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The Pros and Cons of the Affordable Care Act (Obamacare)

Calculator and stethoscope on financial statement concept for finance health check or cost of healthcare

Your view of the pros and cons of the Patient Protection and Affordable Care Act (ACA, commonly referred to as Obamacare) may depend on your political preferences and the role you believe the federal government should play in providing healthcare access for Americans. Even over a decade after it was first passed, Americans largely approve or disapprove of the ACA on party lines. According to a 2020 Gallup Survey, for example, 84% of self-identified Democrats approve of the ACA, while 87% of self-identified Republicans disapprove of it.

No discussion of the pros and cons of Obamacare can avoid disagreement. Your own priorities will likely play a large role in how you weigh the benefits and drawbacks of the ACA. However, when asked about specific provisions, most Americans prefer certain aspects of the ACA over others. Below is a nonpartisan summary of those pros and cons.

The ACA is a large and unprecedented act of Congress, and it would take entire books to thoroughly review all of the impacts of the 900-page law, which has indisputably transformed America's healthcare system. Fortunately, however, the largest and most controversial aspects of the law can be summed up relatively briefly.

How the ACA Is Structured

Initially there was some confusion over whether the Affordable Care Act and Obamacare are the same thing. They are. Obamacare is a derisive term for the ACA coined by opponents of the law.

The ACA first centered around the idea of a so-called “three-legged stool" that allows insurers to still make money while providing more comprehensive insurance coverage. The three pillars of the ACA as originally designed are:

  • Regulate insurers so they provide better coverage for more Americans, including those with preexisting conditions
  • Require everyone — especially healthy Americans — to purchase health insurance to spread out costs (this is known as the “individual mandate")
  • Help low-income people afford health insurance through subsidies and a Medicaid expansion

The idea is that if we require private health insurance companies to cover everyone, including Americans with preexisting conditions, then we also need healthy Americans to purchase health insurance so insurers can remain profitable. Then, by helping low-income Americans with subsidies, more Americans can get health insurance than ever before.

However, in 2017, the Tax Cuts and Jobs Act eliminated the penalty for people who did not purchase health insurance, effective beginning in 2019. The full impact of this is not yet clear but so far the healthcare system has remained functional.

Benefits of the Affordable Care Act

The Affordable Care Act has both increased the number of insured Americans and improved the coverage offered by health insurance companies. Millions of previously uninsured Americans have been able to obtain health insurance because of the ACA.

Better Coverage 

Prior to Obamacare, there were few standards for what a health insurance company could and could not cover. As a result of Obamacare, health insurance now generally covers more procedures, including mental health and maternity care.

One of the most well-known and popular features of the ACA is its rule preventing health insurance companies from denying coverage for people with preexisting conditions, including heart disease, diabetes, and others. Prior to the ACA, anyone looking for insurance who already had a health issue could be denied coverage or face exorbitant rates. It can be unprofitable for insurers to take on patients with preexisting conditions. It's estimated that one in four Americans have a preexisting health condition.

Expanded Medicare and Medicaid

The ACA has also expanded Medicare coverage. For example, the ACA closed the so-called Medicare “donut hole." Prior to the ACA, people on Medicare Part D could lose coverage after spending a certain amount on medication. The ACA gradually reduced the donut hole and, as of 2020, it has been eliminated. Medicare now continues to help pay for medication regardless of the amount already spent. It does not pay the full cost of medication, however (as of this writing it covers 75% of the cost of generic drugs).

Thirty-seven states also expanded Medicaid programs, meaning that many Americans living below the federal poverty line can still obtain health insurance.

Improved Health Outcomes

There are also signs of improved health outcomes because of the ACA. For example, the ACA prevents hospitals from charging for infections that come from a hospital stay. Hospital infections are one of the leading causes of death in the U.S. Perhaps in part because hospitals now lose money from patients that become infected at hospitals, infection rates have lowered dramatically in recent years. Proponents of the law also argue that it has improved the early detection of cancer and improved preventative care, leading to lower healthcare costs and better patient outcomes for cancer and other medical conditions.

In the last several years, it should be noted, insurance premiums under Obamacare have also improved.

Affordable Care Act Negatives

Requiring health insurance companies to provide additional coverage has raised the price of insurance for some people, including their insurance premiums. Folks who would prefer very minimal insurance are forced to pay more for better coverage. The ACA also raised the marginal tax rate for some Americans.

Impact on Small Businesses

Much of the concern voiced by critics involves small businesses. The ACA can provide an incentive for businesses to keep their employee count artificially low, as only businesses with 50 or more employees are required to provide health insurance for their employees. This can affect how many people are employed full-time by small businesses.

Limited Choices

Fourteen states have also refused to expand Medicaid programs, leading to decreased coverage in those states.

Particularly shortly after the ACA was enacted, Americans could not always keep their existing doctors. Some health providers were not covered by insurers under the ACA. After the ACA was first passed, it was difficult for some Americans to find insurance in a marketplace. There were also fewer insurers offering plans due to concerns over whether insurance companies could make money from offering plans. While still a concern, now most Americans can find a health insurance plan in their area.

Healthcare Is Still Expensive

Finally, while the ACA has allowed more Americans to have health insurance, the underlying cost of medical care hasn't been reduced. Even insured Americans often have trouble paying for medical expenses, and 40% of all bankruptcies in the U.S. involve medical debt.

The Individual Mandate

Another key (and controversial) aspect of the ACA as originally passed was the individual mandate. Under the ACA, Americans who did not purchase insurance had to pay a penalty on their taxes. Even after it was first passed, however, the penalty could be less than the cost of paying for insurance, so some taxpayers chose to just pay the penalty. In 2017, the Tax Cuts and Jobs Act removed the penalty, so Americans who choose to go without health insurance do not face any consequences.

While the ACA has so far continued to function without the individual mandate, there are concerns about whether insurers can continue to provide coverage if enough Americans choose to not get healthcare. In 2019, for example, 400,000 fewer people signed up for health insurance on a marketplace than the year before.

The individual mandate has also faced numerous legal challenges. The Supreme Court upheld the individual mandate as Constitutional in 2012. However, legal challenges continue, and the Supreme Court will again decide this issue in 2020.

Did Obamacare Improve Healthcare in the U.S.?

The ACA has largely functioned as designed. Boiled down to its simplest, the issue is that more and better coverage costs more money. If you believe that the federal government should help Americans get decent health insurance plans, then you likely approve of the ACA. If, however, you believe that the federal government should not play a role, then you may think that the ACA is interfering with the free market and raising taxes and premiums for people who could otherwise find health insurance on their own.

Many of the issues discussed in this article are hotly debated. For example, those in favor of keeping the ACA or instituting a single-payer healthcare system argue that it lowers the overall cost of healthcare and ultimately saves taxpayers money. Folks who are opposed argue that it increases costs and is an unaffordable venture. The U.S. healthcare system is extremely complicated and this article does not take a stance on either side.

Need Help With Understanding Your Rights Under the ACA? Contact an Attorney.

Health insurance is complex and the ACA is no exception. If you have questions about insurance coverage, contact a healthcare law or insurance attorneys should they have any legal questions about the ACA.

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