Understanding the Affordable Care Act
In 2010, the Obama Administration successfully passed the Affordable Care Act (ACA). This sweeping legislation consists of two separate bills: the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Both collectively sought to accomplish two overarching goals: increase the number of American citizens with health insurance coverage and reduce healthcare-related costs affecting both consumers and the federal government.
In 2013, one year before the ACA went into full effect, roughly 15% of the population was uninsured, and as many as 32 million U.S. residents were unable to obtain coverage for different reasons (such as pre-existing conditions). The ACA became effective January 2014; by the end of 2016, the rate of uninsured Americans had dropped to 10.9%. The Congressional Budget Office (CBO) estimated that the ACA would help reduce the national deficit by as much as $100 billion over the next decade.
This article discusses the finer points of the ACA, including the following topics:
- Provisions of different health plans available under the ACA
- Layout of the online marketplace (known as the ACA Healthcare Exchange) where individuals and business owners can shop for coverage
- Instructions for applying for health insurance
- Explanation of financial penalties for those who do not obtain coverage
- Information about ‘coverage gaps’ as they relate to state-to-state health insurance programs
- Important considerations for uninsured health coverage shoppers
Coverage Highlights Under the ACA
Under the ACA, health insurance carriers are required to grant the following provisions for all policyholders.
- Young adult coverage: All men and women under the age of 26 are eligible to receive health insurance under their parents’ individual or employer-sponsored coverage plan. This rule applies to persons living in all states, regardless of whether the child is married, attending a higher-learning institution, eligible for employer-based insurance, or otherwise able to obtain coverage beyond their parents’ plans.
Medicaid/CHIP Expansion: One specific goal of the ACA is expansion of Medicaid and Children’s Health Insurance Program (CHIP) in order to provide coverage for millions of uninsured, low-income American families. The original intention of the ACA was to cover any individual under the age of 65 who earns at or below 138% of the Federal Poverty Level (FPL) through an expansion of state-sponsored Medicaid programs. For the first time, low-income individuals who do not have children were to also qualify for Medicaid. Like other uninsured individuals, low-income men and women who are eligible for Medicaid are free to browse different coverage options using the ACA Healthcare Exchange (see below).However, a 2012 Supreme Court ruling allows states to opt out of the Medicaid/CHIP expansion laid down in the ACA, several U.S. states have opted out while others have begun to implement the new programs. As of January 2018, each of the 50 U.S. states (as well as the District of Columbia) falls into one of the two following categories:
- Adopted Medicaid Expansion: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, D.C., Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia.
- Not Adopted Medicaid Expansion: Alabama, Florida, Georgia, Idaho, Kansas, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, Wyoming.
- Subsidized Coverage: Since health insurance mandated by the ACA might cause individuals and households to incur additional expenses beyond their means, the federal government is subsidizing individuals for health coverage if their annual income falls below a certain threshold. Consumers who earn less than 400% of the FPL (roughly $48,000 per year for individuals, and $98,000 for a four-member household) qualify for this subsidy. eHealthInsurance provides an online subsidy calculator to help web users determine the amount to which they are entitled. Please see the subsidy data table below for specific figures.
Consumer Protection: Policy-holders and health insurance companies have fought a long-standing battle regarding health conditions that prompt providers to drop coverage to beneficiaries. Now, under the ACA:
- Policy-holders cannot be denied coverage due to a pre-existing condition, such as a permanent disability or chronic illness. In fact, insurance fraud is the only case in which an individual may be denied coverage. Additionally, providers cannot charge higher premiums for women or individuals facing chronic health issues.
- Plans must include free preventive services, and insurance providers cannot impose limitations on ‘Essential Health Benefits,’ such as screenings and preventive treatments that reduce the risk of cancer and other diseases.
- Insurance providers that spend less than 80% of premium revenue on medical services must rebate the overage to their policyholders. This is known as the ’80-20 Rule.’
- Group health insurance plans must kick in for all employees within a period of 90 days or less from the time he or she becomes eligible for this coverage.
Essential Benefits: Under the ACA, the following benefits are considered essential and must be included in all individual and group coverage plans:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance abuse disorder services (including behavioral health treatment)
- Prescription drugs
- Rehabilitative and habilitative services (including certain devices)
- Laboratory services
- Preventive services and chronic disease management
- Pediatric services (including dental and vision)
A Note on Grandfathered plans: Although the ACA is designed to regulate all health insurance plans in the United States (regardless of the structure or coverage provider), there is one notable exception to the federal ruling: grandfathered insurance plans. A grandfathered plan is classified as one of the following:
- An individual insurance plan purchased prior to March 23, 2010 (when the ACA officially passed)
- An employer-sponsored or group insurance plan that went into effect prior to March 23, 2010.
