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Affordable Care Act (ACA)

"Obamacare"

What is the Affordable Care Act (ACA)?

The Affordable Care Act (ACA), also known as Obamacare, is a healthcare reform that includes a list of provisions that open opportunities for Americans to receive health insurance. The ACA accomplished the following:

1. Expanded Medicaid eligibility

2. Eliminated pre-existing conditions to ensure insurance companies cannot further charge individuals additional medical-related fees

3. Allowed for health insurance exchanges

4. Allowed for children up to the age of 26 to remain on the insurance plan of their parents

 

Affordable Care Act (ACA)

 

Role of ACA, Premium Tax Credits, and Cost-Sharing Reductions

The Affordable Care Act is meant to reduce the cost of health insurance coverage for qualified, but lower-income, Americans by providing premium tax credits and cost-sharing reductions.

Premium tax credits are a federal tax credit that lowers the premium amount that individuals must pay on monthly health insurance when purchased from the marketplace. Unlike regular tax credits, where deductions are made on the taxpayer’s tax liability and are later refunded or reduce taxes from previous years, premium tax credits are calculated by the government and sent to health insurance companies that ensure an individual’s eligibility for the credit.

Qualified candidates then receive a discount on monthly premium payments through tax credits. As the tax credits are direct payments, individuals can opt to pay a discounted price for health insurance. Furthermore, the tax credits are based on income. Individuals who earn higher salaries will receive less premium tax credits, and therefore, a smaller monthly discount. The opposite is true for individuals who make less.

 

To qualify for the premium tax credits, the individual must not be eligible for:

1. Medicaid

2. Children’s Health Insurance Plan (CHIP)

3. Employer-Sponsored Health Insurance

 

Cost-sharing reductions are subsidies that reduce healthcare expenses for individuals, such as deductibles, copayments, and coinsurance. Specifically, the government can do the following:

1. Reduce the amount an individual owes to covered services before purchasing health insurance

2. Reduce a fixed payment for healthcare services

3. Partially reduce the entire cost of healthcare services

 

Outlining the Health Insurance Plan Benefits

Health insurance plans that comply with the Affordable Care Act cover the following health benefits (in addition to other benefits):

  • Hospitalization
  • Pediatric services
  • Pregnancy
  • Emergency services
  • Rehabilitative care/services
  • Prescription medication

 

The Individual Mandate and Current Status of the ACA

The ACA set the rule that all Americans are entitled to receive healthcare coverage through their employer, ACA, or other sources. It was meant to support health insurance payouts to uninsured Americans. However, on January 20, 2017, President Donald Trump signaled the removal of the ACA to reduce the fiscal burden on the United States and to decrease its national debt.

The overall outcome was unsuccessful; however, the government managed to scale the program by cutting enrollment periods by half. By 2018, the number of Americans who were previously covered by ACA decreased by approximately 22% relative to figures given in 2015. By 2019, the Trump administration voted to repeal the entire Affordable Care Act.

 

Pros of the ACA

There were many pros to implementing the Affordable Care Act. For example:

 

1. Covered health insurance to more Americans

Within the first five years of carrying out ACA, more than 16 million Americans received health insurance coverage.

 

2. Health insurance became cheaper

Although insurance coverage wasn’t free under the ACA, insurance companies needed to contribute at least 80% of insurance premiums on medical care and improvements for Americans, which ultimately made health insurance more affordable across lower-income families.

 

3. Prescription drugs became cheaper

Historically, many senior citizens were unable to afford their medications, due to high prices. Under Obamacare, prescription drugs became significantly more affordable, allowing Medicare beneficiaries to save approximately $27 billion on prescription drugs under ACA in 2017.

 

4. Pre-existing health conditions ceased to be a factor that denied health coverage

Before, individuals who were diagnosed with illnesses, such as cancer, previously experienced difficulty receiving health insurance because many insurance companies did not cover treatment for the particular conditions incurred before registering for Medicare. With ACA, Americans could no longer be denied coverage due to such circumstances.

 

Cons of the ACA

There were many cons to implementing the Affordable Care Act. For example:

 

1. Americans with health insurance must now pay higher premiums

Although insurance companies provided wider options of benefits and could cover Americans with pre-existing conditions, the cost of upholding such conditions partially stemmed from charging higher premiums to those who already owned health insurance.

 

2. Rise in taxes

To compensate for ACA, high-income individuals were taxed higher rates, as well as on medical devices and pharmaceutical sales.

 

3. Cutting employment hours to reduce healthcare work coverage

Obamacare enforced the rule that businesses with 50 or more full-time employees must offer insurance or cover healthcare services for their workers. As a result, many businesses reduced full-time employees’ hours to part-time to avoid paying for additional expenses.

 

More Resources

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  • Contingent Beneficiary
  • Social Security
  • Voluntary Life Insurance

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