Obamacare Basics: What is the Affordable Care Act?

The Patient Protection and Affordable Care Act (ACA) is federal public health legislation signed into law in 2010 by former President Barack Obama. The ACA is often called "Obamacare." The ACA made sweeping changes to public health through health insurance and what is required to be covered. One significant difference is all insurers must now offer different levels of coverage and coverage for preexisting conditions.

Before the Affordable Care Act, millions of Americans did not have health insurance. Most of the uninsured were from low-income households. Lack of health insurance was widespread, and the uninsured couldn't afford basic primary care, preventive services, or prescription drugs.

This resulted in significant disparities in health across the nation. Without basic healthcare, minor medical conditions become chronic diseases such as diabetes and heart disease.

Pre-ACA, health insurance companies could refuse to cover anyone with a preexisting condition. A preexisting condition is a health condition that existed before getting new insurance. Under the ACA, health insurers cannot refuse coverage based on a preexisting condition.

Through the ACA, more Americans have access to health insurance and healthcare. They also have increased access to mental health resources.

This article explores the Affordable Care Act and how it affects individuals.

What Is the Affordable Care Act in Simple Terms?

The Affordable Care Act is a federal law that reduces health insurance costs and expands coverage. It does this through the shared responsibility of the government, employers, and policyholders. It also aims to prohibit the restrictive practices of the health insurance industry.

How Does the Affordable Care Act Work?

The Affordable Care Act reduces healthcare costs under a few principles. These principles include a formerly imposed individual mandate (which is no longer applicable) to buy insurance and subsidized premiums. It also includes new regulations for the health insurance industry and permits states to expand the Medicaid program.

Subsidized Costs

The ACA subsidizes the costs of premiums for low-income families in a few ways. First, there are direct subsidies. Direct subsidies include the Medicaid program. Before the ACA, Medicaid did not cover low-income working adults.

The second way is through Medicaid expansion. Medicaid expansion covers adults who work but cannot afford health insurance. This includes adults with a household income below 138% of the federal poverty level. Today, over 40 states and the District of Columbia have expanded Medicaid coverage. Some states use a different income level.

ACA also reduced Medicare reimbursements to healthcare providers under Medicare Advantage. Medicare Advantage is a Medicare-approved alternative to original Medicare. The savings from these cuts to Medicare reimbursements help subsidize older Americans' care.

The final way that the ACA subsidizes health care is through premium tax credits. These tax credits depend on a person's household income and lower their monthly health insurance premiums. Consumers can use these credits each month. Taxpayers can request a refund with their tax returns if they don't.

Insurance Regulations

The ACA added insurance requirements, including prohibiting insurance providers from the following:

• Canceling policies when policyholders become sick
• Placing a lifetime monetary limit on hospital stays or other essential benefits
• Denying coverage to individuals for preexisting conditions

Individual Mandate

The ACA had a penalty for people who did not buy a health insurance plan. This was the individual mandate. This penalty was part of the legislation's effort at cost-sharing.

The intent was to bring as many people into the healthcare market as possible. Doing so would offset the cost of insurance and healthcare for people who couldn't pay.

Congress repealed the individual mandate in 2017.

Key Elements of the Affordable Care Act

The ACA has made sweeping changes to the U.S. healthcare system. The key elements include:

• Allowing dependents to remain under their parent's insurance plans until they turn 26.
• Expanding Medicaid eligibility, including adults without dependents, in participating states.
• Making subsidies available on the state health insurance exchanges
• Enforcing basic standards for health insurance policies
• Reducing the waiting time for new employees to get health insurance

Consumer Protections Under the ACA

The ACA included several measures to protect health insurance consumers. Here are a few:

• Insurers must provide a standardized, plain-language summary of benefits. This helps consumers compare plans.
• At least 80% of premiums must go to actual healthcare services.
• Insurers must cover certain types of preventive care.
• Consumers can choose any physician within the plan's network. They can also use an out-of-network emergency room without penalty.
• Annual and lifetime dollar limits on care are prohibited.
• Consumers can appeal whenever an insurer denies payment for healthcare services.
• Older Americans have access to long-term care through Medicaid.
• Obamacare Affordability and Coverage Options

The Affordable Care Act increases access to health insurance coverage. The Department of Health and Human Services (HHS) implements the ACA. It does this through the Health Insurance Marketplace (www.healthcare.gov).

Health Insurance Marketplace

The Marketplace is an insurance market website. Individuals can find coverage under a qualified health plan on this site. Open enrollment occurs once yearly, usually in late fall through the following January.

The Marketplace offers four categories of coverage: Bronze, Silver, Gold, and Platinum. Bronze plans charge enrollees the lowest premiums but pay a smaller share of costs for care. Platinum plans charge the highest monthly premiums and offer the lowest out-of-pocket costs. Premium plans also pay more of the costs of expensive medical services.

Each plan has different deductibles, copayments, and essential health benefits.

Low-income families may qualify for Medicaid and the Children's Health Insurance Program (CHIP). CHIP ensures low-income children receive pediatric care. This care includes immunizations, wellness checks, and routine medical care.

The Affordable Care Act's Individual Mandate

The most controversial provision of Obamacare was the individual mandate. Almost every individual in the U.S. had to have healthcare coverage under this mandate. The reason? Healthy people paying regular insurance premiums help cover health care costs for all.

The tax overhaul passed by Congress in 2017 repealed the individual mandate.

The tax overhaul went into effect in 2019.

Healthcare Access Today

Not all Americans have access to healthcare. This includes those living in states refusing Medicaid expansion.

The federal government uses new initiatives yearly to inform Americans about health insurance. This includes outreach to local community health organizations and health centers.

These types of organizations understand the health status of community members. They also have better access to the potential beneficiaries of the ACA.

ACA and Small Businesses

Obamacare has options for small business owners. Businesses with less than 50 full-time employees are small employers. These businesses can get health and dental insurance for their employees on the healthcare exchange.

Get Help

The Affordable Care Act is complex and has gone through several changes. These changes can impact healthcare coverage, exclusions, and healthcare costs. If you have any questions, speak to a local healthcare law attorney.