens we buy healthcare for our neighbors already via emergency rooms. Insurance brings this cost down… we also buy roads, schools, education, water… all sorts of things.

    good post.

      • PB @ EconomicallyHumble.com says

        No problem. Its amazing how much misinformation there is out there regarding the law. Facts show it is a good thing economically and socially, but politics reasoning muddles up the issue… and unfortunately politics have turned really gross in the US.

    • says

      Govt, being a monopoly service provider, prevents you from seeing the real cost. Education costs over $10,000 per student, up to $15,000 in Detroit (where under 25% graduate and test scores are abysmal), and $30,000 per student in Los Angeles. If parents were given a voucher of $10,000 for each child, to spend for their child’s education each year, this would give schools incentives to reduce the cost, and increase the quality. Surely, it’s obvious, a class of 25 kids should not be costing $250,000. Do a voucher system and we’d all pay less in taxes, as we would be in control of the educational service, not unelected, unaccountable bureaucrats.

      Why defend a monopoly? If the mafia paved roads, would you defend their theft of 40% of everyone’s earnings?

  4. says

    You can’t legally drive a car without insurance. Freedom isn’t curtailed there?

    Might not be perfect but atleast Obama tried instead of the suggested tax breaks for Pharma companies!

    • says

      This is actually very good point MC! I never thought about this correlation. Yes, when we drive car we buy insurance, its a mandate, yet no one talks against it as Its a norm.

      • says

        Guys, driving is a privilidge, you don’t have to drive. If you breath, you have to buy health insurance.

        Secondly, car insurance protects OTHER drivers, not you. If you get in an accident that is not your fault, you can be assured that the other motorist can cover your costs.

        Its not the same..sorry.

        • csdx says

          But health insurance does protect others. If you get in a car accident and broke someone else’s property, the insurance will cover it. Likewise if you get sick, and use up the hospital’s resources, health insurance will pay them. Since after all, the hospital is obligated to provide the care, you’re really ‘covered’ in the sense of receiving treatment anyways. It’s the hospital that doesn’t get paid if you’re unininsured. Just as having many uninsuired drivers can raise everyone else’s premiums, so does having many uninsured people using healthcare.

          Also driving certainly is a privledge in the abstract. But many places have such sprawl and poor public transportation that it’s almost mandatory.

          Also doesn’t the government already make us buy health insurance as Medicare?

    • says

      I in-fact pay $186 per paycheck towards premium, and I get 26 paychecks. That’s $4800 just towards premium. Then there’s $2,800 yearly out of pocket maximum. In all it goes beyond $7000 each year.

      • PB @ EconomicallyHumble.com says

        Ah I see…. Fortunately, the Congressional Budget Office estimates that a national premium will cost about $4,500 for the highest earners (which of course high earners can afford to pay) or about 2 to 9% deepening on your income. You will save $2,500a year with Obamacare!

        So I guess since you are paying for insurance already you will save money…. and since others will have insurance versus going o an emergency room (which is REALLY expensive) the total costs for health care insurance will come down for all of us! woohoo!

  5. Carol says

    I do hope this bill passes the Supreme Court. My husband and I are self-employed, and without the forth-coming government regulations that you listed above, we are paying much too much for our high deductible insurance plan – the only kind we can afford.
    Let’s even out the playing field a bit. Those who can afford to pay more – do.
    Those who can’t – we get some help.
    Every human life is worth the same as every other human life, regardless of their bank balance.

  6. says

    If the Supreme Court doesn’t strike down this bill they might as well burn the Constitution. This country was built upon freedom to choose, not to be forced to buy things.

    • says

      You may be right, but the way I think of it, I see people resist things for the fear of change. When countries first started imposing visa control, people cried foul. It was straight against freedom.

  7. says

    In India too health insurance is catching up fast but so far it is only limited to people working in MNC’s/corporate world. What bad is happening because of this is that now medical bills are suddenly becoming more and more expensive. I hear every day that Doctors are prescribing test that are no longer necessary. This will make life of a person who doesn’t have an insurance – very tough.

    I liked a few points in Obama care, esp – Insurer can’t discriminate people based on past illness. That is always a point of debate.

  8. says

    Wow, you really opened the flood gates on this one, huh? Excellent assessment of Obamacare, hitting the high points as well as the lows, by the way.

    My cousin’s son was born at 24 weeks, and spend the first five months of his life in the NICU. He still has severe developmental delays. Because of the lifetime max so many insurance companies have, if Obamacare were to be repealed, he would hit his “lifetime max” if he EVER got any serious affliction as an adult, including heart disease, cancer, were in a car accident, diabetes, etc. I hope Obamacare stands, just so my cousin’s son doesn’t have this horrible burden over his head.

  9. says

    Wow, I didn’t realize this was such a hot topic. We have our healthcare covered here in Canada and it is one of the best feelings knowing that worrying about how you are going to pay for emergency visits isn’t something that you need to think about when you get sick.

    And yes, I know that we pay for it when our taxes, and I am perfectly content with that.

  10. says

    The thing that I think about when it comes to ObamaCare is if it is now affordable to buy health insurance yourself, and you have to be covered, why would a company still offer the benefit of health insurance? As it currently stands, it is offered as a benefit (though the costs keep getting passed to the employee). Companies can now take that benefit away and save the money for the business.

    Also, I hate the idea of people making $250K or more labeled as rich. They should adjust this number based on the cost of living for everyone.

    • PB @ EconomicallyHumble.com says

      I like numbers. Like these:

      -35% of the population earns 25K or less.
      -at $250K or more you are at the top 1.5% of earners in the US. (sounds “rich”, when compared to the entire population)
      -$250K is 96% more than the minimum wage worker makes in one year of employment in the U.S. (estimating 16K a year).

    • PB @ EconomicallyHumble.com says

      I almost forgot… companies have offered insurance as a way to recruit employees. The process started after WWII. Insurance through companies is usually cheaper because all of the employees (at that company or combined with others) make a larger insurance “pool”. Its like SAMS club…. buy in bulk and its cheaper.

  11. says

    People with existing chronic illness – that is most older people. You are young now so you don’t care, but I tried getting health insurance for my mom and it is tough.

  12. says

    Insurance is nice, but what the law doesn’t do is guarantee access. That’s really the big issue with any country where government runs or runs a majority of health care. What use is it to you if your bills will be covered if you can’t get the care you need?

    • PB @ EconomicallyHumble.com says

      Oooo, Interesting thought. Where has this happened? (Access is a huge issue in the US, mainly for people in lower income/working class neighborhoods and rural communities. But I like how you spun it… great thought experiment.)

  13. wanda says

    why is that i pay out more heath care cost then what insance covers they pay 700 from july to june so rest a pay for a dont have a job i stayhome take of my mom and dad i have asthma all the time insance run out before my meds do

  14. Pam says

    I am a die-hard when it comes down to change. My instinct is this Obama Care business is the first action that is going to lead us into communism. More focus should be directed on the number of folks being paid huge salaries of hard earned taxpayer dollars for nothing. Come on! There are a number of cuts, in my opinion, that need to be done in the personal chosen to help the supposed qualified president running this country. It don’t take all the hundreds of people we the tax payers are being taxed & forced to pay to aid the president. Cut some of their pay down to minimum wage & see if they could survive. Just see if half of those white shirts would know how to till a garden in the spring & harvest enough food to last them through the winter. Slop a pig, & butcher it for the freezer. I could go on & on.

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