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What is the Affordable Care Act (ACA)?

Last updated March 16th, 2020

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What is the Affordable Care Act (ACA)?

When you hear the term “ACA”, it’s the same thing as Obamacare. This healthcare law is still relevant today and affects you in many ways.

The Affordable Care Act (ACA) has been around for several years, but it’s still a hot topic among political circles and everyday Americans. You may wonder what was the purpose behind this healthcare law, how it changed the healthcare system, and how it affects you? In a nutshell, the ACA removed many barriers that made it difficult for some people to get affordable coverage, especially those who didn’t have access to health insurance through their employer. It also made it easier for individuals, families, and small business owners to compare and shop for plans, get financial assistance, enroll in benefits, and renew their healthcare coverage. 

What is the Affordable Care Act?

Officially called the Patient Protection and Affordable Care Act, the ACA is a comprehensive healthcare reform that gives Americans more rights to access quality, affordable health insurance. The Affordable Care Act is nicknamed Obamacare after President Barack Obama who signed this healthcare bill (H.R.3590) into law on March 23, 2010. 

Purpose of the Affordable Care Act 

Before the ACA, nearly 32 million Americans went uninsured.1 And if you had a pre-existing condition, health insurance plans were allowed to deny you coverage. These are among the reasons why the Affordable Care Act was created. 

In fact, there are three main goals that the ACA was designed to accomplish:2

  1. Make affordable health insurance accessible to more Americans. This was done by offering premium tax credits (called subsidies) to households with incomes between 100 to 400 percent of the federal poverty level.
  2. Expand the Medicaid program to include coverage for those with incomes at or below 138 percent of the federal poverty level. Hawaii and Alaska have different federal poverty levels. (Not all states have decided to expand Medicaid.)
  3. Improve the quality of healthcare delivery in efforts to lower the overall cost of care.

The Affordable Care Act Over the Years

The Affordable Care Act contains numerous laws that took years to be fully implemented. Below are some of the main ACA provisions that took effect over the years.

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– Eliminated lifetime and annual limits on coverage
– Extended dependent coverage on parent’s plan up to age 26
– Prohibited carriers from canceling coverage, except for cases of fraud
– Prohibited coverage exclusions to children with pre-existing conditions
– Eliminated exclusions and higher premiums for pre-existing conditions 
– Implemented the individual mandate requiring most people to have qualified coverage or pay a penalty
– Implemented the employer mandate requiring employers with 50 or more full-time employees to offer qualified coverage or pay a fine
– Repealed the individual mandate penalty in most states

How the ACA Changed the Way Health Insurance is Offered

Some of the main ways the Affordable Care Act (Obamacare) changed the way health insurance is offered include the following.

1. Created Healthcare Exchanges to Buy Coverage

ACA provisions in 2014 implemented a federal exchange via Healthcare.gov as well as state-based health insurance exchanges5 — collectively known as the Health Insurance Marketplace.6 The ACA also created the Small Business Health Options Program or SHOP Marketplace for small employers with 49 or fewer full-time employees. 

HealthCare.com lets you access health insurance plans off the exchange that’s basically identical to subsidy-eligible plans sold in the Marketplace—except cheaper.

2. Created an Annual Enrollment Period 

Most states have an Open Enrollment Period that runs from November 1 to December 15 each year. This applies to plans sold through the exchange and off the exchange in the private marketplace. Once you enroll, the Marketplace automatically renews your coverage each year by December 15.7 But it’s a good idea to review your coverage annually before open enrollment ends to make sure it still meets your needs and update any changes to your application for accurate subsidy results.

3. Created Plans With Different Metal Tiers

Both Marketplace and non-Marketplace plans have different metal tiers that reflect the percentage of your costs (called coinsurance) the health insurance plan covers.

  • Bronze: Covers 60 percent of your healthcare costs and is often the cheapest plan.
  • Silver: Covers 70 percent of your healthcare costs and is usually the most popular plan.
  • Gold: Covers 80 percent of your healthcare costs.
  • Platinum: Covers 90 percent of your healthcare costs and has the highest premium of all metal plans. Platinum plans are not commonly offered.

