Why Did the Affordable Care Act Fail?

Why Did the Affordable Care Act Fail?

Why did the affordable care act fail

The Affordable Care Act was expected to make health insurance more accessible for all Americans. It included subsidies for lower income individuals and an individual mandate that levies a tax penalty on those without coverage.

Unfortunately, the ACA failed to meet many of its intended objectives. As a result, it is currently facing legal challenges with several valid reasons for why.

The Individual Mandate

The individual mandate was the most contentious element of the Affordable Care Act. It required nearly everyone to purchase health insurance or face a tax penalty if they didn’t.

Supporters of the law argued that it increased access to health insurance for more people and helped control costs by creating a pool of younger, healthier customers who could offset expenses associated with providing care for older and sicker patients.

However, opponents of the Affordable Care Act (ACA) were out to destroy it from day one, filing four lawsuits on President Obama’s signing day and filing dozens more over time.

In 2017, Congress passed the Tax Cuts and Jobs Act, repealing the individual mandate by eliminating its financial penalty. Critics claimed this rendered the individual mandate unconstitutional under the Commerce Clause.

The Employer Mandate

The employer mandate of the Affordable Care Act was intended to strengthen and stabilize America’s already robust system of employment-based health insurance, while encouraging businesses who aren’t offering coverage to do so.

For large employers, this means either purchasing fully funded coverage from a commercial health plan or self-insuring and hiring an administrative service organization to manage the plan. Both approaches have distinct market implications and could result in significant penalty payments if noncompliance occurs after 2014 – assuming such penalties start being assessed then.

The Subsidies

The Affordable Care Act has made self-purchased health insurance more accessible by providing premium subsidies (premium tax credits). These subsidies help lower monthly premiums for many ACA plans.

Subsidies protect people from rising premiums by capping the amount they pay based on their income. This helps keep coverage affordable for low-income households that lack funds to purchase insurance policies.

ACA premium subsidies are calculated based on your projected income for the year you apply. If your earnings exceed what was expected, then you may have the option to repay some or all of your subsidy help.

ACA premium subsidies are available to individuals and families whose incomes fall between 100 percent and 400% of the federal poverty level. These subsidies tend to be more generous for higher earners. As a result, record-high enrollment in exchange plans has been driven by these subsidies, driving down the uninsured rate to an all-time low.

The Taxes

Taxes are mandatory payments that individuals and families make to federal, state and local governments in order to fund public goods such as schools or national defense.

Taxes come from a combination of income, property and sales taxes; in 2019, Americans paid $1.6 trillion in taxes according to the Tax Foundation.

Taxes aren’t the only source of funding for government programs. User fees that are assessed on a variety of services like airline tickets, cell phones and hotel rooms also contribute money.

To fund the Affordable Care Act (ACA), multiple taxes were implemented against employers and high-income families. These included excise taxes on health insurers, pharmaceutical companies and medical devices; as well as a Medicare tax for high earners that raised more than $39 billion in revenue over the following decade.

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About the Author: Raymond Donovan