Affordable Care Act: How It Became Law

The Affordable Care Act (ACA), also known as Obamacare, is a comprehensive healthcare reform law enacted in 2010. It was signed into law by President Barack Obama on March 23, 2010, and represented the most significant regulatory overhaul of the US healthcare system since the enactment of Medicare and Medicaid in 1965. The ACA's primary goals were to make affordable health insurance available to more people, expand Medicaid to cover more low-income adults, and support innovative medical care delivery methods to lower healthcare costs and improve quality. The law's major provisions came into force in 2014, and by 2016, the uninsured share of the population had roughly halved, with an additional 20 to 24 million people gaining coverage.

The individual mandate

The Affordable Care Act (ACA), also known as Obamacare, was enacted in March 2010. It is a comprehensive health care reform law with three primary goals: making affordable health insurance available to more people, expanding Medicaid to cover all adults with income below 138% of the federal poverty level, and supporting innovative medical care delivery methods to lower health care costs.

One of the most controversial aspects of the ACA was the individual mandate. The individual mandate required consumers nationwide to purchase and maintain a minimum level of health insurance coverage (known as "minimum essential coverage") or pay a penalty. This provision was designed to ensure enough people signed up for health insurance, including younger and healthier individuals, to balance out the costs of insuring sicker, higher-cost enrollees.

In 2017, Congress voted to remove the ACA penalty, and since then, some states have implemented their own health insurance mandates, with a few enforcing financial penalties for non-compliance. Despite the removal of the federal penalty, the individual mandate itself technically remains in effect.

The expansion of Medicaid

The Affordable Care Act (ACA) was signed into law by President Obama on March 23, 2010. The ACA's Medicaid expansion expanded coverage to nearly all adults with incomes up to 138% of the Federal Poverty Level (FPL) ($20,783 for an individual in 2024) and provided states with an enhanced federal matching rate (FMAP) for their expansion populations.

Under the ACA, the federal government paid 100% of the cost of expansion coverage from 2014 to 2016, with the federal share then dropping gradually to 90% for 2020 and each year thereafter, leaving states to cover the small remaining share. For other Medicaid enrollees, by comparison, the federal government pays between 50% and 77% of the cost of health coverage, depending on the state. To receive the 90% match, states must expand Medicaid to people with incomes up to 138% of the FPL; states that expand coverage but not up to the 138% level receive only the regular Medicaid match.

As of 2024, 41 states (including Washington, D.C.) have adopted the Medicaid expansion, while 10 states have not. The expansion has produced net savings for many states, as the federal government pays the vast majority of the cost of expansion coverage. Expansion has also enabled states to spend less on programs for people with mental health or substance use disorders, as federal Medicaid matching funds are now available to help pay for their treatment.

In all states, individuals can qualify for Medicaid based on income, household size, disability, family status, and other factors. Eligibility rules differ between states. In states that have expanded Medicaid coverage, individuals can qualify based on their income alone. If their household income is below 133% of the FPL (effectively 138% due to the way it is calculated), they qualify for Medicaid.

The ACA's Medicaid expansion has dramatically lowered uninsured rates in expansion states and improved access to care and health outcomes for millions of enrollees. Extensive research finds that the expansion has made people healthier and more financially secure, while also reducing long-standing racial inequities in health outcomes, coverage, and access to care.

The elimination of lifetime limits on coverage

The Affordable Care Act (ACA) was signed into law by President Obama on March 23, 2010. The law is made up of two parts: the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. The ACA has three primary goals: to make affordable health insurance available to more people, expand Medicaid to cover all adults with income below 138% of the federal poverty level, and support innovative medical care delivery methods designed to lower the costs of healthcare.

One of the key provisions of the ACA was the elimination of lifetime limits on coverage, which took effect on September 23, 2010. This provision prohibits insurance companies from imposing a dollar limit on essential health benefits for the duration of an individual's enrollment in a particular plan. Essential health benefits include a set of 10 categories of services that health insurance plans must cover under the ACA, such as doctors' services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, and mental health services.

In addition to eliminating lifetime limits, the ACA also restricted annual limits on coverage, prohibited the rescinding of coverage except in cases of fraud, and eliminated pre-existing condition exclusions for children. These provisions work together to protect consumers and ensure access to essential health benefits, regardless of an individual's health status, gender, or other factors.

The extension of dependent coverage

This change had a significant positive impact on dependent coverage uptake and duration. It reduced the uninsured rate among young adults, with an estimated 2.3 million young adults gaining dependent coverage between 2010 and October 2013. The ACA provision also had a crowding-out effect on other insurance types, with a reduction in employer-sponsored insurance (ESI) in own name, non-parental private insurance coverage, and uninsurance. This meant that the financial burden of insurance premiums and healthcare costs was transferred from dependent children and their employers to parents and parents' employers.

Differences in uptake and duration of dependent coverage remained among racial groups, with Black and Hispanic young adults less likely to enrol or stay enrolled for long periods. Less healthy individuals were also less likely to make use of dependent coverage.

The creation of health insurance marketplaces

The marketplaces were designed to be user-friendly, allowing consumers to input their personal information, such as income and household size, to determine their eligibility for subsidies and cost-sharing reductions. This information helps tailor the insurance plans offered to the consumer's specific needs and financial situation.

The health insurance marketplaces categorised insurance plans into metal tiers: bronze, silver, gold, and platinum. These tiers were based on the level of coverage and cost-sharing, providing consumers with a clear understanding of the benefits and costs associated with each plan. This simplified the process of selecting a suitable insurance plan.

The creation of these marketplaces was a significant step towards achieving one of the ACA's primary goals: making affordable health insurance accessible to a larger population. By providing a platform for comparison and competition, the marketplaces played a crucial role in driving down costs and increasing the accessibility of health insurance for millions of Americans.

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