Affordable Care Act (ACA)

The Patient Protection and Affordable Care Act (ACA), a major healthcare reform bill, was signed into law by President Barack Obama on March 23, 2010. The law’s original provisions were designed to increase coverage, reduce healthcare costs, and enhance the healthcare system. It intended to do this by reforming the health insurance market and assisting those who qualify with lower-cost healthcare coverage.

 

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Affordable Care Act Overview

The ACA created the Health Insurance Marketplace as a way to provide millions of uninsured Americans with coverage. The Health Insurance Marketplace is a federally run service available to all Americans. But the ACA also encouraged states to set up their own individual marketplaces. While many have their own, some chose to join the federal exchange instead. 

On the Marketplace, people can shop for and compare different health insurance plans and insurers to find a plan that suits their needs.

The ACA also regulates what medical services healthcare plans cover. The majority of insurance plans – those that are ACA-approved – are required by the ACA to provide coverage for 10 essential benefits:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Laboratory services
  • Mental health and substance use services
  • Pregnancy, maternity, and newborn care
  • Prescription medications
  • Preventative and wellness services and chronic disease management
  • Pediatric services
  • Rehabilitative and habilitative services

ACA-approved plans are also barred from charging more or refusing coverage based on an applicant’s pre-existing health conditions. But removing the restrictions on pre-existing conditions presented a problem known as adverse selection. This is when more sick people sign up for health insurance to cover needed care, and healthy people don’t sign up because they feel they don’t need it at the moment and could purchase a plan if their health deteriorates. This can severely affect the amount of financial risks an insurance company takes with their plans. 

To discourage adverse selection, the ACA created an annual Open Enrollment Period (OEP), which is the only time people can purchase or change insurance policies. Only those who experience a “qualifying life event”, such as a marriage, a divorce, becoming a parent, or quitting a job with health insurance coverage, are able to enroll outside of the Open Enrollment Period. 

In addition to creating the OEP to make sure people purchase health insurance when they’re healthy, the ACA also originally had a provision that required individuals to purchase health insurance or pay a tax penalty. The reasoning behind this was it would mean everyone would be paying into the health insurance system, making it work more smoothly. This mandate no longer exists on a federal level, but some states do still require its residents to have health insurance.

 

Open Enrollment Period

The Open Enrollment Period begins November 1st and ends January 15th for most states. If you do experience a qualifying life event, you will become eligible for a Special Enrollment Period (SEP), meaning you will be able to enroll in a health insurance plan outside of the OEP. You will generally have 60 days following the event to enroll, and then your coverage will begin the first day of the month following the day you enroll. For example, if you enroll in March your coverage will begin April 1st.

 

Key Points of the Affordable Care Act

The ACA contains provisions meant to 

  • Increase insurance access
  • Strengthen consumer protections
  • Emphasize wellness and prevention
  • Increase the size of the health workforce
  • Lower rising health care costs

To reach these goals, the ACA: 

  • Expanded overall access to coverage – Originally the law required the majority of Americans and legal residents to have health insurance and included a tax penalty if they did not. In exchange, it made premium and cost-sharing credits available to people and families with income between 133% and 400% of the federal poverty level (the poverty level is $23,030 for a family of three in 2022). It also made separate Exchanges through which small businesses can purchase coverage, as well as state-based American Health Benefit Exchanges. The requirement to have insurance is no longer in existence. But the subsidies remain in place. And in many cases, have been expanded to be offered to more people. Employers pay penalties for employees who they do not insure, and who receive health insurance tax credits through the Exchange, with small employers being excluded from the penalty. Additionally, it created new rules on health plans sold in the individual and small group marketplaces, as well as on the Exchanges.
  • Increased insurance protections – The ACA limits the use of yearly restrictions on care, bars lifetime financial caps on insurance coverage, and requires state rate reviews for insurance price hikes. Most plans now also have an annual out-of-pocket maximum. It also forbids insurance plans from canceling or rescinding coverage, as well as denying coverage for people with pre-existing conditions.
  • Created the Prevention and Public Health Fund – Established under the ACA, the National Prevention, Health Promotion, and Public Health Council addresses tobacco use, physical inactivity, and poor nutrition. It also offers money to states for prevention initiatives, including disease screenings and vaccinations. Under the ACA, insurance companies must provide coverage for vaccines, pediatric preventive care, screenings for certain adults for illnesses like high blood pressure, high cholesterol, diabetes, and cancer, as well as public oral health campaigns.
  • Enhanced health quality while reducing costs – The Affordable Care Act also called for investments in health information technology. It included recommendations for reducing medical mistakes, developing payment systems to boost productivity and outcomes, and strengthening provider care coordination. In order to promote comparison shopping in insurance exchanges and promote increased competition and price transparency, the act mandates inspection of health insurance premiums and practices. It also reduces health care fraud and uncompensated care.

