The Affordable Care Act is one of the most significant pieces of legislation ever passed. It contains comprehensive health insurance reforms and tax provisions that affect individuals, families, businesses, insurers, tax-exempt organizations and government entities alike.
Additionally, it includes requirements for government entities to provide affordable coverage for many Americans and provides subsidies to help people pay for their coverage.
1. It is a tax
The Affordable Care Act introduces numerous new benefits, rights and protections. It also widens access to affordable health insurance by offering tax credits and expanding Medicaid/CHIP in many states.
The law also creates new taxes to help finance these reforms, reduce the deficit and distribute after-tax income more evenly.
One major tax provision of the Affordable Care Act is the individual mandate and associated fee (update: this has been reduced to zero at federal level). This new “tax” must be paid by all Americans who don’t have health coverage.
2. It is a mandate
The Affordable Care Act is a law that requires nearly all citizens and legal residents to have qualifying health insurance (public or private), or pay a tax if they do not. This requirement is commonly referred to as the individual mandate.
The Affordable Care Act (ACA) seeks to make health insurance more accessible and affordable by eliminating preexisting condition discrimination, capping rate increases and increasing competition between insurers. Furthermore, it includes premium tax credits to help people afford coverage.
3. It is a regressive tax
The Cadillac tax, also known as the premium surtax, is a regressive tax that will have a disproportionate effect on lower-income workers and families. This revenue source was included in the Affordable Care Act to pay for the law and address some of the inequities surrounding employer-sponsored healthcare being exempt from federal income taxes.
State and local sales and excise taxes are the most regressive element in many state and local tax systems. Poor families pay almost eight times more as a share of their incomes in these taxes than the wealthiest families do.
4. It is a mandate to buy health insurance
The Affordable Care Act mandates that most Americans purchase health insurance or face a tax penalty. It also created insurance exchanges and provided subsidies to cover some of the premium costs.
This principle is known as the “individual mandate.”
Without it, fewer healthy individuals would purchase health insurance to cover the expenses associated with caring for sick individuals. Instead, they’d purchase less costly policies and “free ride,” waiting until they were sick to start footing the bill.
In 2012, the Supreme Court upheld this provision of the Affordable Care Act as constitutional. But in 2017, Congress repealed the financial penalty for not having coverage – leading plaintiffs to argue that this change renders all aspects of the ACA unconstitutional since Congress no longer has authority to require individuals to purchase health insurance.
5. It is a mandate to buy health insurance for everyone
The Affordable Care Act (ACA) required most Americans to purchase health insurance or face a penalty – this requirement is known as the “individual mandate.”
In NFIB v. Sebelius, the Supreme Court upheld the individual mandate of the Affordable Care Act; however, this mandate was repealed by the Tax Cuts and Jobs Act of 2017.
In addition to the individual mandate, the Affordable Care Act provides federal subsidies for those unable to purchase their own coverage or lack access to affordable options. It also extends Medicaid coverage up to 133 percent of the poverty level, providing assistance to those with incomes up to this amount.
6. It is a mandate to buy health insurance for everyone
The Affordable Care Act requires all Americans to purchase health insurance or face a financial penalty. It also requires states to expand Medicaid eligibility for more low-income families and safeguard people with preexisting conditions from discrimination by insurers.
In 2012, the Supreme Court upheld the individual mandate as a legitimate exercise of Congress’ power to tax. But in 2018, President Trump signed a tax bill that eliminated its individual mandate penalty; consequently, several state attorneys general, led by Texas, filed suit alleging that this change rendered the entire law unconstitutional.
In a major setback for the plaintiffs, a federal judge in Texas struck down their mandate and the appeals court upheld it. Now the Supreme Court is taking up the issue.
