What is the Affordable Care Act?

BACKGROUND

The Affordable Care Act enacted arguably the most significant reforms to healthcare in the U.S. since the creation of Medicare & Medicaid in 1965. It aimed to expand access to healthcare coverage by requiring individuals to have health insurance and that insurers offer coverage to all consumers without discriminating based on pre-existing conditions. Since the Affordable Care Act’s enactment, there have been numerous efforts to reform or repeal & replace it, in addition to legal challenges to overturn the law.

OVERVIEW

The Patient Protection and Affordable Care Act (aka ACA or Obamacare) was enacted in 2010 by President Barack Obama and congressional Democrats after more than five months of debate. 

It evolved significantly throughout the drafting process, with a “Medicare for All” proposal scrapped in the early stages due to a lack of support and a “public option” removed by the Senate. The proposal proved controversial during this period, with a majority of Americans opposed to the bill, which prompted House Speaker Nancy Pelosi (D-CA) to say “we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.” The final version of the bill passed along party-line votes with bipartisan opposition in both chambers of Congress and no support from Republican lawmakers.

To increase the number of Americans with health insurance coverage, Obamacare established a mandate for individuals to have health insurance coverage or pay a tax penalty of $695. It also created an employer mandate that businesses with over 50 employees offer full-time workers (defined as 30 hours per week) health insurance coverage or face fines. Both mandates were to take effect in 2014, although the individual mandate was repealed in 2017 by the Tax Cuts and Jobs Act.

Individuals whose employers didn’t provide health insurance coverage could buy health insurance plans on marketplace exchanges established by Obamacare. States had the option to establish exchanges of their own, and if they elected not to then the state’s residents could access the federal exchange ― Healthcare.gov ― which was to have its first open enrollment periods in 2013.

Obamacare’s guaranteed issue requirement prohibits insurers from denying coverage due to pre-existing conditions. Insurance plans offered on the exchange were required to cover “essential health benefits” such as ambulatory and emergency services, hospitalization, maternity and newborn care, prescription drugs, and contraceptives ― although the contraceptive requirement was struck down by the Supreme Court in Burwell v. Hobby Lobby (2014). 

Additionally, the ACA required that insurance premiums be the same for all enrollees of a given age regardless of their pre-existing conditions, and premiums for the oldest enrollees between the ages of 45-64 could only be three times more than those for adults between the ages of 18-24. The bill also allowed dependents to remain on their parents’ insurance plan until their 26th birthday.

To help low-income Americans obtain coverage, Obamacare provided tax credits to subsidize the cost of insurance premiums that phased out for higher earners. There were also subsidies for insurers through Obamacare’s risk corridor program. Funding for these subsidies came through higher Medicare taxes on high-income earners and a variety of other taxes, including a 10% excise tax on indoor tanning sessions. Several other taxes were to take effect in the years after Obamacare’s mandates, including a 2.3% medical device tax and a “Cadillac tax” on expensive, employer-sponsored plans ― although Congress ultimately delayed or repealed several of these (more on that below).

As enacted, Obamacare required states to expand their Medicaid programs to cover individuals up to 133% of the poverty line, with the federal government providing funds to cover the full expansion cost for three years. Federal assistance would gradually decline each year until it reached 90% of the expansion’s cost in 2020, at which point it’d continue at that level thereafter. States that refused to comply would lose all federal Medicaid funding. However, the Supreme Court found this to be unconstitutionally coercive in NFIB v. Sebelius (2012), so the Medicaid expansion became optional.

The ACA also created waivers for states to conduct experiments with an alternative health system that provides insurance at least as comprehensive and affordable as Obamacare without being subject to some of its requirements.

According to data from the Centers for Medicare & Medicaid Services, roughly 8.3 million people will be enrolled in health insurance plans offered on the ACA exchanges in 2020. The Kaiser Family Foundation reports that about 6% of the U.S. population was enrolled in exchange plans in 2018, compared to 49% in employer plans, 20% in Medicaid, 14% in Medicare, 1% in military plans, and a 9% uninsured rate.

WHAT HAPPENED TO THE AFFORDABLE CARE ACT AFTER ITS ENACTMENT?

The ACA proved to be a focal issue in the 2010 midterm elections, which saw Republicans claim the majority in the House in what President Obama termed a “shellacking”. Over the course of the 112th Congress (2011-2012) alone, the GOP House voted more than 30 times to repeal Obamacare. But despite also winning control of the Senate in 2014, Republicans were unable to seriously advance legislation to repeal or replace the ACA throughout the rest of the Obama administration.

Obamacare’s rollout began in earnest during 2013, with Healthcare.gov going live but experiencing significant technical difficulties at its launch. Several million Americans also received notices that their health insurance was being canceled, leading to President Obama’s pledge that “if you like your healthcare plan, you can keep it” being awarded Politifact’s Lie of the Year for 2013. 

