The Affordable Care Act or Obamacare

Signed into law by President Barack Obama in 2010, the Patient Protection and Affordable Care Act—generally known as the Affordable Care Act or ACA—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. But it should be noted that although no Republicans voted for the final bill, the process of creating the ACA was very much bipartisan. 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?

The ACA implemented a wide range of reforms. Some are more behind-the-scenes, including payment reforms, efficiency in the Medicare system, and a focus on value-based care. But many of the reforms have significantly changed the landscape of health insurance in America, including coverage, access, and affordability. The bulk of these consumer-facing reforms have applied to the individual market, and to some extent, the small group market. But there have also been changes in the large-group market and for Medicare and Medicaid. Here's a summary of some of the most important changes (note that grandmothered and grandfathered plans are exempt from many—but not all—of the ACA's requirements):

Guaranteed-Issue Coverage in the Individual Market
All individual major medical health plans purchased since 2014 have been guaranteed issue. 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. [Note that while short-term health plans are sometimes referred to as major medical plans, they are not regulated by the ACA and they still use medical underwriting.]

Health Insurance Exchanges
The creation of health Insurance Exchanges, or marketplaces, where individuals and families—and in some states, small businesses—may purchase guaranteed issue qualified health insurance plans. Note that there is just one official exchange in each state. In most states, it's HealthCare.gov, but DC and 12 states have fully state-run exchanges and use their own websites for enrollment. Individual major medical plans can also be purchased directly from the insurance companies (with the exception of DC, where all plans are sold via the exchange), and the coverage is still guaranteed-issue.

Limited Enrollment Windows
Regardless of whether individual major medical coverage is purchased through the exchange or directly from an insurer, it's only available during open enrollment or a special enrollment period (with the exception of Nevada, where it can be purchased year-round but with a waiting period before it takes effect). Prior to the ACA, individual major medical coverage could be purchased at any time, but applicants were subject to medical underwriting in nearly every state.

Premium Subsidies
The ACA provides low and middle-income purchasers with subsidies (premium tax credits) to make buying health insurance more affordable. To be eligible for these premium subsidies, enrollees cannot have income above 400% of the poverty level, or $103,000 for a family of four in 2020. There is no financial assistance available above 400% of the poverty level (unless you're in California, where a state program supplements the federal subsidies), so the affordability of health insurance is much more subjective for people with income above that level.

Cost-Sharing Reductions
There are also subsidies to reduce out-of-pocket costs for eligible enrollees who select silver plans in the exchange (income cannot exceed 250 percent of the poverty level or $64,375 for a family of four in 2019). These subsidies help to improve access to health care by reducing the amount of money that enrollees have to pay when they receive medical care.

Individual Mandate
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 are no longer subject to penalties for being uninsured unless they live in one of the states where state-based individual mandates (and penalties) have been implemented.

Elimination of Lifetime and Annual Limits
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.

Essential Health Benefits
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.

Actuarial Value Requirements
In the individual and small group markets, all plans issued since 2014 (with the exception of catastrophic plans in the individual market) have to fit into one of four "metal" levels that are determined based on actuarial value.

Employer Mandate
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."

Expansion of Medicaid and Transition to MAGI-Based Eligibility
Medicaid has historically covered low-income, low-asset Americans who were also either pregnant, children, parents of minor children, disabled, or elderly. The ACA called for an expansion of Medicaid to cover adults age 19-64 (including those who do not have children and are not pregnant or disabled) with income as high as 138% of the poverty level (133% plus a 5% income disregard). The law also transitioned some Medicaid populations to an eligibility system that only considers income, without taking assets into consideration. But a Supreme Court ruling in 2012 made Medicaid expansion optional for each state, and there are still 14 states (as of 2019) that have taken no action towards expanding Medicaid. As a result, there are 2.5 million Americans caught in the Medicaid coverage gap—their incomes are too low for premium subsidies, but they're also ineligible for Medicaid.

Improvements to Medicare
The ACA has gradually closed the Medicare Part D donut hole, and added new preventive care benefits to Medicare.

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

Some parts of the ACA will never be implemented: As noted above, the Supreme Court disallowed a provision that would have withdrawn federal Medicaid funding to states that didn’t offer Medicaid to more people. Most states have expanded Medicaid anyway, but some continue to resist expansion, leaving 2.5 million people in 14 states with essentially 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, but likely to be repealed before then), 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 2020, at the discretion of states and health insurers).

And although the individual mandate (individual shared responsibility provision) was implemented and continues to exist, the tax levied by the IRS for non-compliance was eliminated after the end of 2018, under the terms of the GOP's Tax Cuts and Jobs Act. This resulted in higher health insurance premiums in 2019, as insurers knew that the people who would be most likely to drop their coverage would be those who were healthy—ie, the people who are most needed in order to balance out the overall health of the risk pool.

Ongoing Legal Challenges

The ACA has endured numerous legal challenges over the years. And as of 2019, there is a pending lawsuit (Texas v. Azar) that threatens to overturn the entire law. The lawsuit stems from the fact that an earlier lawsuit (the one in which the Supreme Court ruled in 2012 that the ACA was constitutional but that states could not be forced to expand Medicaid or lose their federal Medicaid funding) determined that the enforcement mechanism for the individual mandate constituted a tax rather than a penalty.

That tax was eliminated (effective January 2019) by the GOP tax bill that was enacted in late 2017. Soon thereafter, a group of 20 GOP-led states sued to overturn the ACA, arguing that without the tax, the rest of the law could no longer be considered constitutional. Legal scholars generally agreed that this was a stretch, but in December 2018, a federal judge ruled that the ACA should indeed be overturned.

Under the Trump administration, the Department of Justice has declined to defend the ACA, and has agreed with the judge's ruling—that the ACA should be overturned in full. Oral arguments in the appeal were heard in July 2019, and a ruling is expected by the end of 2019. Nothing will change immediately if the appeals court agrees with the lower court, as the case is likely to make its way to the Supreme Court.