Affordable Care Act (ACA)

What is the Affordable Care Act?

The Affordable Care Act (ACA) is the comprehensive healthcare reform Act. The law is also known colloquially as “Obamacare” because it was the hallmark legislation of the first term of the Obama administration and signed into law by President Barack Obama on March 10, 2010.

The law has three primary goals.

  1. Make affordable health insurance available to more Americans
  2. Expand the Medicaid program to cover all adults with income below 138% of the federal poverty level
  3. Support innovative medical care delivery methods designed to lower the costs of health care generally

The mechanism used to expand healthcare access for those that don’t qualify for Medicaid is through premium tax credits that offset the cost of health insurance. Generally, households with incomes between 100% and 400% of the federal poverty level are eligible for premium tax credits that are applied on a sliding scale based on income. As of 2020, 35 states and the District of Columbia have expanded Medicaid.

What is the ACA individual mandate?

A controversial pillar of the Act is the Shared Responsibility Payment, or individual mandate, which has since been repealed. The individual mandate was designed to encourage healthy people who could afford health insurance to buy it even if they wouldn’t otherwise. For plan years through 2018, people who could afford to purchase health insurance but chose not to, were subject to the penalty.

In 2012, the U.S. Supreme Court ruled that the individual mandate was constitutional. In December 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which eliminated the individual mandate penalty, effective January 1, 2019. The ruling removed the Shared Responsibility payment beginning with 2019 plan years.

What is the Health Insurance Marketplace?

An important part of the ACA is the creation of a health insurance exchange for each state. This is a place where consumers can see the plans available, compare them, learn if they qualify for a premium tax credit and the amount, and enroll. On October 1, 2013, the federal Health Insurance Marketplace was opened for consumers to choose an individual or family plan for 2014. The Marketplaces have offered plans each year up to this writing (2020).

Implementation and operation of the exchanges vary by state. There are four types:

  1. State-operated
  2. Federally-operated
  3. Federally-supported state based
  4. State-federal partnership

In 2020, there were:

  • 13 state-based exchanges
  • 6 federally supported exchanges
  • 6 state-federal partnership exchanges
  • 26 federally-operated exchanges

The marketplace also offers small business health plans, which are generally for businesses with less than 50 employees.

What consumer protections are contained in the ACA?

The ACA also enacted consumer protections including those related to preexisting health conditions. Prior to the ACA, private U.S. health insurance companies on the individual market could discriminate against people with preexisting medical conditions. For example, the companies could refuse to let applicants enroll or deny coverage for any medical care related to the preexisting condition. The Act requires private health insurers on the individual market to allow anyone to enroll regardless of age, health status, gender, medical history, and occupation.

The ACA also made it illegal for health insurance companies to charge higher rates based on gender or health status. In addition, the Act banned patient cost-sharing for specific preventive services.

The government estimates that the ACA has expanded health care to 20 million Americans who were previously uninsured.

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