Major Health Insurance Reforms Under Obamacare
Obamacare includes major reforms that all health insurers must implement.
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In many ways, the United States has the worst health care delivery system in the developed world. We pay about twice as much for health care than other developed nations, yet our health outcomes are no better than theirs. This is primarily because we rely on private health insurance to pay for health care for most people -- other than retirees and the poor.
Obamacare has not changed our reliance on private health insurance—which is one reason health insurers backed its passage. However, it has resulted in some significant reforms of the private health insurance system. As a result, some of the worst features of the old system no longer affect Americans.
No Preexisting Condition Exclusions
Obamacare prohibits health insurers from denying anyone coverage based on their health status. This means you're able to purchase health insurance regardless of any current or past health conditions. One welcome side effect of this reform: much shorter and simpler health insurance applications.
Insurance Premium Rate Reform
Insurers may vary their premiums based on the following factors only:
- your age (older people may be charged up to 300% more than the young)
- tobacco use
- where you live, and
- the number of family members covered.
This has resulted in rate decreases for people with health conditions as well as decreases for older people in some states who previously were charged as much as five times more than young people. It has also resulted in rate increases for others who purchase their own individual health coverage—primarily the young and healthy. The amount of such increases varies widely from state to state.
Minimal Comprehensive Coverage
All health insurers must offer comprehensive health insurance coverage that provides at least the following ten essential health benefits:
- ambulatory (“walk in”) patient services
- emergency services
- maternity and newborn care
- mental health and substance use disorder services (including behavioral health treatment)
- prescription drugs
- rehabilitative and habilitative services and devices
- lab services
- preventive and wellness services and chronic disease management, and
- pediatric services (including oral and vision care).
Because of Obamacare, your health insurer can't cancel your insurance coverage if you get sick.
No Dollar Caps
Before Obamacare, many health insurance policies had annual and lifetime dollar caps--that is, a maximum amount the insurance would cover. Once the cap was exceeded, the insurance ended. For example, a person with a $1 million lifetime cap would have to pay all health expenses over $1 million out of his or her own pocket. Given the astronomical cost of health care, these caps could be exceeded very quickly in the event of serious illness. However, under Obamacare, insurers may not impose lifetime or annual dollar limits on their coverage. This means that no matter how much your health care costs, your insurer must pay all of your expenses once you've paid your total annual out-of-pocket limit.
The Employer Mandate
Before Obamacare, there was no legal requirement that employers provide their employees with health insurance coverage. This has changed. Starting in 2015, larger employers were required to offer their employers minimally adequate coverage or be required to pay a hefty fine to the IRS. This insurance must pay for at least 60% of covered services. Employers can require that employees contribute toward their insurance coverage, but they can’t require them to pay more than 9.5% of their household income toward it. In 2015, the employer mandate applied to employers with 100 or more full-time equivalent employers. Starting in 2016, the mandate applied to employers with 50 or more full-time equivalent employees.