“Patient Protection and Affordable Care Act” (PPACA) also called “Affordable Care Act” (ACA) and popularly referred to as “Obamacare” is a US law aimed at providing US citizens with affordable health insurance protection against illness or disease. This law came into effect in the year 2010 when the then President of United States, Barack Obama signed the bill on March 23rd that same year. Due to this it is referred to both its supporters and critics as Obamacare. However, it took another 4 years for major provisions of the Act to be actually implemented.
In this blog, Student Cover provides you an insight into the bill, its history as well as its impact on the insurance sector in the US and how it affected International Students going for higher studies in that country.
While countries like United Kingdom have had programs like National Health Service to take care of health care concerns of its citizens, in US, there was no such universal health care program or legislation ensuring inclusive, if not universal, health care. In addition to that, the high cost of medical treatment as well as unregulated nature of insurance industry left people with very limited options.
The Medicare and Medicaid programs which have been there in the US since 60s covered limited number of people. Medicare provided some relief to senior citizens (above 65 years of age) and also to those with disabilities whereas Medicaid was directed towards very low income groups. Both Medicare and Medicaid were schemes fully funded by the government. For the rest, buying health insurance was the only option. As a result, a large section of people who could not afford to buy health insurance from private vendors were left with no health insurance cover.
The high cost of medical treatment in the country led many private health insurance providers to charge high premium. This led people to avoid buying health insurance unless they fell sick. This increased risk to insurance companies. In order mitigate this risk, they further increased the premium which further made purchasing of insurance less affordable.
However, many people who purchased health insurance hoping to get medical cover got rude shock when their insurance claims were rejected by insurance providers either due to existing pre-condition or due to the increased likelihood of them falling sick in future.
All this eventually led various sections of the society to demand a legislation that regulated the insurance industry as well as provided opportunity to low income families to avail the benefits of health insurance cover.
During 2008 Presidential elections in the US, a law to cover all American citizens was one of the poll promises made by President Barack Obama. After winning election, he set out to convince the US congress to pass Patient Protection and Affordable Care Bill. After much debate in public, media and in US congress, the bill was passed which Obama eventually signed into a law on 23rd March 2010.
The bill is quite extensive and covers a wide range of areas from Medicaid and Medicare expansion to regulation of premium, health coverage and other mandatory requirements. Some of the salient features of Obamacare (Affordable Care Act) are as follows:
- Guaranteed Insurance – The act makes it mandatory for insurance companies to provide insurance coverage to those who seek it. The insurance companies are forbidden from denying insurance coverage on grounds of pre-existing conditions. For those children who are either orphans or whose family members are too poor to provide them with insurance cover, it requires the government to make provision to secure the health cover for such children.
- Non-Rejection on grounds of sickness – As mentioned earlier in the blog, due to high cost of insurance, people often delayed buying health insurance until they fell sick. Due to this, health insurance companies often use to reject the insurance claims of such people. However, the Affordable Care Act bans companies from not providing insurance to such people.
- Essential benefits – One of the most significant provisions of Affordable Care Act was that it made it mandatory for health insurance providers to not deny services like Ambulatory patient services; emergency services; hospitalization; maternity and newborn care as well as prescription drugs laboratory services etc. These were standard benefits that each and every health insurance plan was required to provide.
- Free Preventive Care– Prior to Obama care, preventive care procedures, which included medical screenings such as mammograms, colonoscopies etc. or vaccinations were either not covered or included provisions for co-payments and deductibles. This discouraged people from undertaking procedures aimed at detection or prevention of disease. Obamacare has made it mandatory to provide coverage for preventive care without requiring the insured to pay any money in the form of co-payments or deductibles.
- No more caps on annual/lifetime essential coverage benefits – The Affordable Care Act bans the insurance companies to put any cap on providing those benefits that come under essential coverage benefits. This means that an insurance company can no longer allowed to deny benefits to its clients if they seek benefits such as Ambulatory patient services; emergency services; hospitalization; maternity and newborn care as well as prescription drugs, laboratory services for multiple times in a year or within their lifetime.
- Individual Mandate – Although a bit contentious, this provision was inserted in the Act in order to reduce financial risks that insurance companies could face due to inclusion of above mentioned provisions. The individual mandate clause makes it mandatory for every person living in the US who is not covered by employer sponsored health plan, Medicaid, Medicare or other public insurance programs to either purchase health insurance or pay financial penalty. This was done to bring more people, including healthy people who might not require health insurance, under the insurance umbrella. This reduced the risk facing health insurance companies. An individual, at best can avoid taking health insurance for only 90 days in a calendar year without having to pay a penalty.
- Standardization of Insurance Plans – The Affordable Care Act also resulted in establishment of 4 tiers of health insurance plans namely Bronze, Silver, Gold and Platinum. These plans varied in the degree of out-of-pocket requirements for benefits availed by the insured. For example, the bronze plans have a very low premium but have higher out-of-pocket payment requirements whereas the Platinum has highest premium but has a very low out-of-pocket payment requirement.
Impact of Obamacare on International students
As mentioned in the earlier paragraph, the Individual Mandate clause was one of the contentious provisions of Affordable Care Act is that made it mandatory for people living in the US to purchase health insurance. However, it was felt that it would be unfair to subject resident aliens (non-US citizens living in US), which included international students, to individual mandate. This was because most international students, who came to the US to pursue higher education in its universities, did not enjoy facilities that US citizens enjoyed. Therefore, it was decided to give waiver of 5 years to international students for before they are required to comply with individual mandate clause.
The other significant impact that Obamacare had on international students was on the international insurance companies providing health insurance to international students in US universities. The law gave universities option to demand international health insurance companies to provide student health insurance plans that either comply with or are comparable to the provisions of Affordable Care Act. As a result, many Indian companies operating in the US and providing health insurance to students could no longer provide cheaper alternatives to students against university sponsored plans which are costlier.
However, Indian students can avail the benefits of Indian student health insurance plans in addition to US plans through dual insurance. These plans have lower premiums and do not have co-payment and co-insurance requirements. Students can contact Student Cover at email@example.com or call us at 96501 66773.