The Affordable Care Act (ACA), formally the Patient Protection and Affordable Care Act (PPACA) and informally known as Obamacare, is a landmark U.S. federal statute enacted by the 111th United States Congress and signed into law by President Barack Obama on March 23, 2010. Together with amendments made to it by the Health Care and Education Reconciliation Act of 2010, it represents the U.S. healthcare system's most significant regulatory overhaul and expansion of coverage since the enactment of Medicare and Medicaid in 1965. Most of the act remains in effect.
The ACA's major provisions came into force in 2014. By 2016, the uninsured share of the population had roughly halved, with estimates ranging from 20 to 24 million additional people covered. The law also enacted delivery system reforms intended to constrain healthcare costs and improve quality. After it came into effect, increases in overall healthcare spending slowed, including premiums for employer-based insurance plans. The increased coverage was due, roughly equally, to an expansion of Medicaid eligibility and changes to individual insurance markets. Both received new spending, funded by a combination of new taxes and cuts to Medicare provider rates and Medicare Advantage. Several Congressional Budget Office (CBO) reports stated that overall these provisions reduced the budget deficit, that repealing ACA would increase the deficit, and that the law reduced income inequality.
The act largely retained the existing structure of Medicare, Medicaid, and the employer market, but individual markets were radically overhauled. Insurers were made to accept all applicants without charging based on pre-existing conditions or demographic status (except age). To combat the resultant adverse selection, the act mandated that individuals buy insurance (or pay a monetary penalty) and that insurers cover a list of "essential health benefits". Young people were allowed to stay on their parents' insurance plans until they were 26 years old.
Before and after its enactment the ACA faced strong political opposition, calls for repeal, and legal challenges. In the Sebelius decision, the U.S. Supreme Court ruled that Congress cannot use the Commerce Clause to compel individuals to buy health insurance but upheld the individual mandate by recharacterizing the penalty as a tax. The Court also held that states could opt out of the ACA's Medicaid expansion without losing existing federal Medicaid funding, while otherwise upholding the law. This led Republican-controlled states to not participate in Medicaid expansion. Polls initially found that 43% of Americans wanted to see the law repealed or scaled back and 49% wanted to see it expanded or enacted as is. By 2017, the law had majority support. The Tax Cuts and Jobs Act of 2017 set the individual mandate penalty at $0 starting in 2019.
Provisions
ACA amended the Public Health Service Act of 1944 and inserted new provisions on affordable care into Title 42 of the United States Code. The individual insurance market was radically overhauled, and many of the law's regulations applied specifically to this market, while the structure of Medicare, Medicaid, and the employer market were largely retained. Some regulations applied to the employer market, and the law also made delivery system changes that affected most of the health care system.
Insurance regulations: individual policies All new individual major medical health insurance policies sold to individuals and families faced new requirements. The requirements took effect on January 1, 2014. They include: Guaranteed issue prohibits insurers from denying coverage to individuals because of preexisting conditions. States were required to ensure the availability of insurance for individual children who did not have coverage via their families. A partial community rating allows premiums to vary only by age and location, regardless of preexisting conditions. Premiums for older applicants can be no more than three times those for the youngest. Essential health benefits must be provided. The National Academy of Medicine defines the law's "essential health benefits" as "ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care" and others rated Level A or B by the U.S. Preventive Services Task Force. In determining essential benefits, the law required that standard benefits should offer at least that of a "typical employer plan". States may require additional services. Preventive care and screenings for women.PPACA , 2713,(a)(4) "[A]ll Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity".Women's Preventive Services Guidelines HRSA, U.S. Department of Health and Human Services This mandate applies to all employers and educational institutions except for religious organizations. These regulations were included on the recommendations of the Institute of Medicine.
Annual and lifetime coverage caps on essential benefits were banned. Insurers are forbidden from dropping policyholders when they become ill. All policies must provide an annual maximum out-of-pocket (MOOP) payment cap for an individual's or family's medical expenses (excluding premiums). After the MOOP payment is reached, all remaining costs must be paid by the insurer. Preventive care, vaccinations and medical screenings cannot be subject to co-payments, co-insurance or deductibles. Specific examples of covered services include: mammograms and colonoscopies, wellness visits, gestational diabetes screening, HPV testing, STI counseling, HIV screening and counseling, contraceptive methods, breastfeeding support/supplies and domestic violence screening and counseling. The law established four tiers of coverage: bronze, silver, gold and platinum. All categories offer essential health benefits. The categories vary in their division of premiums and out-of-pocket costs: bronze plans have the lowest monthly premiums and highest out-of-pocket costs, while platinum plans are the reverse. The percentages of health care costs that plans are expected to cover through premiums (as opposed to out-of-pocket costs) are, on average: 60% (bronze), 70% (silver), 80% (gold), and 90% (platinum). Insurers are required to implement an appeals process for coverage determination and claims on all new plans. Insurers must spend at least 80–85% of premium dollars on health costs; rebates must be issued if this is violated.