Grandfathered policies are not required to provide coverage to individuals with pre-existing conditions, and are otherwise exempted from other ACA requirements. Providers of plans that qualify as ‘grandfathered’ must inform all beneficiaries of this status; policyholders may then opt to cancel their grandfathered plan and browse the ACA Healthcare Exchange for a new plan that covers pre-existing conditions.
Understanding the ACA Health Insurance Marketplace
In an effort to maximize enrollments and ease the process by which individuals and business owners purchase health coverage, the federal government created an online health insurance marketplace. Health insurance providers who list plans on the website pay a small fee in exchange for increased visibility in the marketplace.
It should be noted that individuals who meet any of the criteria listed above may choose to obtain additional coverage from a provider on the marketplace. They can also opt out of their existing plan in order to receive sole coverage from a marketplace insurer.
Individuals who need or would like to browse for health insurance plans listed on the marketplace must sign up for coverage within the ACA Open Enrollment Period. The 2018 Open Enrollment Period ended on December 15, 2017; those who missed this period do to certain life circumstances may qualify for a Special Enrollment Period.
In addition to the nationwide health plan marketplace, several states have created their own coverage databases to exclusively assist state residents in procuring a health plan. The following states offer their own healthcare exchange websites; all other states rely on HealthCare.gov:
- California: Covered California
- Colorado: Connect for Health Colorado
- Connecticut: Access Health CT
- Delaware: Choose Health Delaware
- District of Columbia: DC Health Link
- Hawaii: Hawaii Health Connector
- Idaho: Your Health Idaho
- Kentucky: Kynect: Kentucky Healthcare Connection
- Maryland: Maryland Health Connection
- Massachusetts: Massachusetts Health Connector
- Minnesota: MNSure
- Nevada: Nevada Health Link
- New Mexico: BeWellNM
- New York: New York State of Health
- Rhode Island: HealthSource RI
- Vermont: Vermont Health Connect (VHC)
- Washington: Washington Healthplanfinder
- West Virginia: West Virginia Health Insurance Marketplace
Regardless of whether a consumer uses the nationwide marketplace or a state-specific exchange, he/she is able to choose one of four individual plans, which are categorized by the rough percentage of medical costs covered by the insurer:
- Bronze: The insurer pays 60% of medical costs, and the plan-holder pays 40%.
- Silver: The insurer pays 70% of medical costs, and the plan-holder pays 30%.
- Gold: The insurer pays 80% of medical costs, and the plan-holder pays 20%.
- Platinum: The insurer pays 90% of medical costs, and the plan-holder pays 10%.
These four ‘metal plans’ adhere to a price structure that matches their coverage rates. For instance, bronze plan-holders pay the lowest premium of all four metal plans but also face higher deductibles and out-of-pocket costs. Platinum plan-holders, on the other hand, pay the highest premiums in exchange for lower deductibles. Generally speaking, bronze and silver plans are best suited for young, relatively healthy individuals who do not require frequent physician visits, while gold and platinum plans are the best option for individuals with consistent medical needs.
Applying for Coverage
As stated above, the open enrollment period for individuals seeking health coverage in 2018 ended on December 15, 2017. When the next open enrollment period kicks off in the fall (exact dates TBD), individual coverage seekers can obtain plans by:
- Shopping for plans and applying online
- Calling (800) 318-2596 or TTY: (855) 889-4325 to enroll over the phone (available 24 hours a day, seven days a week)
- Small business owners can call (800) 706-7893 or TTY: (800) 706-7915 to enroll over the phone
Regardless of the format one uses to obtain a health plan, he or she need the following materials in order to complete an application:
- Information about household size
- Home or mailing addresses and birth dates of everyone applying for coverage
- Social security number or documentation numbers (for legal immigrants)
- Employment and earnings information (W-2 tax forms, payment invoices, etc.) for everyone in the household who requires health coverage
- Estimates of the current year’s household income
- Existing health plan numbers and information currently covering anyone in the household
- An Employer Coverage form for each employer-sponsored health plan for which anyone in the household is eligible
Subsidies and Penalties
As mentioned above, individuals and families who fall within a certain income bracket qualify for tax subsidies from the federal government.
Eligible individuals and families who purchase a plan through the marketplace within the open enrollment period and do not qualify for an employer-sponsored or federal health plan, meet the income criteria, and cannot be claimed as dependents may be eligible for the Premium Tax Credit.
Just as some individuals who purchase a health plan from the marketplace qualify for certain savings benefits, those who do not purchase a health plan within the open enrollment period and remain uninsured are charged a financial penalty.
