What Is the Affordable Care Act?

The Affordable Care Act (ACA) is a law that is sometimes referred to as Obamacare. Its goal was to provide affordable health insurance for all Americans.

PolicyPals team

Published January 13, 2021

The Affordable Care Act (ACA) is a law that is sometimes referred to as Obamacare. It is a comprehensive healthcare reform act that was enacted in March of 2010. The ACA’s goal was to provide affordable health insurance for all Americans, and to protect consumers by limiting insurance coverage restrictions.

Overall, this law set out to do three things: make healthcare more affordable overall; expand Medicaid programs to extend to adults dealing with severe poverty; and support healthcare innovation so as to lower health care costs in the future.

In addition, the ACA:

  • Prohibited health insurance companies from denying or charging more for customers with pre-existing conditions.

  • Mandated the purchase of health insurance coverage.

  • Allowed children to stay on their parent’s health insurance plans until the age of 26.

  • Lowered health care costs for those who qualify.

Despite mixed public reactions to the reform, it has been successful in its goals.

Millions of Americans have contracted health insurance coverage through the ACA: by 2016, the uninsured share of the population had roughly halved, with about 20-24 million additional people covered. Many of them with low-paying jobs or unemployed, sometimes because of a disability or difficult family situation. Others have been able to get decent health insurance despite pre-existing medical conditions or chronic diseases.

The implemented a vast expansion of coverage to include what is considered essential healthcare benefits and free preventive care services.

Finally, premium tax credits were made available to those who qualify which lowers health care bills significantly.

Key Changes Required by the ACA

The Affordable Care Act was the most significant healthcare regulatory overhaul since Medicare and Medicaid in 1965.  As a consequence, insurers and all new individual health insurance policies sold on the marketplace have to meet new requirements, including:

  • New health insurance marketplaces – or exchanges – were launched, for people to buy health insurance plans. All marketplace plans must comply with specific requirements (such as those listed below).

  • Health plans are divided in four tiers of coverage - the so-called metal tiers: bronze, silver, gold and platinum, ensuring that marketplace health insurance plans cover at least 60% of all medical expenses.

  • Guaranteed issue ensures that people with pre-existing health conditions can no longer be denied coverage. In addition, policyholders cannot be dropped by insurers when they become ill.

  • Young adult coverage is extended up to age 26 on family plans.

  • All ACA-compliant health insurance plans must cover preventive health services and 10 essential health benefits, as well as preventive care and screenings for women.

  • Preventive care, vaccinations and medical screenings cannot be subject to co-payments, co-insurance or deductibles.

  • All policies must have an annual maximum out of pocket (MOOP) payment cap for individual or family policies. Once reached, the remaining expenses are to be paid by the insurer.

  • There can be no annual and lifetime coverage caps on essential benefits.

  • The ACA offered health insurance subsidies, such as premium tax credits and cost-sharing reductions, to make health insurance premiums more affordable. In addition, Medicaid and CHIP was expanded to more low income families.

  • A review process for premium increases was put in place, to force health insurers to justify rate increases and avoid unreasonable price surges.

Essential Benefits All Marketplace Plans Must Offer

To comply with the Affordable Care Act, health insurance plans must cover a set of 10 categories of essential health and medical services. These include doctors’ services, hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and more as listed below:

  • Ambulatory patient services (outpatient care)

  • Emergency services

  • Hospitalization (like surgery and overnight stays)

  • Pregnancy, maternity, and newborn care

  • Pediatric services, including oral and vision care

  • Prescription drugs

  • Laboratory services

  • Mental health and substance use disorder services, including counseling and psychotherapy

  • Rehabilitative and habilitative services and devices

  • Preventive and wellness services and chronic disease management

Preventative health care measures, like check-ups and immunizations, are also covered by all plans. And all plans must also offer dental coverage for children (dental benefits for adults are optional). 

This list is not exhaustive: some plans cover more and specific services may vary based on your state’s requirements.

Despite these benefits, the mandate that everyone have insurance has upset some consumers. The general idea was to have wider spread cost-sharing, implying that a larger pool of applicants would produce cheaper insurance for everybody because of the law of large numbers. Yet, it is widely argued that the tax increases and higher insurance premiums needed to pay for Obamacare made health insurance more costly overall.

How to Buy Health Insurance on a Marketplace

To get a marketplace insurance plan, visit healthcare.gov or your state marketplace.

You can only buy a new insurance plan during the open enrollment period, which lasts from November 1 to December 15. During this period, everybody can sign up for a new plan on the marketplace.

After December 15, you can only change plan or enroll in a new marketplace insurance plan if you qualify for Special Enrollment. Usually, life events such as getting married, having a baby, getting divorced or separated will qualify you for a special enrollment period. You’ll also be eligible if you move away from your current ZIP code or if you quit you job.

After creating an account, you will be able to check if you’re eligible for savings, like tax credits or lower copayments, coinsurance, and deductibles. You will then be able to search and compare health plan options available in your area and enroll in the plan the best fits your needs.

If you need help to understand health insurance plans, coverage and options, talk to your health insurance agent!