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So the Supreme Court had their big ruling on the new health care law—aka "Obamacare"—but to be honest, I'm still not really sure what the law does. What does it mean and how (if at all) is it going to affect me personally?
Uninsured and Confused
Politics aside, we know the Patient Protection and Affordable Health Care Act (PPACA) is kind of confusing, so let's break it down to the basics of what the law means, what the recent Supreme Court ruling signifies, and finally take a look at what the law will actually mean to you.
The Basics of the PPACA and the Supreme Court Ruling
The PPACA is a gigantic law and we're just going to summarize it quickly. If you want a full guide to everything you could possibly need to know head over to the official Healthcare web site for the full text of the bill, state-by-state implementation, and more. If you'd prefer a more summarized approach, Reddit user CaspianX2 has done an excellent job of breaking it down simply (with citations).
The Basics of PPACA
PPACA was initially signed into law in 2010 and a number of its rules have already gone into effect. Here's a rundown of some of the most important aspects of the law:
- Individual Mandates: By 2014, every citizen in the US will be required to have health care. Medicaid will be expanded to include a wider range of people, and subsidies will be offered for those who struggle to pay for insurance (we'll explain how all this will work below).
- Employer Mandates: Employers with over 50 employees will be required to offer some type of health insurance option to employees.
- No More Pre-Existing Conditions: Insurance companies cannot deny you if you have a pre-existing condition like a chronic illness or disease. In addition, insurance companies can't drop you because of an illness.
- Children Can Stay On Parent's Plan Longer: Previously, it was up to the insurance company to decide how long a child could stay on a parent's insurance program. Now, children can stay on their parents plans until they're 26 years old, regardless of whether they're in school, married, or considered a dependent.
- No Lifetime Limit: Insurance companies used to have a lifetime limit on the amount you could spend on treatment over the course of your life. Now, that cap has been removed and your insurance company can't refuse to pay for services because you've reached a cap. Photo by Jennifer Morrow.
What Happened in the Supreme Court Ruling
In November 2011, several petitions were sent in against PPACA, claiming that the individual mandate was unconstitutional because it "forced" people to buy health care. The Supreme Court of the United States (SCOTUS) agreed to hear arguments over these issues, which brings us to yesterday's big news.
In Plain English: The Affordable Care Act, including its individual mandate that virtually all Americans buy health insurance, is constitutional. There were not five votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, five Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters.
Basically the only thing that matters to you is that the individual mandate remains. This means you are required by law to get health insurance by 2014. If you don't have insurance by then, you will be fined (more on that in the next section).
How It Will Affect You Personally
We know how and what a large chunk of PPACA has already done since it first started in 2010, but the big question on everyone's minds until yesterday's Supreme Court decision was how the individual mandate will affect people going forward. That depends entirely on one factor: whether or not you currently have health insurance.
If You Have Insurance
If you already have insurance the mandate itself has no effect on you (obviously). However, a number of changes are still on the way up through 2016 when the law is fully implemented. On top of the above provisions regarding how insurance companies cover you, the hope is that new markets will open up to offer cheaper options, but only time will tell.
You may also see an increase in your taxes, assuming you're making over a certain amount every year. Smart Money breaks it down in detail, but the main impact is an increase in Medicare taxes:
Starting in 2013, an extra 0.9% Medicare tax will be charged on: (1) salary and/or SE income above $200,000 for an unmarried individual, (2) combined salary and/or SE income above $250,000 for a married joint-filing couple, and (3) salary and/or SE income above $125,000 for those who use married filing separate status. For self-employed individuals, the additional 0.9% Medicare tax hit will come in the form of a higher SE bill.
The only other major financial change insured people will see is that the new law halves the amount you can keep in your "flexible spending account." This pre-tax medical fund was to help pay for any medical procedures, and it was capped at $5,000. Now it's capped at $2,500 and purchases for non-prescription medicines are not eligible.
All of this is on top of the other changes we mentioned, of course—like being accepted regardless of pre-existing conditions, and being able to stay on your parent's insurance until age 26. Check out Healthcare.gov's timeline for a full breakdown. Photo by frances1972.
If You Don't Have Insurance
Since the point of PPACA is to get uninsured Americans insured, if you're not insured, the SCOTUS ruling has a much bigger impact on you. First off, if you can afford insurance, you need to be insured by 2014. This is so that people don't wait to get insurance until they're sick.
What private options you'll have are still up in the air. On a state-federal level, Medicaid will be expanded to include more people at the beginning of 2014 on a state-by-state basis. You qualify if your income is below $14,404 for individuals or $29,326 for a family of four (133 percent of the federal poverty level). Smart Money suggests the uninsured should have cheaper options if you're unemployed or self-employed:
The new law will requires states to provide online "exchanges" with the aim of making it easier for people to find and afford individual plans that suit their needs. This, plus the new pre-existing condition mandate, will help self-employed and unemployed people get more affordable and complete coverage.
Those options are going to vary state-by-state much like they do now. It's hard to say what options will be available to you and when. Subsidies will be offered for low-income individuals. Kaiser Health News provides the details:
Premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level, or $14,404 to $43,320 for individuals and $29,326 to $88,200 for a family of four.
The subsidies will be on a sliding scale. For example, a family of four earning 150 percent of the poverty level, or $33,075 a year, will have to pay 4 percent of its income, or $1,323, on premiums. A family with income of 400 percent of the poverty level will have to pay 9.5 percent, or $8,379.
One place to start looking for insurance is Healthcare.gov's Insurance finder, but a lot of the options will change as we get closer to the implemenation of the individual mandate in 2014.
If you don't get insurance by then, you might face fines. The Washington Post breaks down the numbers:
In 2016, after the law is fully in place, about 4 million people will pay the penalty to the Internal Revenue Service for being uninsured, the Congressional Budget Office has estimated. They would pay $695 per uninsured adult or 2.5 percent of family income, up to $12,500 per year.
If you don't pay the fines the IRS can withhold your refund, but no other course of action is taken against you. Photo by The Consumerist.
It All Boils Down to This
If you're uninsured, you need to buy insurance by 2014. If you can't afford it, the government can help you pay for it through subsidies. Many people will see an increase in their Medicare taxes, as well as changes to how insurance companies treat you.
Hopefully that clears things up. It is a confusing law with a lot of different rules dispersed over a wide range of time, so be sure to check out the links above for more detailed explanations of everything.
P.S. Have more questions? Sound off in the comments (but be civil).
Title image remixed from Clover (Shutterstock).