The Affordable Care Act or Obamacare

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Signed into law by President Barack Obama in 2010, the Patient Protection and Affordable Care Act is responsible for the most sweeping reforms of the United States’ healthcare system since the 1965 passage of Medicare and Medicaid.

Background

Hotly contested along party lines, Republicans opposed the Affordable Care Act, derisively using the term Obamacare to describe the Act. By 2012, President Obama had embraced the term Obamacare, and it is now widely used by both supporters and opponents of the law. But controversy about the ACA continued after its passage, with numerous court challenges to the law; the legislation remains controversial under the Trump Administration.

What Are the Reforms?

Some of the reforms implemented by the Affordable Care Act include establishing Health Insurance Exchanges, or marketplaces, where individuals, families, and small businesses may purchase guaranteed issue qualified health insurance plans with premium subsidies that ensure the premiums are affordable for applicants with income up to 400 percent of the poverty level (above that level there is no assistance available, making the affordability of health insurance much more subjective for people with income above 400 percent of the poverty level).

The ACA provides low and middle-income purchasers with subsidies to make buying health insurance more affordable (eligible enrollees cannot have income above 400 percent of the poverty level, or $100,400 for a family of four in 2019), and subsidies to reduce out-of-pocket costs for eligible enrollees (income cannot exceed 250 percent of the poverty level or $62,750 for a family of four in 2019).

For tax years 2014 through 2018, the ACA also imposed a tax penalty on those who remained uninsured; the penalty took effect in 2014, and gradually ramped up to its maximum level by 2016. But although there is still a law requiring most Americans to maintain minimum essential health insurance coverage, the penalty for non-compliance was reduced to $0 as of January 2019, under the terms of the Tax Cuts and Jobs Act (H.R.1)that was enacted in late 2017. People who were uninsured in 2018 face a penalty when they file their taxes in 2019, but people who are uninsured in 2019 are no longer subject to penalties unless they live in one of the states where state-based individual mandates (and penalties) have been implemented.

The ACA prevents insurers from refusing to cover people with a pre-existing condition, or from charging them higher premiums because of a pre-existing condition. This is true both on and off the exchanges and represents a significant change from how the individual market functioned prior to 2014 in nearly every state. 

The ACA eliminated annual and lifetime dollar caps on how much an insurance company will pay for an insured’s covered health care (essential health benefits), and limits out-of-pocket maximums. Large group health plans are not required to cover all of the essential health benefits (most do, however), but for any essential health benefits that they do cover, they cannot impose any dollar limits on how much they'll pay for those services.

The ACA requires health insurance plans in the individual and small group markets to cover ten essential health benefits. One of the essential health benefit categories is preventive care, and a wide range of preventive care services are required to be covered with no cost-sharing. Although large group plans are not required to cover the full list of essential health benefits, non-grandfathered large group plans are required to cover preventive care with no cost-sharing.

The ACA requires large employers—those with 50 or more full-time equivalent employees—to offer affordable, minimum value health insurance to all full-time (30+ hours per week) employees, or risk a penalty under the employer shared responsibility provision. Employers must ensure that the coverage is considered affordable for the employee, but there's no affordability test for the cost of covering family members under the plan. Because of how this works and how subsidy availability is determined in the exchanges, some people are unable to obtain affordable coverage due to what's referred to as the "family glitch."

[Most of the above provisions do not apply to grandmothered and grandfathered plans.]

Some Parts of the Affordable Care Act Have Been Delayed or Eliminated

Some parts of the ACA will never be implemented: The Supreme Court disallowed a provision that would have withdrawn federal Medicaid funding to states that didn’t offer Medicaid to more people. This has resulted in a coverage gap, whereby 2.2 million people in 16 states essentially have no realistic access to coverage.

Additionally, Congress repealed the long-term care provision of the ACA, known as the CLASS Act, in January 2013 after the Department of Health and Human Services determined it was unworkable.

Numerous aspects of the ACA were delayed, including the employer shared responsibility provision (it took effect in 2015, rather than 2014, and wasn't fully phased in until 2016), the Cadillac Tax (now set to take effect in 2022), and the termination of non-grandfathered, non-ACA-compliant plans that were issued prior to 2014 (these plans are transitional, or " grandmothered," and they're allowed to continue in force until the end of 2019, at the discretion of states and health insurers).

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