The Patient Protection and Affordable Care Act, also referred to as ACA, is a landmark U.S. federal statute passed by Congress on March 23, 2010 and signed into law by President Obama on that same date.
The Affordable Care Act (ACA) offers Americans access to health care through exchanges or marketplaces at an affordable cost, as well as subsidies, tax credits and cost-sharing reductions to lower monthly premium costs of qualifying plans.
Premiums
The Affordable Care Act (ACA) mandates health plans to cover essential benefits, and limits out-of-pocket expenses. You also have the option of selecting a higher deductible plan with more coverage at less cost.
Premium subsidies help make benchmark plans affordable on the Marketplace, with their amount determined by what percentage of your income you would need to contribute without them.
This system helps ensure all Americans can obtain affordable health coverage while limiting those whose coverage has lapsed due to rising premiums; consequently, the uninsured rate has declined substantially.
The Affordable Care Act’s subsidies are calculated based on an individual’s Modified Adjusted Gross Income (MAGI). This calculation accounts for wages, salary, interest and dividend income and any Social Security payments reported as income on their tax return.
Subsidies
One of the Affordable Care Act’s primary goals is to make health insurance more accessible and affordable for all Americans, and one approach it takes toward this end is through subsidies for health plans as well as payments directly to insurers.
Additionally, the Affordable Care Act seeks long-term systemic changes in how health-care services are organized and delivered; its aim is to enhance quality and efficiency while decreasing costs.
To fulfill its goals, the Affordable Care Act focuses on making insurance more affordable to low-income Americans while reforming how insurance is purchased and administered – such as by reducing cost sharing between insurers.
Subsidies are tax credits that reduce premium payments by an amount based on your income. The size of your subsidy depends on it.
Subsidies were increased for two years under the American Rescue Plan Act and set to expire by the end of 2022; however, due to the Inflation Reduction Act they will now continue for an additional three years, providing millions of ACA enrollees with financial support.
Taxes
The Affordable Care Act has revolutionized how healthcare expenses are taxed in the US. Medical costs can now be deducted directly from income, and you may now receive tax credits for your health insurance premiums.
Your monthly premium depends on several factors, including income, type and location of insurance coverage as well as any government subsidies available to cover premium costs.
Example: In New Hampshire and Vermont respectively, an individual aged 40 would pay $456 without subsidies for a benchmark silver plan in 2023.
One of the more contentious taxes associated with the Affordable Care Act is the Health Insurance Tax. This fee aims to be linked with overall rates of premium growth.
Out-of-pocket expenses
Out-of-pocket expenses, or your share of medical bills not covered by insurance, such as deductibles, copays and coinsurance premiums should all be carefully considered when selecting health insurance plans.
People with high out-of-pocket costs often struggle to cover their bills, using savings or other resources as they use up savings accounts or borrow from family. Long-term financial consequences may also ensue such as damage to credit ratings or inability to afford essentials like food and housing.
The Affordable Care Act’s out-of-pocket spending caps follow a sliding scale to make it easier for consumers with lower and middle incomes to cover their healthcare costs.
Comparative to pre-ACA trends, year-to-year changes in adjusted mean out-of-pocket expenditures and total health spending decreased during year one after the ACA implementation for those in the lowest income group. This finding is in keeping with literature on its implementation’s effects; however, more research needs to be conducted in order to ascertain whether its effects are permanent. We would also like a deeper understanding of how outcomes vary among income groups. Hopefully this study can inform policy discussions regarding improving affordability in health coverage.
