Affordable Care Act

What is the Affordable Care Act?

The Patient Protection and Affordable Care Act (PPACA), also known as the Affordable Care Act (ACA), was passed by Congress and signed into law by President Barack Obama in March 2010. The health reform legislation was designed to extend health insurance to uninsured Americans and to lower health care costs. The ACA is also referred to as Obamacare.

Deeper definition

The ACA has three primary goals.

  • To make health insurance available to more people, the ACA provides households with incomes between 100 percent and 400 percent of the federal poverty level with subsidies in the form of tax credits.
  • The ACA expanded the Medicaid program to include all adults with incomes below 138 percent of the federal poverty level. Not all states have expanded their Medicaid programs.
  • The ACA supports innovative methods of health care delivery designed to lower the overall cost of health care.

The ACA provides many patient rights and protections. These include:

  • Prohibiting insurance companies from reducing or denying benefits to patients with pre-existing conditions.
  • Allowing people under the age of 26 to obtain health insurance through their parents’ insurance plans.
  • Eliminating lifetime and annual dollar limits on health care coverage.
  • Prohibiting rate hikes based on gender or health status.
  • Giving patients the right to rapidly appeal insurance company’s decisions.
  • Ensuring all plans contain minimum benefits, including free preventative care, visits to OBGYN providers without a referral, and free birth control.

Mandates for individuals and employers

The ACA requires individuals to have health insurance. Failure to provide proof of health insurance may result in fees that are assessed through taxes. There are a few exceptions to the mandate. Individuals who participate in a recognized health care sharing ministry, whose employers’ health insurance is too expensive or are incarcerated may meet exception requirements.

Under the ACA, employers with 100 or more full-time employees were required to insure at least 70 percent of their full-time employees by 2015 and 95 percent by 2016.

Employers with 50 to 99 full-time employees were required to begin insuring their employees by 2016. Employers with less than 50 full-time employees are not subject to the ACA’s mandate.

The ACA does not apply to employees who work less than 30 hours per week. Employers that don’t offer employees the minimum health care insurance must make monthly Employer Shared Responsibility Payments to the IRS.

The ACA has received a great deal of criticism. Critics of the ACA point to:

Rising costs

In October 2016, it was announced that insurance plans sold through HealthCare.gov were expected to rise by 22 percent in 2017. The U.S. Department of Health and Human Services argued that subsidies also would rise, keeping the premiums affordable.

The people signing up for ACA health insurance are sicker, and their care is more expensive than insurers expected. To address this problem, insurers can raise rates or pull out of the marketplace.

Insurers pulling out of the marketplace

In February 2017, Humana announced it would no longer sell policies on the exchange in 2018, because it’s losing money. Humana’s move to pull out affects approximately 150,000 policyholders in 11 states. The pullout is expected to leave many counties without coverage.

In 2016, Aetna reported it was pulling out of the individual market in 15 states because it was losing money. Since then, a federal judge has ruled that Aetna’s assertion to pull out due to lost money was false. The judge ruled Aetna’s decision to pull out was partially due to a federal antitrust lawsuit that blocked its proposed merger with Humana.

Affordable Care Act example

An estimated 20 million people have received health insurance under the Affordable Care Act. By the end of 2015, 14.5 million of those received insurance through CHIP (Children’s Health Insurance Program) and Medicaid. Insurance rates vary based on geography and age. On average, a bronze plan for a 50-year-old costs $489.54 per month with a deductible of $6,092. Learn more about health insurance at Bankrate.com.

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