The Patient Protection and Affordable Care Act of 2010 (PPACA) is a law that significantly changed health care in the United States. It was enacted in conjunction with the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act). Together, these laws are commonly referred to as the Affordable Care Act or Obamacare.
Under the ACA, everyone can choose how to get coverage. If they already have a plan, whether through their employers, Medicaid, Medicare, or privately, they can keep it.
Those who couldn't get health insurance have additional options. They can purchase it from a health insurance exchange and possibly get a subsidy. They may be eligible under expanded Medicare guidelines. Exemptions were available for a wide variety of situations. How much Obamacare costs an individual depends on one’s age, type of plan, family size, income, and location.
These two laws helped lower the percentage of the population who had no health coverage from 16% in 2010 to 9% in 2018.
The ACA's purpose is to lower federal government spending on health care. In 2009, the year before the ACA was signed, Medicare and Medicaid cost $676 billion or 10% of the budget.
These costs were projected to total more than double by 2020 to $1.4 trillion or 25% of the budget. Actual 2020 expenses for these programs were slightly lower at $1.1 trillion. Both programs are part of mandatory spending which cannot be cut without an Act of Congress.
The only way to cut federal health care spending is to lower the cost of health care for the nation. The best way to do that was to reduce the number of hospital visits. That's the most expensive treatment, comprising one-third of all U.S. health care costs. If that could be reduced, then health care costs and federal health care spending would also drop.
The ACA seeks to lower emergency room visits through prevention. That's why it required everyone to have insurance. That would allow them to seek treatment for their illnesses before they became a crisis. Now that the requirement has been lifted, health care costs will probably rise faster over time.
Preventive care is the best way to lower the nation's Medicaid costs. That program reimburses hospitals for all unpaid emergency room treatment. It's cheaper to pay for preventive care than a trip to the hospital. Preventive care lowers health care costs because treatment for diseases in their early stages is cheaper than treatment for full-blown, late-stage illnesses.
Over the first 10 years, the ACA was projected to add $1.1 trillion to the federal budget.
On the other hand, a study by the Congressional Budget Office said it would lower the budget deficit by $143 billion over these same 10 years. How? The Act offsets its costs by:
- Lowering payments to hospitals
- Increasing Medicare taxes on higher-income households
- Assessing penalties on employers who don't offer, and individuals who don't take, health care insurance
- Assessing taxes on various health-related activities
- Reducing overhead by consolidating the higher education loan program with the Pell Grant program
How the ACA Changed Health Care
The PPACA was signed into law on March 3, 2010. The Reconciliation Act was signed on March 30, 2010.
The ACA was phased in over several years. Between 2010 and 2016, Obamacare made the following changes to health care.
Small businesses received tax credits to cover up to 35% of their total employee premium payments. This increased to 50% in 2014. Small business tax credits can benefit qualified small businesses. That's those that employ fewer than 25 full-time employees or those that pay less than $50,000 a year on wages for full-timers.
Indoor tanning services were assessed a 10% excise tax.
A reinsurance program offset the costs of health benefits for workers aged 55 to 64 who were forced into early retirement.
Medicare beneficiaries who fell into the Medicare Part D Prescription Drug "donut hole" received a $250 rebate. They received a 50% discount on brand name drugs in 2011. The donut hole will be eliminated in 2020.
Children were allowed to stay on their parents' health insurance until they turn 26.
Private plans created after 2010 were required to cover preventive services with no co-payments, and they are exempt from deductibles. Consumers who applied to new plans have access to an external appeals process if coverage is denied.
Insurance companies were prohibited from dropping coverage if someone got really sick. They couldn't create lifetime coverage limits. They could no longer deny coverage to children with pre-existing conditions. The same applied to adults in 2014. Until then, adults with pre-existing conditions who were denied coverage received access to temporary health insurance coverage until the exchanges were set up.
Medicare-covered preventive services were exempted from deductibles and the co-pay was eliminated.
Insurance companies must prove they spent at least 80% of the premium payments on medical services, rather than on things like advertising and executive salaries. Those that didn't were required to provide rebates to policyholders.
States were funded to require health insurance companies to submit justification for all rate hikes.
Funds were expanded to increase the number of doctors and nurses, and more community health centers. That's enough to double the number of patients they can treat in the next five years.
Medical expenses must be at least 10% of income before they are deductible for those under 65. Manufacturers and importers of medical devices pay a 2.3% excise tax. Federal funds were increased to allow Medicaid to offer free preventive services and to extend the Children’s Health Insurance Program for an additional two years. The federal government funded states to pay primary care physicians 100% of the Medicare fee. Medicare started a pilot program to encourage hospitals to bundle services before submitting for payment.
Obamacare taxes instituted many changes to the tax law.
Additional taxes were assessed on the 1 million people who make more than $200,000 and on the 4 million couples filing jointly who made more than $250,000. Specifically, they paid a total of 2.35% Medicare taxes on income above the threshold. This percentage is an increase from the previous 1.45%. They also paid 3.8% Medicare taxes on the lesser of (a) dividends, capital gains, rent, and royalties; (b) income above the threshold.
Families in most states could start shopping on the health insurance exchanges beginning October 1, 2013. Businesses with fewer than 50 employees started in November.
Health insurance coverage bought through the exchanges began. Medicaid eligibility was expanded to include those with incomes up to 133% of the federal poverty level. New subsidies became available for those with incomes up to 400% of the poverty level. This refers to earnings of $95,400 for a family of four.
Every citizen was required to have health insurance by March 31, 2014, or face an income tax surcharge. The minimum was $95 per adult and $47.50 per child. This was capped at $285 per household. The maximum was 1% of adjusted gross income, capped at the cost of purchasing the "bronze" health insurance plan on the exchanges. The penalty was eliminated by the Tax Cuts and Jobs Act effective in 2019.
The tax for those who didn't purchase insurance rose to $695 per adult. It's $347.50 per child and capped at $2,085 per family. The 2015 statistics on Obamacare taxes showed that 6.7 million taxpayers paid the penalties because many said they could not afford insurance.
Businesses with 100+ workers must pay $2,000 per worker, except for the first 30, if they don’t offer health insurance. This applies to businesses with 50 to 99 employees in 2016. The tax applies if even just one employee can find the same benefits with a lower-cost premium on the exchange.
Has the ACA Been Repealed?
There's been tremendous opposition to the ACA before, during, and after it became law.
Lawsuits argued that the mandate that all U.S. citizens must purchase health care insurance from a private carrier, or pay a penalty, was unconstitutional. The Supreme Court ruled it was constitutional, under Congress' right to impose a tax. In 2018, Congress repealed the mandate with the Tax Cuts and Jobs Act.
The House of Representatives voted to repeal the law numerous times. In 2013, they shut down the government and threatened to default on the debt if it weren't defunded. In fact, there has been so much opposition that 22% of Americans think the law has already been repealed.
In-Depth: Pros and Cons | What's Wrong with Obamacare | How It Works | How It Affects You | What's in the ACA | Obamacare Explained | Cost to the Nation