What Is the Affordable Care Act?

History of the Affordable Care Act 

In 2008, President Barack Obama signed into law sweeping health reform legislation called the Patient Protection and Affordable Care Act,¹ now referred to as the Affordable Care Act (ACA) or, informally, Obamacare.

Among other reforms, the ACA created federal and state Health Insurance Marketplaces where people without other health insurance can buy individual coverage and get subsidies if they qualify. The law prohibits insurers from discriminating against the 130 million² Americans with preexisting conditions, or from charging women higher premiums for the same coverage, and it requires many insurers to cover certain essential health benefits.³ Further, under the ACA,  young adults can generally stay on their parents’ health insurance until age 26, and states can expand Medicaid to cover more low-income residents. 

The law has been politically controversial. The U.S. Supreme Court upheld key ACA provisions in 2012,⁴ and will hear a new case⁵ in November 2020 and decide the ACA’s fate by June 2021.

What You Need to Know 

The Affordable Care Act (ACA), or Obamacare, allows you to buy health insurance through federal and state Health Insurance Marketplaces.

The ACA provides subsidies to most people who buy Marketplace plans. 

The ACA created new consumer protections, like prohibiting discrimination if you have a preexisting condition, mandating coverage for essential services and covering preventive care at 100%. 

How Do You Enroll?

Who Can Enroll? 

Any U.S. citizen or legal immigrant can enroll⁶ in Marketplace health insurance. 

Federally Run Health Insurance Marketplace vs. State-Run Health Insurance Marketplace 

Everyone can buy insurance on a Marketplace,⁷ no matter where you live. In 32 states,⁸ the federal government runs the Marketplace. Everywhere else, states operate their own or a hybrid,⁹ combining state administration with the federal platform. The difference between a state and federal Marketplace¹⁰ is who runs the program. Consumer protections and insurance rules are largely similar everywhere, though some state regulations differ. 

When Can You Enroll? 

Every year, the Marketplaces hold open enrollment when anyone can sign up. The timing varies depending on the Marketplace. Federal open enrollment¹¹ is typically between November 1 and December 15 each year and some states extend their open enrollment period beyond this window.

What Are Qualifying Events? 

Outside of open enrollment, you can still enroll in a Marketplace plan if you experience a qualifying event,¹² like losing your health insurance, moving, getting married or divorced, or becoming a U.S. citizen. These events trigger a Special Enrollment Period, after which you have 60 days to enroll. 

How Do You Compare Plans? 

The Marketplaces make it much easier to compare health plan options side by side, like buying an airline ticket or shopping for cars. Before the ACA, you often had to call each insurer and manually compare individual plans, or work with an insurance broker. Marketplaces let you compare plans online by a range of features, like how much you’ll pay and what’s covered. 

What Is a Summary of Benefit Coverage? 

The ACA requires health plans to publish a Summary of Benefit Coverage (SBC).¹³ SBCs let consumers compare plans by their costs, benefits, covered services, and other features like provider networks or rules for accessing services, such as whether you need referrals to see specialists. All insurers must use the same format for SBCs and include the same general information, so you can compare plans more easily.

How Can You Use Them to Compare Plans? 

You can use SBCs to see the details of plans you’re considering, get answers to basic questions about features like deductibles or out-of-pocket limits, find information about out-of-pocket costs like copayments and coinsurance, and read the rules about which providers you can see and what services are covered. 

SBCs can give you a rough idea of what services might cost so you can compare those estimates across plans. But SBCs don’t give definitive answers about specific costs in specific situations. 

How Do You Pay for Obamacare?

Obamacare subsidies help offset the cost of health insurance for people who meet income criteria. The subsidy, or premium tax credit, is applied to your premium payment each month. In 2019, 8.5 million¹⁴ people (or about 75% of 11 million Marketplace enrollees)¹⁵ got some kind of Marketplace financial assistance.

Subsidies are based on your best estimate of your income for the year. Most people can’t predict their income perfectly, and there’s no penalty for guessing wrong. You just have to work out any differences with the IRS when you file federal taxes. 

Medicaid expansion 

As part of the ACA, states could choose to expand Medicaid¹⁶ by broadening eligibility for subsidized insurance based on income. In 39 states¹⁷ that expanded Medicaid, enrollment increased by 12.4 million, or nearly 33%.¹⁸  

Medicaid eligibility rules vary by state. You can find out if you’re eligible and apply via healthcare.gov¹⁹ or your state’s Medicaid agency. In some states, the application for Medicaid is the same as for subsidized Marketplace coverage, so you only apply once and the state determines your eligibility for the right program. 

Tax penalty 

One of the most controversial features of the ACA was the individual mandate, which required anyone who could afford health insurance to buy it or face a federal tax penalty.²⁰ In the Tax Cuts and Jobs Act of 2017,²¹ Congress set that penalty to $0, effectively eliminating the individual mandate starting in 2019.

What Are Metal Levels? 

Marketplace plans fall into one of four metallic tiers — bronze, silver, gold, and platinum.²² The metal level of a plan refers to how much of the insurance coverage you pay for versus the insurance company. The lower the metal value (e.g., bronze), the lower your premium might be but the more you’ll pay in other out-of-pocket costs like deductibles,²³ copayments,²⁴ and coinsurance.²⁵ On the other hand, a platinum plan will have a higher monthly premium but cover more of your healthcare costs. 

What Are the Essential Health Benefits? 

The ACA designated certain services as essential health benefits,²⁶ which means insurers must cover them with no out-of-pocket cost to consumers. The ten essential health benefits include preventive care, mental health, and maternity care. 

Where Can You Get Help?

Even though the ACA tried to make shopping for health insurance easier, it can still be confusing. If you feel overwhelmed, navigators²⁷ can help. Federal funds pay for specially trained people and organizations to help with the eligibility and enrollment process. Help is available in every state.²⁸ Community-based health centers, hospitals, and local nonprofit agencies can also help. 

Next Steps

Thanks to the ACA, people who don’t have health insurance through a job can buy insurance on a Marketplace and be guaranteed coverage even if they have a preexisting condition. If you need health insurance, check the Marketplace in your state to see what plans are available and best fit your health needs.   

While the future of the ACA will be considered by the Supreme Court this fall, coverage purchased during this year’s open enrollment will most certainly continue through 2021. Don’t miss this opportunity if a Marketplace plan makes sense for you!