The Affordable Care Act (ACA) became law on March 23, 2010. Designed to improve health insurance coverage, increase consumer protections, emphasize prevention and wellness, and improve quality and system performance, the ACA is an important step forward for the nation’s health system.
The ACA will help make healthcare more accessible to individuals and families with lower incomes. Millions of people have already benefited from premium assistance tax credits that make coverage more affordable.
Taxes
Taxes are the main source of government revenue, and they pay for public programs and work. Depending on the level of government (federal, state or local), taxes can fund national defense, Social Security and health care.
Throughout history, varying justifications and explanations have been offered for imposing taxes. They often stem from utilitarian, economic or moral considerations.
To reduce costs and increase insurance coverage, the ACA introduced a number of new tax provisions. These include a tax on employers that don’t offer adequate health insurance, a new tax on high-cost health plans (known as the “Cadillac tax”) and an increase in the limit on the medical expense deduction for individuals and businesses.
In addition, the ACA imposed excise taxes on health insurers, pharmaceutical companies and manufacturers of medical devices and raised taxes on high-income families. These changes are expected to raise $8 billion in 2022 and $39 billion by 2028. They are intended to finance health reform and cover the cost of providing federal subsidies to low-income households.
Medicaid
One of the ACA’s most important components was Medicaid expansion. It gave states the option to offer coverage to people who had been denied health care in the past due to their income levels.
Millions of low-income adults gained coverage in expansion states, and their access to care improved. They got more check-ups, got more treatment for chronic conditions, and had lower medical debt.
Those benefits continued even after coverage took effect, according to several studies. More importantly, Medicaid expanded to millions of new people who were previously uninsured, preventing them from losing their coverage when their jobs were cut or their incomes fell.
Medicaid also enables states to respond to population and economic shifts, changing coverage needs, technological innovations, public health emergencies such as the opioid addiction crisis, and other dynamics. State-level control of Medicaid is governed by Title XIX of the Social Security Act and a large body of federal regulations. The federal government matches states’ spending on an open-ended basis, which means that states can use their federal resources to respond to a wide range of circumstances.
Exchanges
A key component of the ACA is the creation of health insurance exchanges, which enable people to shop for coverage from different insurers and secure federal subsidies for premiums. In addition to offering standardized plan choices, exchanges provide side-by-side comparisons of benefits and costs and help promote competition among health plans to make coverage affordable.
To ensure that consumers have access to the best health plans, exchanges must be selective in qualifying plans and avoid adverse selection (the disproportionate enrollment of high-risk, expensive individuals, resulting in a rise in premiums). States also have significant flexibility in two other key areas: how Exchanges relate to and participate in their state’s larger health care marketplace; and whether to require Exchanges to purchase products from the private market and determine eligibility for Medicaid and CHIP programs.
In Utah, for example, the health insurance exchange is operated by the state with limited involvement from an FFE. The state’s responsibilities include conducting eligibility determinations and enrolling qualified individuals in Qualified Health Plans (QHPs), certifying QHPs, and providing consumer assistance services.
State Flexibility
The Affordable Care Act was able to achieve its national objectives in many ways that allowed states to modify the program in ways that spurred state innovation in coverage and delivery systems. This flexibility allowed states to meet national Medicaid goals and exceed those targets in many instances.
The ACA offers a variety of flexible options to states in terms of eligibility, benefits, premiums and cost sharing, and provider payments and delivery systems (Figure 1). These vary widely across the country.
In addition, the ACA included a set of programs, known as state innovation waivers, that allow states to modify the ACA framework. These waivers have received praise from both ends of the ideological spectrum and can achieve what both sides earnestly wish for: promoting more affordable, flexible, patient-centered health care. The Trump administration has encouraged states to use these “Section 1332” waivers and provided a checklist designed to help states develop applications.
