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How Obamacare will affect US families

2nd July 2012

The US Supreme Court's upholding of President Barack Obama's healthcare reform plan will have a profound impact on millions of families in the country.

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The Court issued a 5-to-4 ruling upholding Obama's Affordable Care Act (ACA), which seeks to expand health insurance coverage.

Under the new law, individuals earning more than a certain amount will be required to buy insurance, and insurance companies will be forced to offer coverage to anyone who applies for it.

The plan had been challenged on the basis that it is unconstitutional to make such claims on individuals, but judges deemed the law appropriate under Congress' powers to levy taxes. Those who fail to comply with the law will face fines, which judges viewed effectively as a form of taxation.

Now, the low-income Medicaid care plan will be extended to more families, including those at up to 1.33 times the current poverty level, although states do not have to comply with their end of the deal.

This means that not all the 17 million people who could be reached by extending Medicaid provision, will be.

For families below certain income levels, the government will pay tax credits and subsidies to enable them to buy health insurance.

Under the plan, a working family of four without health insurance from an employer with an annual income of around US$60,000 (£38,000) could expect to receive tax credits worth around US$9,000 (£5,700) if they buy insurance in 2014.

However, the total annual premium for such a family is estimated at US$14,700 (£9,400), meaning the family will have to find at least another US$5,000 a year to meet its obligations, not to mention healthcare-related out-of-pocket expenses, which are capped at US$6,250 for this fictional family.

A typical American household in 2010 spent just US$3,157 out of a total annual expenditure of US$48,109 on healthcare, according to figures from the federal government's labour department.

Citizens whose religious beliefs or income prevent them from buying health insurance would be exempt, as would anyone in prison, or immigrants with no documents.

Under Obama's reform law, insurance is deemed to be unaffordable for a family if it exceeds 8% of its income, after subsidies and employer contributions.

This could mean that many of America's estimated 50 million uninsured could stay that way, in spite of the new law.

The provisions could leave out families that are too affluent to qualify for Medicaid or tax credits, but who make less than US$180,000 a year, a level at which the full cost of private health insurance becomes affordable again.

And working-class families are unlikely to find easily the 7% of their income which they are expected to spend on health insurance.

The Supreme Court also upheld a clause in the ACA which requires health insurance providers to insure people with pre-existing health conditions.

This is important for many people, because they know that they cannot be turned away from insurance, even if they lose their job.

There are also rules to ensure that premiums cannot vary too wildly from person to person, so that an insurance company cannot charge an elderly person more than three times the rate they ask from a young person, nor a smoker more than 1.5 times that of a non-smoker.

Overall, the ACA, which comes into effect in 2014, is expected to bring affordable health insurance within the reach of millions more people.

According to the non-partisan Congressional Budget Office, an additional 20 million people will gain coverage by buying their own insurance through public exchanges.

Overall, feelings about the "Obamacare" package are still very mixed.

More than two-thirds of respondents to a 2012 poll said they supported the federal subsidies, the guaranteed coverage for previous conditions, and the expansion of Medicaid.

However, many are opposed to the individual mandate to buy health insurance, and think the law will not prevent healthcare costs from continuing to rise.


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