young doctorsThere’s a lot of speculation about the long-term effects of the Affordable Healthcare Act, otherwise known as “Obamacare.” Assuming that the act stays in effect, it will make sweeping changes to the way that people purchase health insurance as well as the insurance policies themselves. Many people will not be affected by the change at all; for others, the change may have a positive or negative effect on their finances. Overall, the effect of Obamacare on an individual will depend on that person’s current insurance status, income, family size and health.

What’s Changing?

Over the next two years, several changes will take place in the way that insurance is provided. By 2014, all individuals will be required to purchase insurance coverage. People who do not purchase a policy will be subject to tax penalties. In addition, the way that insurance works will be changed somewhat. Insurance companies will no longer be able to deny coverage to individuals with preexisting conditions, and rates will be regulated by the government.

All insurance companies will have certain requirements for coverages. For example, preventative care will need to be offered to insureds without any out-of-pocket costs. The amount of out-of-pocket expenses an individual is expected to pay will also be limited. This will reduce the presence of high-deductible programs and decrease the utility of flex spending accounts.

The program also limits the amount of health expenses that can be deducted from taxes at the end of the year. The bill also introduces several tax increases, including an increase in Medicare taxes and investment return taxes. These taxes predominately affect high-earners and businesses.

How Will Obamacare Affect Me?

Depending on your current situation, the Affordable Healthcare Act may have a dramatic impact on your life or it might pass relatively unnoticed:

— If you already have insurance through your employer, you may not notice the change at all. Some businesses are choosing to accept the tax penalty rather than offer insurance, so benefits may be cut by your employer. If this happens, you will need to purchase private insurance or pay the tax penalty yourself.

— People who currently have a private insurance policy may pay lower rates thanks to the act. The details of your policy may also change. For example, the amount of out-of-pocket expenses you’ll be required to pay will be dependent on your income and the size of your family.

— If you are currently uninsured, you will need to purchase health insurance by 2014 or risk paying the tax penalty. Depending on your income, you may qualify for insurance through the state-funded insurance exchange. This means that lower-income households will get insurance at a lower price than high-income households. The tax penalty is the same for all income brackets.

— You will be exempt from paying the tax penalty if insurance would cost more than 8% of your annual income. Additionally, if you own a small business, you are not required to provide insurance to your employees. Only businesses with 50 or more employees are subject to the tax penalty.

— Medicaid will still be available to people who need it and cannot afford insurance through the state exchange. The insurance exchange will also interact with both Medicaid and Medicare to provide hybridized insurance coverage.

— If you have a preexisting condition or illness, you will be able to purchase insurance and that coverage cannot exclude your existing conditions. For many people, this is the best benefit of the act; it does, however, mean that people may take advantage of it by simply choosing to buy insurance when they’re sick and pay the tax penalty in other years. Due to the size of the penalty, this should not be a major concern, but it is a possible loophole in the coverage.

Ultimately, the people who will most benefit from the Affordable Healthcare Act are those who most need its protection.

People who could not qualify for health insurance before have the opportunity to purchase a policy that will provide ample protection, and individuals who could not afford private health insurance will have access to affordable policies. This will be extremely beneficial to people in lower and middle-class households where the effects of a health problem can be financially ruinous.

People with higher incomes will be more affected by these changes. This is due in part to the fact that insurance will cost more for high-income households. The tax increase will also directly affect high-earners as the rates for investment taxes will see a dramatic increase. Businesses, too, will have higher operating costs due to the necessity of coverage, but the overall price should stay competitive.

In the long run, this act may serve to decrease the cost of healthcare by encouraging more people to obtain preventative care and deal with health issues sooner. People who don’t have insurance often wait until their medical conditions become a crisis before obtaining care, which ultimately leads to high costs that often go unpaid and must be absorbed by the healthcare provider. Ideally, Obamacare should reduce these expenses.

The program is still in its fledgling stages, and it may undergo numerous changes over time. Indeed, depending on the results of the upcoming election, Obamacare may be repealed. At the moment, however, it appears that Americans should prepare to start shopping for insurance in 2014.

Alan Dunn

Written by Alan Dunn – one of our highly talented and underpaid writers. For more information on Alan follow him on Twitter or Google Plus

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