Individuals who had not obtained insurance for 2017 received the higher of the two following penalties:
- A penalty of $695 per adult and $347.50 per child; this penalty is capped at $2,085
- A penalty equivalent to 2.5% of the uninsured household income
- These penalties rise annually with inflation
Uninsured individuals must obtain coverage of some sort, but they are not required to obtain a plan via the marketplace and may opt to shop for policies with providers who are not listed on the exchange. Furthermore, a penalty is not given to individuals who are covered under the following plans and choose not to obtain coverage from a marketplace-based provider:
- Any qualified health plan outside of the Health Insurance Marketplace
- Any “grandfathered” plan in effect before March 23, 2010
- An employer-based plan (including retiree plans and COBRA coverage)
- Medicare Part A or Part C
- Most Medicaid coverage
- The Children’s Health Insurance Program
- Coverage under a parent’s health plan
- Most student health plans
- Peace Corp volunteer health coverage
- Some types of coverage offered through the Department of Veterans Affairs
- Most TRICARE plans
- Department of Defense Nonappropriated Fund Health Benefits Program
- Refugee medical assistance
- State high-risk pools
Additionally, some people may apply for an exemption for health insurance. Those who receive this exemption are not required to pay the penalty fee. Exemptions may be awarded to individuals under the following circumstances:
- Income-related exemptions (e.g., if the lowest-priced coverage available to an individual is more than 8.16% of his/her household income)
- Hardship exemptions (e.g., if an individual is homeless, was evicted, or experienced the death of a family member)
- Health coverage-related exemptions (e.g., if an individual was uninsured for no more than 2 consecutive months of a year)
- Group membership exemptions (e.g., if an individual is a member of a federally recognized tribe or recognized healthcare sharing ministry)
- Other exemptions (e.g., if an individual was incarcerated or living abroad)
Click here to see the full list of healthcare exemptions and learn how to apply.
Finally, please note that certain health plans do not satisfy the requirements of the ACA. In these cases, plan-holders may be penalized even while receiving coverage:
- Plans that exclusively cover dental and vision services
- Non-COBRA worker’s compensation
- Plans that exclusively cover singular medical conditions
- Plans that exclusively offer discounts on medical services
Understanding the Coverage Gap
Historically, Medicaid has only been available to children and their parents, disabled individuals, and the elderly. Adults with no dependent children, on the other hand, did not qualify for Medicaid. Furthermore, eligibility for parents was relatively limited and varied on a state-by-state basis.
The ACA was designed to reduce the coverage gap for these individuals by providing Medicaid to all persons who fall within certain income brackets, regardless of whether or not they have children. With passage of the ACA, the “national Medicaid income eligibility level” has been set at 138% of the Federal Poverty Line. However, a Supreme Court ruling in 2012 allowed some states to opt out of the Medicaid expansion altogether.
In the 33 states (as well as the District of Columbia) that voted to expand Medicaid, all individuals qualify for Medicaid if their income is 138% of the FPL or lower. In the 18 states that opted not to expand Medicaid or are currently debating the issue, parents are eligible for Medicaid at variable rates in relation to the FPL, while individuals without children are not eligible for Medicaid. The one exemption is Wisconsin, which did not adopt the ACA expansion but covers adults up to 100% of the FPL based on a Medicaid waiver.
To learn the current status of state Medicaid expansion decisions, see this map of data compiled by the Kaiser Family Foundation.
Final Considerations Before Choosing a Plan
HealthCare.gov and the ACA Health Plan Marketplace are designed to ease the process of obtaining health insurance for you and your family, but consumers should still research all of their available options to determine which plan, provider, and structure best meets their medical needs. Here are three factors to seriously consider:
- Health benefits: A health plan should enable you to visit the doctor and receive medical treatment as often as you require. without causing you to go broke. Be sure to investigate each plan to see if it imposes a limit on the amount of physician visits you’re allowed within a given year, restricts a prescribed medication you currently use, or otherwise disrupts the level of care you are accustomed to receiving.
- Costs: Health plans with low premiums are generally cheapest on a month-to-month basis, but these plans also carry high deductibles and force beneficiaries to pay substantial out-of-pocket costs when a medical emergency occurs. Most experts agree it’s best to determine your premiums and deductibles based on your age and health status. If you don’t require a significant amount of medical care within a given year, then a low-premium plan might suit you best. If a medical emergency occurs, your out-of-pocket costs could skyrocket. On the other hand, those who require frequent doctor visits may find high-premium plans are their most cost-effective option.
- Doctors: Many health insurance plans found on the ACA health plan marketplace adhere to a ‘physician network,’ and require plan-holders to exclusively visit doctors and specialists within this network; ‘out-of-network’ visits lead to higher out-of-pocket costs. If you have a close relationship with your physician, please ensure he/she is within your network for different plan options; otherwise, it may be wise for you to shop for a plan outside the marketplace.
