Obama Desk
Source: White House on Flickr.

The Patient Protection and Affordable Care Act, better known as Obamacare, may have gone into effect with the flip of the calendar on Jan. 1, 2014, but it remains a work in progress for much of America, which is still acquainting itself with the new health law.

Controversial, but working?
Obamacare represents a vast departure from the previous way consumers searched and paid for health insurance, as well as the method by which insurers picked their members. Under Obamacare consumers shop for health insurance in transparent exchanges that are designed to make purchasing decisions easier to understand. The exchanges are also in place to help spur competition among insurers, hopefully pushing premium prices down for the consumer, or at the very least curbing premium inflation. Lastly, new minimum plan benefit requirements were implemented, and insurers were told they could no longer deny coverage to people with pre-existing conditions.

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Source: Covered California.

The idea was radical, but thus far it appears to be paying off for millions of Americans. Statistics from the Department of Health and Human Services following the end of 2014-2015's open enrollment period show that more than 11 million Americans signed up for health insurance, many of whom qualified for subsidies to make their monthly payments more affordable. Furthermore, a recent study from the Centers for Disease Control and Prevention showed that the uninsured rate in the U.S. (including Medicare enrollees) had dropped to 9.2% in the first quarter, the first time in history the uninsured rate in the U.S. was in the single-digits.

Big changes are coming to Obamacare in 2016
But Obamacare as a law is constantly evolving, whether or not you realize it. As we move toward the end of the year, it's important you're aware of three big changes that are coming to Obamacare in 2016.

1. The minimum penalty for individual mandate non-compliance is going up a lot.
The first big change will be particularly noticeable for those who remain uninsured, as the penalty for non-compliance with the individual mandate will soar from its 2015 levels (after soaring in 2015 from 2014 levels).

Taxpayers who didn't have health insurance in 2014 and who didn't qualify for one of more than a dozen exemptions were required to pay the greater of $95 or 1% of their modified adjusted gross income, or MAGI. In 2015 this penalty rose to the greater of $325 or 2% of MAGI. Next year consumers who choose not to purchase health insurance can expect a penalty that's the greater of $695 or 2.5% of MAGI. For a family the penalty could top out at $2,085! Beyond 2016 the minimum penalty will increase in line with the rate of inflation. 

Images

Source: Flickr use Reynermedia.

The individual mandate penalty was put in place to coerce holdouts to enroll for health insurance, with a specific focus on healthier young adults, whose premium payments are needed to help offset the higher costs associated with insuring people with pre-existing conditions. However, the jury is still out on whether or not the individual mandate penalty will do the trick. Even in 2016 the penalty will still likely be half or less of the roughly $3,700 average annual cost consumers paid in 2015 if they purchased a silver-tier plan without a subsidy. For many individuals it's just cheaper to remain uninsured.

Also, some individuals facing the penalty have probably avoided it by owing money to the IRS at the end of the year. Since the IRS can't garnish wages or seize property to collect the penalty, the most it can do is ask you to pay or deduct the penalty from your tax refund. If no refund is due, the IRS has little it can do to collect other than take you (and probably millions of other people) to court.

2. The employer mandate will go into full effect.
Another big change going into full effect next year is the employer mandate -- the actionable component of the law targeted at businesses.

Under the employer mandate, businesses must provide their full-time employees (and their children up to age 26) health coverage options, and ensure that those options cover at least 60% of total allowed medical costs. In addition, if the cost of healthcare premiums exceeds 9.5% of a full-time employees' MAGI, then the business is responsible for providing a subsidy to cover the difference. Fail to comply with these new rules and businesses could be looking at some very steep fines that range between $2,000 and $3,000 per full-time employee, or FTE.

Images
Source: Flickr user Erik Hersman. 

In 2015, big businesses with 100 or more FTE were edged into the employer mandate, with employers required to offer at least 70% of their FTEs health insurance coverage. In 2016 and beyond, businesses with 100 or more FTE will need to boost their coverage to 95% or more. Mid-sized businesses of 50 to 99 FTEs will also be required to offer coverage to 95% of qualifying employees after being exempt from the penalty in 2015. Businesses with 49 or fewer full-time employees will still be exempt from Obamacare penalties, as are part-time employees, defined as working 29 or fewer hours per week.

The implementation could be bumpy, with some mid-sized business owners worried about a double-digit hike in premium rates when they shift to the exchange platform. Other businesses have been proactive, though in differing directions. Costco Wholesale, for example, has been offering health plans for full- and part-time employees for a long time. Conversely, Regal Entertainment, the operators of the nation's largest chain of movie theaters, cut thousands of workers to part-time from full-time in order to avoid any chance of being penalized from Obamacare. Regal specifically cited Obamacare as the reason behind its hourly cutbacks.

Like the individual mandate penalty above, this looks to be a work in progress in 2016.

3. Insurers are set to enact their largest premium rate hikes since Obamacare went into effect.
The Affordable Care Act, by name, is meant to make access to medical care affordable for as many Americans as possible. In 2016 that could change for the worse.

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Source: Social Security Administration.

In June the federal government released data from health insurers across the U.S. that were requesting a double-digit rate increase (or decrease) in plan premiums. Under Obamacare, any double-digit changes in health premiums need to be explained in detail to a state's Office of the Insurance Commissioner, with the idea being that there would be a system of checks and balances in place that prevent insurers from boosting their premium rates by huge chunks at a time without justification. Based solely on the statistics defining the magnitude of increases requested, 2016 could turn out to be a big year for premium hikes.

According to data compiled by the Washington Examiner, which took a closer look at 37 states and Washington D.C., the number of policies with double-digit rate increase requests nearly doubled to 231 in 2016 from 121 requests in 2015. Further, in 2016, 126 plans are requesting premium jumps of at least 20%, 61 plans are asking for a 30% hike, 26 policies are seeking as much as a 40% jump, and a dozen plans are after a 50% (or higher) hike. In 2015 we only witnessed 21 requests for a 20% hike, just nine requests for a 30% hike, and not a single request of 40% or beyond.

In other words, 2016 looks like it could be the first year where we discover just how affordable the Affordable Care Act really is. One of the prevailing fears among insurers and medical care providers, such as hospitals and primary care physicians, is that consumers will be so strained by the cost of premiums that they may not be able to afford the out-of-pocket deductibles required when heading to a doctor.

Long story short, big changes are coming in 2016, so make sure you're prepared.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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