President Obama has said that the Affordable Care Act (aka Obamacare) borrows heavily from similar legislation at the state level (aka Romneycare) implemented in Massachusetts in 2006 and passed by then governor Mitt Romney. We examine the similarities and differences between the two pieces of legislation, and also note how Romney's current healthcare policy differs from the 2006 law he passed.
| Obamacare | Romneycare | |
|---|---|---|
| Benefit limits | Forbidden on both annual and lifetime basis | Not forbidden, although most MA insurers do not place limits |
| Retroactive rescinding of coverage | Forbidden | Forbidden |
| Individual Mandate | Yes. Individuals are required to buy health insurance for themselves and their dependents. If they don't, they pay a penalty when they file their taxes. | Yes |
| Preventative Care | Free (covered by premium) | Co-pay, but must be covered without a deductible |
| Contraception | Included under free preventative care | Not mentioned |
| Coverage for Pre-existing Conditions | Yes, the law requires insurers to cover all pre-existing conditions. | Insurers required to cover, but can limit coverage of certain conditions to 6 months |
| Subsidized insurance | Yes; for anyone earning up to 400% of poverty level | Yes; for anyone earning up to 300% of poverty level. Free for anyone earning up to 150% of poverty level. |
| Employer Mandate | Yes, companies with 50+ employees required to provide healthcare coverage to at least 95% of their workforce. Coverage must be affordable (cost | Yes for companies with 11 or more employees |
| Penalties for employers not providing insurance | $2,160 per employee per year if no insurance plan offered & at least 1 employee received a premium tax credit or subsidy. If plan offered but not affordable or doesn't provide minimum value, $3,240 per year per employee receiving a premium tax credit | $295 per employee for companies with over 11 employees |
| Age Limit for Children Under Parents’ Plan | Children stay on parents' plan until the age of 26 | Children can stay on parents’ plan until age 26 or until they have not been a dependent for 2 years – whichever is sooner. |
| Effective Date | March 23, 2010; most major provisions took effect in January 2014; phase in through to 2020 for remaining provisions. | April 12, 2006 |
| Penalty for not being insured | Whichever is higher – (1) a per person calculation: $695 per adult, $347.50 per child with a max of $2,085 per family, or (2) 2.5% of the part of household income that’s above the yearly tax filing threshold ($10,150 individuals; $20,300 couples) | Minimum of $1,200 a year |
Both Obamacare and Romney care aimed to reduce the number of uninsured people -- at the national and state level respectively. Obamacare battled the problem of an uninsured population of around 45 million (around 15%) while the uninsured population of Massachusetts in 2006 was about 8%. Other objectives included implementing consumer protection laws that would prevent health insurance companies from rescinding coverage retroactively or denying coverage to people with pre-existing conditions.
Requiring insurers to provide coverage to people with pre-existing conditions creates the problem of moral hazard i.e. people only buy insurance when they need it (after they are sick). To tackle this problem, both Romneycare and Obamacare include a mandate for all individuals to buy health insurance. Another justification for the individual mandate is that laws require emergency rooms to treat people regardless of whether they are insured or can pay for treatment. Hospitals seldom get paid for these services to the uninsured and this raises their costs, which they are forced to recover from their paying patients. This increases the costs of the entire healthcare system.
Under Obamacare, those who do not purchase insurance must pay a minimum penalty of $695 per year. This penalty will be higher for those with higher incomes, but there are exemptions for people with low incomes and the total fee cannot be more than $2,085 per family.
Under Romneycare in Massachusetts, those who do not purchase insurance must pay a minimum of $1,200 a year in tax penalties. Romney now opposes the individual mandate on a federal level, but has supported implementing tax breaks to encourage individuals to purchase insurance.
There has been debate in political and legal circles about whether the penalty for not complying with the individual mandate is a tax or a penalty. The US Supreme Court has upheld the constitutionality of the individual mandate by treating the penalty as a tax. Politicians (including President Obama and Mitt Romney), not wanting to be seen as favoring higher taxes, have disagreed with the Supreme Court and said the penalty is not a tax.
The individual mandate has been heavily criticized by libertarians and conservatives; they claim it infringes on civil liberties by forcing individuals to engage in commerce. Critics have said that it is constitutional for states to impose such mandates but not for the federal government to do so.[1]
Obamacare requires companies with 50 or more employees to offer insurance to their employees. If they do not, they must pay a penalty of $2,000 per employee.
Romneycare in Massachusetts requires all companies with 11 or more employees to offer insurance or pay a penalty of $285 per employee per year. However, Romney initially attempted to veto this mandate, and he opposes its use in federal healthcare policy. Romney’s current healthcare plans do not include the employer mandate.
The criticism of the employer mandate is that it is a barrier to job growth because it makes it more expensive for employers to hire more people.
Obamacare subsidizes insurance for anyone who earns up to 400% of the federal poverty level. The subsidy will be inversely proportional to an individual’s annual income.
Romneycare in Massachusetts subsidizes insurance for anyone who earns up to 300% of the federal poverty level and provides free coverage for anyone earning up to 150% of the poverty level.
Mitt Romney now aims to encourage states to offer subsidies to the poor and to experiment with high-risk pools and insurance buying exchanges to harness the purchasing power of large groups. However, no state would be required to participate.
Obamacare allows young adults to remain on their parents’ insurance plan until they are 26, a provision Romney now opposes.
Romneycare offers reduced benefit plans for young adults under 26 who do not have access to employer-based coverage. They can stay on their parents’ plan for two years after they are no longer claimed as a dependent, or until they turn 26, whichever comes first.
Obamacare forbids insurers from placing limits on the benefits an individual can receive during their lifetime or in a given year.
Romneycare does not forbid limits on lifetime or annual benefits, but most insurance companies in Massachusetts do not use these limits.
Obamacare requires insurers to cover pre-existing conditions and prevents insurers from rescinding cover after an individual falls ill.
Romneycare in Massachusetts requires insurers to cover pre-existing conditions, but it allows them to limit that coverage to 6 months. It also prevents insurers from rescinding cover after an individual falls ill.
If he becomes president, Mitt Romney plans to prevent discrimination against individuals with pre-existing conditions, as long as they maintain continuous coverage. However, insurers will be allowed to deny coverage to first-time customers.
Preventative care is free under Obamacare, and includes contraception.
Romneycare in Massachusetts allows co-pay for preventative care, but insurers must cover it without a deductable. The plan does not mention contraception, but Massachusetts already had a mandate in place that covered contraception, along with other prescription drugs.
Mitt Romney has not made his current stance of preventative care clear, but he opposes forcing companies and institutions to cover the cost of contraception for employees.
Romneycare depends upon hundreds of millions of dollars in funding from the federal government and so the plan did not raise taxes for Massachusetts residents. Obamacare, on the other hand, is a federal program so its funding comes from new taxes. These include a tax surcharge on medical devices and a tax on "cadillac" health plans i.e. expensive, premium health plans that provide the best coverage. Supporters also cite savings in Medicare expenses to fund Obamacare.
Critics of Obamacare have said the law creates several new government institutions and these bureaucratic agencies will increase the size of government, resulting in higher federal government expenses. They also fear bureaucratic mandates will potentially limit the freedom of doctors to do what's best for their patients.
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