In 2010, President Barack Obama signed the U.S.Affordable Care Act, which is designed to reduce healthcare costs and make coverage more accessible for everyone.
The Affordable Care Act (ACA) offers premium tax credits, cost-sharing reductions and other strategies to reduce healthcare insurance premiums. It also creates a new health insurance marketplace.
1. Tax Credits
Premium tax credits are an invaluable resource for Americans looking to purchase health insurance through the Marketplace. They offer a refundable tax credit that reduces monthly premiums, which can be claimed in addition to any income tax refund you may receive.
In order to qualify for a premium tax credit, you must have an adjusted gross income between 100 percent and 400% of the federal poverty level (FPL), be ineligible for affordable and adequate coverage through an employer or government program, and be a legal resident in the United States.
The American Rescue Plan expanded and extended these subsidies beginning with the 2021 coverage year, extending them through 2025. Furthermore, the Inflation Reduction Act extended these enhanced subsidies until 2025, providing much-needed relief to millions of Americans.
People who enroll in a market plan may also receive cost-sharing reductions, though these are different than tax credits. A tax credit is an one-time payment that can help offset some of the expenses of purchasing coverage through the marketplace; on the other hand, cost sharing reductions are paid monthly, similar to an HRA.
2. Pre-Existing Condition Coverage
Before the Affordable Care Act (ACA) was passed, insurance companies could deny coverage or charge higher premiums for people with pre-existing conditions. These rules were intended to shield insurers from paying out-of-the-strange amounts for medical care for these individuals; however, they made it harder for consumers to obtain affordable health insurance.
The Affordable Care Act significantly limited these policies, yet some still deny coverage if you have pre-existing conditions. Examples include short-term medical plans, Farm Bureau plans and some non-ACA compliant health insurance offerings.
Employer-sponsored plans in the small group market have long been exempt from such limitations. Under HIPAA, they cannot discriminate against an individual employee (or dependent) based on their medical history.
3. Limits on Out-of-Pocket Expenses
One of the primary purposes of health insurance is to safeguard people against catastrophic costs and medical bill-induced bankruptcy. That’s why the Affordable Care Act (ACA) prohibited lifetime dollar limits on coverage as well as annual out-of-pocket limit requirements.
Although these provisions come with some tradeoffs (higher deductibles, greater cost-sharing before the OOP cap), they remain an essential safeguard for individuals and families with chronic or complex healthcare needs. They should not be repealed under replacement or reform proposals.
The health care law also permits states to charge higher copayments for alternative benefits, such as those provided by private insurers and certain Medicare plans. These fees are determined by the state’s payment for those services and vary based on income level.
Furthermore, many health plans have out-of-pocket maximums that specify how much money must be paid each year for eligible healthcare expenses before your plan covers 100% of those costs. Once this limit is reached, there are no more cost sharing obligations and your insurer will cover all covered healthcare costs for the remainder of the year.
4. Coverage for Children
The Affordable Care Act (ACA) offers coverage through Medicaid and CHIP to children of low-income families. Enrollment in these programs takes place during open enrollment periods in state marketplaces, though some states allow enrollment year-round.
Parents have access to a range of child-only insurance plans. These may include major medical plans, cost sharing services, short and fixed payment options.
Although not as cost-effective as Medicaid, these policies offer a reliable level of coverage and are usually available year-round. Plus, some may even qualify for tax credits to help offset some expenses.
Furthermore, the Affordable Care Act (ACA) mandates insurance companies to offer child-specific health plans. While these can be reasonably priced, they often come with limited benefits and high deductibles; thus, they may not be the best option for children who have complex healthcare requirements.