A battle in Congress over funding for Obamacare led the House GOP and conservative allies like Sen. Ted Cruz (R-TX) to initiate a 16-day partial government shutdown in October 2013, the second-longest in U.S. history to that point. There were more headwinds for Obamacare in 2014, as Vermont’s effort to launch a statewide, single-payer healthcare system using an ACA state waiver was abandoned due to the high tax burden that would’ve been imposed on small businesses.

Despite legal challenges and political battles, the uninsured rate dropped throughout these years. According to data from USAFacts, the rate of health insurance coverage (private or public) has exceeded 90% each year since 2015. By February 2016, the Dept. of Health and Human Services (HHS) estimated that 20 million Americans gained healthcare coverage via Obamacare. 

Increases in health insurance premiums over the years kept Obamacare’s popularity in the red prior through 2016, an issue that contributed to the election of President Donald Trump and Republican majorities in both chambers of Congress who ran on promises to finally make good on its repeal. But for the first time in January 2017, a majority in the RealClearPolitics poll average supported Obamacare. The repeal effort went ahead, as the Trump administration stopped enforcing the individual mandate and took several other actions to weaken the ACA after taking office, such as cutting off advertising and outreach for open enrollment periods and eventually cutting off subsidies paid to insurance companies.

The GOP House passed the American Health Care Act, which would’ve repealed and replaced Obamacare, on a party-line vote of 217-213 in May 2017. But the effort failed in the Senate in late July 2017, as three Republican senators ― Susan Collins (ME), John McCain (AZ), and Lisa Murkowski (AK) ― voted against the Senate GOP’s “skinny repeal” bill.

Congress has continued to modify the law since then, albeit on a smaller scale than a repeal and replacement bill:

• Republicans repealed Obamacare’s individual mandate in their tax overhaul known as the Tax Cuts and Jobs Act, which became law in December 2017.
• In 2018, bipartisan legislation delayed Obamacare’s medical device tax (which had been delayed once during the Obama era), along with its “Cadillac tax” and a tax on health insurers. All were repealed in a bipartisan government funding package in 2019, although the tax on insurers will remain in effect for 2020 before its repeal takes effect in 2021.
• Obamacare’s Independent Patient Advisory Board (IPAB), which was derided as a “death panel” for having the power (which was never used) to impose mandatory Medicare cuts, was repealed in a 2018 bipartisan budget bill.

Another legal challenge to the ACA will see the Supreme Court rule on its constitutionality in 2020 stemming from a lawsuit filed by conservative states that, because the ACA didn’t include a severability clause and the individual mandate was repealed, the entire healthcare law is now invalid.

WHAT ARE CURRENT PROPOSALS TO REFORM THE AFFORDABLE CARE ACT?

Following the failure of GOP efforts to repeal and replace the law in 2017 and Democrats winning control of the Senate in 2018, efforts to overhaul the ACA have largely gone by the wayside ― although Republicans have vowed to try again if they regain control of the House and hold the Senate and White House in 2020.

There has been renewed Democratic interest in legislation that would create a “public option” that would participate in the ACA exchanges. It would be a taxpayer-funded health insurance plan built off of the Medicare framework.

Democrats have also introduced some legislation aimed at shoring up the ACA, including a bill to increase federal reimbursements for states participating in the Medicaid expansion, and a bill to increase spending on outreach for Obamacare.

WHAT IS “MEDICARE FOR ALL”?

In recent years there has been increasing advocacy by liberals for a single-payer healthcare system, such as the “Medicare for All” plan offered by Sen. Bernie Sanders (I-VT). While specifics vary between proposals, in general they would abolish private health insurance and enroll all Americans in Medicare, cap physician reimbursement at Medicare rates, and eliminate copayments & premiums.

Critics contend it would require significant tax increases, dramatically increase federal spending to an estimated $32 trillion over a decade, and could lead to healthcare rationing due to a shortage of doctors once they’re forced to be compensated at the lower Medicare reimbursement rates.

WHAT DO SUPPORTERS OF THE ACA SAY?

The ACA has provided access to healthcare to millions of Americans who would have struggled to afford health insurance without it, and lawmakers should expand on the successes of the ACA to move further toward the goal of universal coverage.

WHAT DO OPPONENTS OF THE ACA SAY?

The ACA should be reformed through a market-based approach that allows consumers to buy health insurance plans across state lines, and states should have more discretion to ease restrictions around what “essential health benefits” must be covered.

RESOURCES

• Countable - Affordable Care Act Enactment
• Kaiser Family Foundation - Total Population Health Insurance Coverage
• Centers for Medicare & Medicaid Services - Federal Exchange Enrollment

— Eric Revell

(Photo Credit: Pete Souza - White House via Wikimedia / Public Domain)