Obamacare Basics: What is the Affordable Care Act?
The Patient Protection and Affordable Care Act (ACA) , a piece of federal legislation commonly referred to as "Obamacare," made sweeping changes to how health insurance is procured and paid for. Signed into law on 2010 (but curtailed through court and legislative challenges), ACA puts certain limits on what insurers may or may not do with respect to eligibility and coverage. The ACA has numerous, often-complex provisions that phase in over time (through 2022).
This article provides a concise overview of Obamacare, how it affects you, and what you need to do to take advantage of its benefits. To learn more about your rights and responsibilities as an employee, see Health Insurance Benefits.
The Affordable Care Act: Provisions at a Glance
The Affordable Care Act seeks to lower health care costs by making sure more people participate and receive preventive care, while prohibiting some of the insurance industry's more restrictive practices. Beginning in 2019, Americans are no longer required to maintain health insurance coverage (the "individual mandate," which was repealed in 2017). The following is a list of key ACA provisions (with the implementation date in parentheses, where applicable):
- Dependants may be covered by their parents' insurance plans until they turn 26.
- Insurers may not cancel policies when policy holders become sick.
- State health insurance exchanges (the "Health Insurance Marketplace") allow businesses and individuals to compare plans and enroll for coverage.
- Insurers may not place a lifetime monetary limit on hospital stays or other benefits deemed "essential" in new policies.
- Insurers may not deny coverage to individuals for pre-existing conditions, and must offer the same premiums within the same age and geographical group regardless of gender and pre-existing conditions, except tobacco use.
- Medicaid eligibility expands to include those earning 133 percent of the official poverty level, including adults without dependants, in participating states.
- Subsidies (in the form of refundable tax credits) available on the state health insurance exchanges for individuals with a household income up to 400 percent of the official poverty level.
- Minimum standards for health insurance policies enforced.
- Employers may not require employees to wait more than 90 days for health insurance eligibility.
Already Covered? How Obamacare Affects You
If you haven't had health insurance in the past, the Affordable Care Act gives you and your employer some incentives and options. But if you already have coverage -- whether it's Medicare, Medicaid, a private insurance plan, or through your employer -- you may keep your current plan. You are free to explore your options in the broader marketplace, but you will not be eligible for subsidies.
The following ACA provisions will impact existing plans (if purchased after March 23, 2010):
- Insurers are required to provide individuals with a standardized, plain-language summary of benefits (which also helps with plan comparisons).
- Rate increases of more than 10 percent must be publicly justified; 80 percent of premiums must be spent on actual health care services.
- Insurers may not cancel your plan in response to an illness.
- Certain types of preventive care must be covered at no additional cost to the patient.
- Patients are free to choose any physician within the plan's network and may use an out-of-network emergency room without penalty.
- Annual and lifetime dollar limits on care are prohibited.
- Patients are granted the right to appeal whenever an insurer denies payment for health care services.
Obamacare Affordability and Options
As the bill's title would suggest, the Affordable Care Act was intended to make health care coverage more accessible and affordable to more Americans. Visit the Health Insurance Marketplace and provide information about your household (size, annual income) to find out whether you qualify for free or low-cost coverage.
The Marketplace offers four categories of coverage to help with comparisons: Bronze, Silver, Gold, and Platinum. Bronze plans typically charge the lowest premiums, but pay a smaller share of costs when care is rendered. Platinum plans typically charge the highest monthly premiums, offer the lowest out-of-pocket costs, and pay more of the costs if you need expensive medical care.
Supreme Court Challenges to the Affordable Care Act
The U.S. Supreme Court took up two separate challenges to the ACA, decided in 2012 and 2015 (respectively), but justices ultimately upheld key parts of the Act. In the first case, the Court ruled that the penalty paid by those without insurance technically was a tax and thus constitutionally permissible. In the second case, the Court ruled that states without their own health care exchanges were nevertheless entitled to federal subsidies.
The ACA's Individual Mandate and Repeal
Perhaps the most controversial provision of Obamacare was the individual mandate, the now-repealed requirement that nearly every individual in the U.S. have health care coverage. The rationale for requiring coverage was that young, relatively healthy people who pay regular insurance premiums ultimately help cover the costs of older and less-healthy individuals. And since insurance companies may not refuse to cover those with pre-existing conditions, the mandate theoretically would discourage people from simply waiting until they had a health care emergency.
However, the tax overhaul passed by Congress and signed into law by President Donald Trump in 2017 repealed the individual mandate (which the Supreme Court decided was a tax), going into effect in 2019.
Need Help Understanding the ACA? Talk to an Attorney
The ACA, commonly referred to as "Obamacare," has gone through many twists and turns. Challenges to the law have molded it into something quite different than its original conception, so you may be left wondering what your legal obligations are. Consider speaking with a health care law attorney if you have any additional questions or concerns about the Affordable Care Act.