How Obamacare Works

I want to begin by helping you understand one of the most misunderstood words in health insurance, “Obamacare.” The government has done a great job in promoting Obamacare in that if you haven’t ever heard the term then you were probably one of the crew members aboard the S.S. Minnow with Gilligan and the rest who were (fictionally) abandoned on a desert island.

There are many ideas on what Obamacare is, but, to put it simply, it is a federal law that private insurance companies have to adhere to if they want to sell major medical/stop loss health plans in any of the states in America. The technical name of the law is The Patient Protection and Affordable Care Act (PPACA though the more common acronym is ACA) which passed legislation in March of 2011 and was fully implemented in 2014. Two of the biggest components of the ACA are

(1) Mandating coverage for pre-existing conditions and 

(2) The possibility of qualifying for an Advance Premium Tax Credit.

Pre-Existing Condition Coverage

Mandating qualified health plans to cover pre-existing health conditions regardless of the diagnosis date and effective date of the health plan is a huge change in the health insurance landscape. Before this legislation, if you had a pre-existing condition prior to purchasing or renewing a health plan the insurance company would either rider (not cover) the condition and anything relating to it or decline coverage altogether, but now all medically necessary services has to be covered as long as the plan is active and not behind on the monthly payments. 

The Advance Premium Tax Credit

The Assisted Premium Tax Credit is a key part of Obamacare. It’s a monthly dollar amount the government pays to the insurance company on behalf of the consumer to go towards the consumer’s premium, and the consumer pays the difference. The amount is dependent on the household size, everyone’s age, estimated household income, etc… As stated, the tax credit can be applied each month towards your monthly premium, or you can pay the full amount of your monthly premium and collect the year’s aggregate amount when you file taxes in the following calendar year from when you enrolled. With how high the premiums are getting it’s not usually feasible to push off using a tax credit, so most choose to receive the benefit ahead of time. One thing to note – is if you end up making more money than was estimated, you’ll likely have to pay back some or all of the tax credit used which could easily equal a hefty sum, so if you’re unsure of what that number will be then a good rule of thumb is to overestimate your income to reduce the odds of having to pay back any amount of the tax credit. If your income ends up lower than what was estimated then the extra amount of APTC you qualified for but didn’t get to use will be captured when you file your taxes. 

If you are interested in seeing if you qualify for the advance premium tax credit, reach out to one of our advisors. They can help you properly apply for the tax credit and make sure you understand all implications of using the tax credit. In our experience 9 out of 10 people will qualify for some savings. CLICK HERE or call 801.901.3519 to see how much you could save.