Since its passage in 2010, the Affordable Care Act (ACA), known as Obamacare, has been a hotly debated topic in the United States. One of the key goals of the ACA was to increase access to affordable health insurance for Americans who were previously uninsured or underinsured.
Over a decade later, the ACA has significantly impacted the insurance world in the USA, affecting everything from individual insurance plans to employer-sponsored coverage. This change was met with a mostly positive reception since it meant that insurance policies were sold at a lower price and provided better coverage to the insured.
What is the Affordable Care Act, and what are its main functions?
The ACA, or Affordable Care Act, is a comprehensive healthcare reform law passed in 2010 in the United States. It is also commonly referred to as Obamacare, after the former President of the United States, Barack Obama, who championed the legislation.
The main goal of the ACA is to make health care more affordable and accessible for all Americans, regardless of their income or health status. To achieve this goal, the law includes a variety of provisions, including:
Expansion of Medicaid: The ACA expanded Medicaid coverage to all individuals with incomes up to 138% of the federal poverty level. This allowed millions of low-income individuals to gain access to health insurance.
Health insurance exchanges: The ACA created health insurance exchanges, or marketplaces, where individuals and small businesses can compare and purchase health insurance plans. These exchanges are designed to make it easier for individuals to find affordable coverage that meets their needs.
Individual mandate: The ACA included an individual mandate, which required most individuals to have health insurance or face a penalty. The goal of this provision was to encourage more people to get insurance and help spread the risk among a larger pool of individuals.
Protections for pre-existing conditions: The ACA prohibits insurers from denying coverage to individuals with pre-existing conditions, such as diabetes or cancer. This provision ensures that individuals cannot be denied coverage or charged higher premiums based on their health status.
Essential health benefits: The ACA requires all health insurance plans to cover essential health benefits, including preventive care, prescription drugs, and maternity care. This ensures that individuals can access the care they need to stay healthy and treat illnesses.
A New Era of Insurance: The ACA's Legacy
Insurance companies had to make several changes to meet the ACA requirements, ranging from cost changes to administrative decisions. So, what exactly were those changes?
1- Coverage Expansion
The ACA expanded access to health insurance coverage through several provisions, including creating the Health Insurance Marketplace, Medicaid expansion, and individual and employer mandates.
The Health Insurance Marketplace, or the Health Insurance Exchange, is a platform where individuals and small businesses can shop for and purchase health insurance. The marketplace offers a variety of plans from private insurance companies, and individuals may be eligible for subsidies to help offset the cost of premiums based on their income.
Medicaid expansion was another key provision of the ACA, which allowed states to expand their Medicaid programs to cover individuals with incomes up to 138% of the federal poverty level. As of 2021, 38 states and the District of Columbia have expanded their Medicaid programs under the ACA.
The individual mandate required most Americans to have health insurance or face a penalty, while the employer mandate required certain employers to offer health insurance to their employees. This resulted in more people signing up for insurance policies in fear of having to pay penalties.
2- Essential Health Benefits
The ACA required that all health insurance plans sold on the individual and small group markets cover essential health benefits. These include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services, and pediatric services.
Before the ACA, health insurance plans could vary significantly in terms of their benefits, and some plans did not cover basic services like prescription drugs or mental health care. The ACA's essential health benefits requirement helped to standardize the benefits offered by health insurance plans and ensure that individuals had access to necessary medical services.
3- Pre-existing Conditions
The ACA prohibited health insurance companies from denying coverage or charging higher premiums to individuals with pre-existing conditions. This was a significant change in the insurance industry, as previously, insurers could exclude coverage for individuals with pre-existing conditions or charge them higher premiums.
For example, before the ACA, an individual with a history of cancer might have been denied coverage or charged higher premiums for health insurance due to their pre-existing condition. Under the ACA, insurance companies are no longer allowed to deny coverage based on pre-existing conditions, which has helped millions of Americans access necessary medical care.
The ACA introduced various cost-sharing measures to help make health insurance more affordable for individuals and families. These measures include:
Premium Subsidies: The ACA created premium subsidies to help individuals and families with low and moderate incomes afford health insurance. These subsidies are based on household income and insurance costs in the individual's local market.
Cost-Sharing Reductions: The ACA also established cost-sharing reductions for individuals and families with incomes below 250% of the federal poverty level. These reductions lower the out-of-pocket costs associated with healthcare services, including deductibles, copays, and coinsurance.
Tax Credits: Besides premium subsidies, the ACA created tax credits to help small businesses offer health insurance to their employees. Small businesses with fewer than 25 full-time employees and average wages under $56,000 per year may be eligible for tax credits.
5- Administrative Changes
Finally, the ACA introduced several administrative changes to the insurance industry, including establishing minimum medical loss ratios, creating the Center for Consumer Information and Insurance Oversight (CCIIO), and implementing new reporting requirements for insurance companies.
Minimum Medical Loss Ratios (MLRs) are the minimum percentage of premium dollars that insurers must spend on medical care and quality improvement activities. The ACA requires insurers to meet certain MLR standards or provide rebates to their customers. For example, suppose an insurer has an MLR of 80%. In that case, they must spend at least 80% of their premium dollars on medical care and quality improvement activities, leaving a maximum of 20% for administrative costs and profits. If an insurer does not meet these requirements, they are required to provide rebates to their customers.
The Center for Consumer Information and Insurance Oversight (CCIIO) was established under the ACA to help ensure that health insurance plans comply with the law's requirements. The CCIIO oversees the implementation of the ACA's insurance market reforms, including the prohibition on denying coverage for pre-existing conditions and the requirement that plans cover essential health benefits. The CCIIO also oversees the health insurance marketplaces, which allow individuals to shop for and compare health insurance plans.
New reporting requirements for insurance companies were implemented under the ACA to increase transparency and accountability in the insurance industry. Insurance companies must report on a range of metrics, including their MLRs, the number of enrollees in each plan, and the types of benefits covered by each plan. This information is publicly available and can be used by consumers to make more informed choices when selecting a health insurance plan.
Overall, these administrative changes were designed to increase transparency and accountability in the insurance industry and ensure that health insurance plans provide adequate coverage for consumers. They represent a significant shift in how the insurance industry operates and provide consumers with more information and protection than ever before.
The bottom line
The Affordable Care Act has significantly impacted the insurance world in the USA since its passage in 2010. While the law has certainly had its share of controversies and challenges, it has also succeeded in expanding access to healthcare coverage for millions of Americans. The ACA has brought about changes in insurance premiums, coverage, and regulation that have affected individuals and employers. However, the future of healthcare reform in the USA remains uncertain, and the fate of the ACA is still up in the air.
Regardless of what happens, it is clear that the ACA has left a lasting mark on the insurance landscape in the USA and will continue to shape the conversation around healthcare reform for years to come.