Individual mandate The individual mandate required everyone to have insurance or pay a penalty. The mandate and limits on open enrollment were designed to avoid the insurance death spiral, minimize the free rider problem and prevent the healthcare system from succumbing to adverse selection.
The mandate was intended to increase the size and diversity of the insured population, including more young and healthy participants to broaden the risk pool, spreading costs.
Among the groups who were not subject to the individual mandate are: Undocumented immigrants. Estimated at 8million, roughly a third of the 23 million projection, they are ineligible for insurance subsidies and Medicaid. They remain eligible for emergency services. Medicaid-eligible citizens not enrolled in Medicaid. Citizens whose insurance coverage would cost more than 8% of household income. Citizens who live in states that opt-out of Medicaid expansion and who qualify for neither existing Medicaid coverage nor subsidized coverage.
The Tax Cuts and Jobs Act of 2017, set to $0 the penalty for not complying with the individual mandate, starting in 2019.
Exchanges
ACA mandated that health insurance exchanges be provided for each state. The exchanges are regulated, largely online marketplaces, administered by either federal or state governments, where individuals, families and small businesses can purchase private insurance plans. Exchanges first offered insurance for 2014. Some exchanges also provide access to Medicaid.
States that set up their own exchanges have some discretion on standards and prices. For example, states approve plans for sale, and thereby influence (through negotiations) prices. They can impose additional coverage requirements—such as abortion. Alternatively, states can make the federal government responsible for operating their exchanges.
Premium subsidies Individuals whose household incomes are between 100% and 400% of the federal poverty level (FPL) are eligible to receive federal subsidies for premiums for policies purchased on an ACA exchange, provided they are not eligible for Medicare, Medicaid, the Children's Health Insurance Program, or other forms of public assistance health coverage, and do not have access to affordable coverage (no more than 9.86% of income for the employee's coverage) through their own or a family member's employer. Households below the federal poverty level are not eligible to receive these subsidies. Lawful Residents and some other legally present immigrants whose household income is below 100% FPL and are not otherwise eligible for Medicaid are eligible for subsidies if they meet all other eligibility requirements. Married people must file taxes jointly to receive subsidies. Enrollees must have U.S. citizenship or proof of legal residency to obtain a subsidy.
The subsidies for an ACA plan purchased on an exchange stop at 400% of the federal poverty level (FPL). According to the Kaiser Foundation, this results in a sharp "discontinuity of treatment" at 400% FPL, which is sometimes called the "subsidy cliff". After-subsidy premiums for the second lowest cost silver plan (SCLSP) just below the cliff are 9.86% of income in 2019.
Subsidies are provided as an advanceable, refundable tax credit.
The amount of subsidy is sufficient to reduce the premium for the second-lowest-cost silver plan (SCLSP) on an exchange to a sliding-scale percentage of income. The percentage is based on the percent of federal poverty level (FPL) for the household, and varies slightly from year to year. In 2019, it ranged from 2.08% of income (100%-133% FPL) to 9.86% of income (300%-400% FPL). The subsidy can be used for any plan available on the exchange, but not catastrophic plans. The subsidy may not exceed the premium for the purchased plan.
(In this section, the term "income" refers to modified adjusted gross income.)
Small businesses are eligible for a tax credit provided they enroll in the SHOP Marketplace. +Maximum net premium after subsidies (2019) for family of four Income % of federal poverty level Premium cap as a share of income Income Maximum annual net premium after subsidy(second-lowest-cost silver plan) Maximum out-of-pocket 133% 3.11% of income $33,383 $1,038 $5,200 150% 4.15% of income $37,650 $1,562 $5,200 200% 6.54% of income $50,200 $3,283 $5,200 250% 8.36% of income $62,750 $5,246 $12,600 300% 9.86% of income $75,300 $7,425 $15,800 400% 9.86% of income $100,400 $9,899 $15,800a.In 2019, the federal poverty level was $25,100 for family of four (outside of Alaska and Hawaii).
b.If the premium for the second lowest cost silver plan (SLCSP) is greater than the amount in this column, the amount of the premium subsidy will be such that it brings the net cost of the SCLSP down to the amount in this column. Otherwise, there will be no subsidy, and the SLCSP premium will (of course) be no more than (usually less than) the amount in this column.
Note: The numbers in the table do not apply for Alaska and Hawaii.
Cost-sharing reduction subsidies