4. Made Minimum Essential Health Benefits Mandatory

All ACA-compliant health insurance plans, including catastrophic health plans, must offer the following 10 essential health benefits to be considered “qualified coverage”:

  1. Chronic disease management, wellness services, and free preventive care
  2. Emergency services
  3. Outpatient care
  4. Hospitalization (inpatient care)
  5. Laboratory services
  6. Prescription drugs
  7. Rehabilitative and habilitative services and devices
  8. Pediatric services, including dental and vision care for children*
  9. Pregnancy, maternity and newborn care, including breastfeeding services
  10. Mental health and substance use disorders, including behavioral health treatment

*ACA health plans are not required to offer dental and vision coverage for adults.

How the Affordable Care Act Affects You

Health Insurance through the Marketplace

If you buy health insurance through the Marketplace, you’ll be able to check your eligibility for Obamacare subsidies, Medicaid, and the Children’s Health Insurance Program (CHIP) through a single application.8 Subsidies are based on your previous year’s income. To complete your application and make sure you report the correct income, you’ll need information such as birth dates, social security numbers, tax returns, and paystubs. 

Missed Signing Up?

If you miss open enrollment, you may not be able to get health insurance and apply for subsidies until the following year. However, year-round enrollment is available if you have a qualifying life event that makes you eligible for a Special Enrollment Period

Can’t afford health insurance?

If you can’t afford private health insurance, you’ll likely qualify for Medicaid if your income is below 100 percent of the federal poverty level (FPL) or up to 138 percent of the FLP if your state has expanded Medicaid.9 If your income is too high to qualify for Medicaid, you can get low-cost health insurance for your eligible children through CHIP as well as coverage for yourself if you’re pregnant (depending on your state).

Grandfathered in?

If you already had health insurance or offered health coverage to employees prior to March 23, 2010, when the Affordable Care Act became law, you can keep your plan under the law’s “grandfathered” rule. Grandfathered plans don’t have to meet all of the ACA’s requirements, such as providing essential health benefits and offering free preventive care. However, grandfathered plans are required to cover your dependents up to age 26 and they must adopt ACA rules to eliminate exclusions on pre-existing conditions for adults and children.10 

Small Business?

If you’re a small employer with 25 or fewer full-time employees, you may qualify for the Small Business Health Care Tax Credit if you enrolled in coverage through SHOP. The tax credit is worth up to 50 percent of the cost toward employee premiums or 35 percent if your business is a non-profit.

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Article Sources
  1. National Conference of State Legislators. “The Affordable Care Act: A Brief Summary.” ncsl.org (accessed December 2019).

  2. Federal Website for the Health Insurance Marketplace. “Affordable Care Act (ACA)” healthcare.gov (accessed December 2019).

  3. Kaiser Family Foundation. “The Coverage Provisions in the Affordable Care Act: An Update” kff.org (accessed December 2019).

  4. Democratic Policy and Communications Committee. The Patient Protection and Affordable Care Act: Detailed Summary. dpc.senate.gov (accessed December 2019).

  5. Democratic Policy and Communications Committee. The Patient Protection and Affordable Care Act: Detailed Summary. dpc.senate.gov (accessed December 2019).

  6. Federal Website for the Health Insurance Marketplace. Health Insurance Marketplace. healthcare.gov (accessed December 2019).

  7. Federal Website for the Health Insurance Marketplace. Automatic re-enrollment: Keeps you covered, but it’s better to update & shop 2020 plans. healthcare.gov (accessed December 2019).

  8. Federal Website for the Health Insurance Marketplace. Health Insurance Marketplace. healthcare.gov (accessed December 2019).

  9. Democratic Policy and Communications Committee. The Patient Protection and Affordable Care Act: Detailed Summary. dpc.senate.gov (accessed December 2019); Federal Website for the Health Insurance Marketplace. “Affordable Care Act (ACA)” healthcare.gov (accessed December 2019).

  10. Kaiser Family Foundation. “The Coverage Provisions in the Affordable Care Act: An Update” kff.org (accessed December 2019).