Obamacare: The affordable care act

Obamacare: the Affordable Care Act (ACA)Learn how the ACA improved coverage and made it more affordable through income-based subsidies. Find ACA-compliant plans now, during open enrollment.

How the ACA makes coverage more affordable? The Affordable Care Act included major provisions designed to make comprehensive health coverage affordable to Americans who struggled to pay for coverage prior to the ACA.

How do premium subsidies help many ACA plan buyers? As of early 2022, nearly 13 million Americans were receiving Obamacare’s premium subsidies. And the subsidies have been made larger and more widely available than they used to be, thanks to the American Rescue Plan and the Inflation Reduction Act. (These provisions are in effect through at least 2025.)The premium subsidies – which are actually tax credits – offset the cost of premiums for any metal-level ACA-compliant health plan available through an ACA marketplace.Subsidy eligibility is largely based on income, but there are a handful of other factors, including immigration status, age, and access to government-sponsored or employer-sponsored coverage. Here’s a full explanation of premium subsidy eligibility.Use our 2023 subsidy calculator to see how much you could save on marketplace premiums.Americans not eligible for premium subsidies include individuals whose employer offers comprehensive “affordable” coverage, those who are eligible for Medicaid, premium-free Medicare Part A, or another government program, and individuals who are incarcerated or not legally present in the U.S.

How does ACA’s Medical Loss Ratio (‘80/20 Rule’) help consumers?Obamacare established the Medical Loss Ratio – the 80/20 Rule – which forced health insurance companies to devote more premium dollars to medical care for policyholders, as opposed to administrative costs. When insurers don’t meet these requirements, they have to issue refunds to policyholders. In 2021, more than $2 billion in rebate checks were sent to American consumers.The ACA also requires Medicare Advantage plans to spend at least 85% of revenue on medical costs and quality improvements, although rebates in the case of non-compliance are issued to the federal government instead of enrollees.

Health plans must cap out-of-pocket costs. Under Obamacare, health plans have to cap enrollees’ out-of-pocket exposure for in-network care at a level that’s set each year by the federal government. (Plans can have out-of-pocket caps that are lower than the federally determined amount, but not higher.) For 2023, the cap is $9,100 for a single person, and $18,200 for a family. Prior to the ACA, individual-market plans sometimes had out-of-pocket limits of $20,000 or more, or no limits at all.

An alternative to COBRA The Affordable Care Act added a new alternative to COBRA. COBRA gives employees the option of continuing their group coverage after leaving a job or otherwise losing access to their employer-sponsored coverage. (State continuation provides this option in many states for people who work for smaller employers.)Since the mid-1980s, COBRA provided a realistic way for people to maintain coverage while between jobs if they had pre-existing conditions and were unable to qualify for medically underwritten individual health coverage. COBRA allowed these individuals to keep the same coverage they had at their job, but the coverage was expensive, since the employee assumed the full price of the plan – including the portion the employer had been paying.Obamacare’s guaranteed issue provision assured coverage eligibility for these individuals – and also ensured that their new individual-market coverage is as comprehensive as group coverage (for example, the inclusion of maternity coverage – which wasn’t part of most individual market plans prior to 2014). For most enrollees, coverage under the ACA is also affordable, thanks to premium subsidies. And – depending on income levels after leaving a job – some of these individuals now qualify for expanded Medicaid with free or very low-cost premiums.As a result, the law freed Americans from “job lock” allowing them to pursue self-employment and entrepreneurship, confident that they have access to comprehensive, affordable coverage on the individual market.