 

Affordable Care Act Coverage Requirements

As mentioned, when the law was put in place, U.S citizens and legal residents were required to have coverage. Those without insurance had to pay an annual tax penalty. As of, 2019, though, insurance coverage is no longer mandatory on a federal level. Although it is not a federal requirement, some states still do have, or are trying to pass laws to require coverage. 

The states that still have mandatory coverage include:

  • California
  • Massachusetts
  • New Jersey
  • Rhode Island
  • Vermont (required, but no penalty for non-compliance)
  • Washington D.C

Connecticut, Hawaii, Maryland, Minnesota, and Washington have previously tried to pass legislation to require coverage.

 

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Requirements For Employers

In general, under the ACA, companies must provide “affordable” health insurance with “minimal value” to 95% of their full-time employees.  And their children up until the end of the month in which the children turn 26. This “employer mandate” only applies, though, to employers with 50 or more full-time workers or full-time equivalents (FTEs). Full-time employment is any employees who work 30 or more hours per week. Employers with more than 200 staff members must automatically enroll workers in their health insurance programs. Employees are free to decline benefits.

Employee contributions for employee-only coverage are “affordable” if they do not exceed a certain portion of their family income. Initially set at 9.5% in 2014, the affordability threshold amount gets a yearly update to account for inflation. For 2023, the affordability threshold is 9.12%.

For a plan to provide “minimum value,” it has to pay at least 60% of covered medical services. These services include deductibles, copays, and coinsurance. It also must offer significant coverage for inpatient hospital services.

In the event that an employer does not provide insurance or does not give at least one medical plan option with “affordable,” “minimal value” coverage, they will face a penalty if any full-time employee purchases insurance through the Marketplace and receives a federal premium subsidy.

 

Advantages and Disadvantages of the ACA

The Affordable Care Act has been beneficial to many Americans. It has provided access to health insurance to more citizens. Including those with pre-existing conditions who previously could have been denied coverage. The ACA has prevented insurance companies from increasing insurance premiums at an unreasonable rate. It also makes sure plans cover screenings for diseases and preventative care. Allowing more citizens to afford to maintain their health when, before the ACA, they might have passed on insurance and health services all together.

On the other hand, for every benefit there are always some drawbacks. Many people who were already insured saw their premiums increase. Additionally, new taxes were introduced to help support the ACA requirements, including on medical equipment and pharmaceutical sales. And unfortunately, many businesses also cut employee hours to avoid having to offer health insurance. 

Those who have spoken out against the ACA believe that it hurts small businesses, drives up healthcare prices, and makes people more dependent on government services. But those who support the Affordable Care Act feel that it allows more people access to healthcare. And to receive medical attention more rapidly and lead healthier lives. They argue that if the healthcare system does not have to absorb the cost of the uninsured, the health care system will function more effectively.

 

The Bottom Line

The Patient Protection and Affordable Care Act (ACA), also known as Obamacare, has provided millions of previously uninsured Americans with access to health care. Through the Health Insurance Marketplace, individuals can browse and purchase health insurance plans that have to include coverage for multiple essential health benefits. Through three presidential administrations, the ACA has kept developing, and will hopefully continue to offer new benefits to all Americans.

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