Frequently Asked Questions about the Affordable Care Act
What is the Affordable Care Act?
The Affordable Care Act (ACA) is a comprehensive piece of healthcare legislation that was passed into law under President Obama. The three overarching goals of the ACA are to ensure more people can purchase affordable health insurance, to provide greater coverage to children and adults through the Medicaid program, and to reduce the cost of healthcare. The ACA is for anyone not covered by their employers, young adults, children, and individuals who make less than 138% of the poverty line.
What is Obamacare?
Obamacare, a term often used interchangeably with the Affordable Care Act, is simply another name for the same piece of healthcare law. Much confusion exists around the supposed differences between the two; a 2017 study by Morning Consult found that 35% of Americans either thought they were different policies or weren’t sure. The term came to prominence as Republican congressional leaders tried to saddle the president with responsibility for the law if it proved a failure.
What is the Patient Protection and Affordable Care Act?
The Affordable Care Act is actually two pieces of legislation – the Patient Protection and Affordable Care Act and the Health Care Education Reconciliation Act of 2010. The PPACA is predominantly concerned with ensuring millions more low-income Americans are eligible for Medicaid. It also works to improve existing Medicaid provisions and strengthen the Children’s Health Insurance Program (CHIP). Some specific goals of the PPACA include working to improve long-term care services, quality of care, delivery systems, and access for more Americans.
How Many People Are on Obamacare?
The number of people on Obamacare has grown significantly since the legislation first passed. Prior to the ACA being enacted, 48 million Americans were without health insurance. As of 2016, that number had shrunk to 28.6 million, or 9% of the American public. Nearly 11.8 million Americans signed up for Obamacare for 2018, despite a shorter sign-up window.
When Did Obamacare Start?
Obamacare discussions started in February of 2009 when President Obama called a joint session of Congress to create a structure for healthcare legislation. The bill that emerged from committee hearings and markups was eventually passed by Congress and signed into law in March 2010. Americans were able to sign-up for Obamacare starting in 2013.
How Does Obamacare Work?
Obamacare works by mandating insurance companies provide coverage for all Americans who need it, regardless of preexisting conditions. To sign up for Obamacare, individuals apply online, by mail, or in person. Applicants answer a series of questions to help determine the type of insurance for which they are qualified and how much their monthly premium will be based on their income. They are then given a choice of several different levels of insurance coverage from which to choose. Individuals who willfully decide not to have coverage are required to pay an annual penalty as mandated by the legislation.
How Much is Obamacare?
How much Obamacare costs depends on many factors. Thankfully there are numerous tools available to help people understand their premiums. Some of the factors that influence cost include where a person lives, how much money they make, if they are married, if they have children enrolling, and whether their spouse receives health insurance through their employer. Individuals or families with middle or low income can receive Obamacare subsidies (also known as premium tax credits) to help offset the costs associated with healthcare. Individuals looking to get a better sense of what their healthcare costs may be can use this calculator.
Is Medicaid Obamacare?
Because Obamacare includes Medicaid provisions in its legislation, it can be confusing whether these two things are the same. The important thing to remember is that, while Obamacare health insurance is provided by private companies, Medicaid is a government-funded and government-run program. Obamacare did change Medicaid, though; under the legislation, states have the option to expand Medicaid, thereby making it easier for more people with incomes under a certain level to be covered.
How to Apply for Obamacare
Applying for Obamacare is an easy process which can be completed in a number of ways, including:
- Online: Visit Healthcare.gov
- Phone: Call 1-800-318-2596
- In Person: Speak to a trained counselor in your region to walk you through the process
- Mail: Print this paper application and mail it in
Obamacare vs. Affordable Care Act
Obamacare and the Affordable Care Act are used interchangeably to refer to the same law. It’s vitally important to remember this when it comes to listening to news about policy or picking a candidate to represent your needs and views.
Is the Affordable Care Act Working?
When considering whether the Affordable Care Act is working, it’s important to assess its success by a number of metrics. Now that the legislation has been active for five years, analysts can use data to better understand its impact on the American healthcare system.
The ACA set out to ensure more Americans were insured regardless of their income or the state of their health. The number of Americans lacking health insurance has dropped by nearly 50% since its inception. The mandate on coverage for preexisting conditions remains in place.
Another goal of the ACA was to make health insurance more affordable for more people. According to data from the New York Times, 85% of the 7.3 million Americans who signed up for insurance during the first enrollment period received subsidies to decrease their costs. Premiums differ based on the number of insurance providers in each state. States with more options typically have lower premiums as insurance companies fight for their share of the market. The ACA has also been beneficial to the health insurance industry, which has seen significant growth in new clients since its introduction.