Nearly 49 million Americans have no health insurance. Health care represents roughly $2.6 trillion or 18% of the nation’s budget, and costs continue to rise. People with pre-existing conditions can be denied coverage or be forced to buy expensive plans. The Medicare trust fund is expected to be unable to pay 100% of hospital insurance costs by 2024.
For these reasons and others, most policy makers agree that the health care system needs to be changed.
The health reform law passed in 2010, also known as the Affordable Care Act, represents one way to address these issues. The main goal of the law is to expand health insurance coverage to millions of Americans and to protect health care consumers with new regulations placed on the insurance industry. The law is scheduled to roll out over the course of four years, with its most significant changes to take effect in 2014. Some want to repeal and replace the law and have different proposals for changing health care.
Here are highlights of what the law includes, along with its alternatives.
The Mandate, the Tax, and Coverage for Pre-existing Conditions
Starting Jan. 1, 2014, almost all Americans will be required to buy insurance. Those who already have insurance will be able to keep it whether they get coverage through their employer or buy it on their own.
Those who don't have insurance through an employer can buy it through state-based health insurance markets that will be online by 2014. And millions of lower-income Americans will gain coverage through Medicaid; the program’s eligibility requirements will expand to include more people as a result of the law, also starting in 2014.
People who don't buy insurance will have to pay a tax penalty, starting with the 2014 tax filing. The penalty for the 2014 tax year will be $95 or 1% of taxable income (whichever is greater). This penalty will increase over several years.
The individual mandate was included to help offset the requirement for people with pre-existing conditions. Under that requirement, insurance companies will no longer be allowed to deny people coverage because of their medical condition or to charge them more.
Without requiring everyone to purchase insurance, insurers could not afford to cover people with serious medical conditions. If everyone pays for health insurance, the costs can be shared between people who are well and use fewer medical services and those who are sicker and use more.
Help Paying for Insurance
The law provides:
- Tax credits for people with incomes that are between 138% and 400% of the poverty level (up to $92,200 annually for a family of four in 2012).
- Coverage for more people under Medicaid, the state and federal health insurance program for people with low incomes. An individual that makes less than $15,415 or a family of four that earns less than $31,809 will be eligible.
States have the option to expand their Medicaid program and cover more people. People living in states that don’t expand Medicaid may not be eligible for Medicaid coverage.