The Affordable Care Act, formally known as the Patient Protection and Affordable Care Act (ACA) or “Obamacare,” is a landmark U.S. federal statute enacted by the 111th Congress and signed into law by President Barack Obama on March 23, 2010.
The ACA expands access to coverage, increases consumer protections, emphasizes prevention and wellness, improves quality and system performance, and reduces health care costs.
What is the Affordable Care Act?
The Affordable Care Act, also known as “Obamacare,” aims to make health insurance more affordable and accessible for all Americans. It includes premium subsidies, cost-sharing reduction (CSR) subsidies, and Medicaid expansion.
Millions of Americans now have access to ACA-compliant coverage. They can find and purchase a plan through an online exchange, or marketplace, operated by individual states or by the federal government.
ACA-compliant health plans must cover many important benefits, including preventive care, hospital visits and prescription drugs. They must not discriminate against people with pre-existing conditions, and they must be affordable for low-income consumers.
However, the ACA has not yet achieved its goal of universal coverage. It has not addressed gaps in the US health system, including market failures that affect costs and quality. It has not addressed the needs of children and youth with special health care needs. Consequently, it may have limited impact on the US health system. These problems are not well recognized or understood by participants in the current system, and will limit the ACA’s effect on costs and value.
What is the Individual Mandate?
The individual mandate is a requirement that people have health insurance or pay a tax penalty, or both. The idea is that when healthy and unhealthy people contribute to the cost of insurance, it makes it cheaper for everyone.
Until January 2019, the federal individual mandate was enforced by the IRS. Since then, the tax penalty has been removed at the federal level but individual mandates are still in effect at state levels in five states and Washington, D.C.
While the individual mandate is not currently in effect, it’s important to know what it is and how it affects the ACA. Insurers still use the size of the penalty as a factor in how much they charge for coverage.
What is the Tax Credit?
The Affordable Care Act (ACA) includes a tax credit that can help you pay your health insurance premium. It’s called the “premium tax credit.”
The ACA offers this credit for low and moderate income people whose household income is between 100% and 400% of the federal poverty level. Individuals and families can receive a credit to the amount of the cost of a benchmark silver plan in their area, based on a sliding scale.
However, there is a catch: Those who receive credits that exceed the amount allowed will have to repay some of them. Depending on the family’s income, this may be a substantial amount.
What is the Exchange?
Health insurance exchanges (or marketplaces) are the online places where you can compare the costs, benefits and features of a variety of plan options. They also help you find out if you qualify for a tax subsidy or Medicaid.
An exchange is an important part of the ACA. It organizes the market, reducing transaction costs and increasing transparency for consumers and small employers.
The ACA’s exchanges are required to operate by January 1, 2014. States will have to establish their own exchanges and build or contract with technology companies that will manage them.
States have a range of options for how to structure their exchanges from an active purchaser model, where the exchange negotiates product offerings with insurers as large employers often do, to an open marketplace model in which all qualified insurers offer products through the exchange. Regardless of the operating model, an effective exchange should provide comparison shopping tools to promote choice based on price and quality and enable consumers to narrow plan options based on their preferences.
