The Affordable Care Act, also known as Obamacare, was signed into law by president Obama in 2010. Our system differs from places with free healthcare such as Australia and the UK, because they pay higher taxes. But shockingly we as a nation spend the more money per capita on healthcare than Germany, the UK, or Canada. As of 2013, the US spent 18% of its GDP on healthcare costs.
According to Forbes Writer, Jeffrey Dorfman, Obamacare does little if anything to reduce total expenditures on health care – mostly it just shuffles around who pays for what. Simply put, millions of people who had trouble affording health insurance and may have not had any, can now buy it at below-market price by receiving a subsidy from the federal government.
The affordable Care Act, has two main methods of paying for what it offers- taxes, and higher insurance premiums for some. Most Americans who know anything about health insurance would guess the first, but what is shocking most are the higher insurance premiums that middle class Americans are burdened with so that other ordinary Americans can benefit from a lower price tag.
“Obamacare requires insurance companies to cover people with pre-existing conditions and forces limits on the price differentials insurance companies are allowed to charge people based on all sorts of risk factors (like smoking). That means that insurance companies are guaranteed to lose money on lots of the people they will be insuring. Simple economics demands that the insurance companies make up those losses somewhere.“
The way that Obamacare deals with these losses, which is something they don’t make obvious, is with the gains on young and healthy individuals. There is a reason the law forces people to buy health insurance, and it isn’t always for that individual’s own benefit.
So why are we now just hearing about Obamacare in the news? As open enrollment starts today, Nov 1st 2016, on the Affordable Care Act exchanges, consumers in certain parts of America are getting ready for huge rate hikes, while others may jump ship.
The premium for the benchmark plan is more than doubling in Arizona, to an average of $422 a month for a 27-year-old enrollee. In Oklahoma, it’s increasing 69% to $424. Monthly premiums range from a low of $219 in New Hampshire and Massachusetts to $760 in Alaska.
The media in favor of Obamacare advertises the benefit of “subsidies” that put a limit on how much you have to pay. But to qualify for a subsidy, you must be a U.S. citizen and earn as a household less than four times the federal poverty level. If you’re single, you are eligible if you make less than $47,500 a year.
Although there are more people insured today than in 2010, the law shouldn’t allow health plans to “dump sick people on other health plans,” says economist John Goodman, who sums up the way some Americans are feeling today.
Thank you, Tesha, for this post. If students are interested in an economic analysis of the Affordable Care Act (ACA), they can register for Econ 261: Public Finance in Spring 2017. We spend a couple weeks on the act and the issues. One thing that has been in the news lately is some new distinction between the ACA and the term “Obamacare”. Somewhere someone decided to apply the term “Obamacare” only to the people who purchase their health insurance on the exchanges. I’m not sure when this transition happened, but it appears to be an accepted differentiation in the media.