On November 10, 2020, the Supreme Court of the United States heard oral arguments regarding the Affordable Care Act (also known as the ACA or Obamacare). President Donald Trump and President-Elect Joe Biden speak about the future of the ACA. Because it is in the recent news, this is an Affordable Care Act summary.
I want to simply provide education so that we all know what the Act entails today so that we can be up-to-date on the changes that could come in the future.
This Affordable Care Act summary includes a timeline of major events, including congressional changes, Supreme Court Cases, and the 10 Hallmarks of the Affordable Care Act.
Affordable Care Act Summary of Events
- March 23, 2010 – President Barack Obama signed the Affordable Care Act into law.
The ACA was actually an amendment to the Public Health Service Act of 1944. While the Act did not make changes to the structure of Medicaid, Medicare, or employer-sponsored employee health insurance, the ACA did overhaul the market structure for individual insurance as it was centralized through exchanges (some ran by individual states and one federal exchange for the remaining states without an individual exchange).
Affordable Care Act Summary of 10 Hallmarks of the Law
I’ll continue the summary of events further in this post, but it’s important to know some of the important components that were included in the original law, as some of them have changed in the past ten years, and perhaps we aren’t all aware that these are part of the law.
Of important note is that these ten things are not inclusive of all items impacted by the enactment of the Affordable Care Act.
- Through providing a guaranteed issue clause, the ACA prohibits insurers from rejecting coverage based on pre-existing conditions.
Let me give you a couple of examples of what this means. An elementary student recently had a seizure. It was his first seizure; however, from what I understand it was pretty intense. He needed chest compressions and was hospitalized for days after. He now has a pre-existing condition. No insurance company can deny him coverage based on the fact that he had this seizure.
Likewise, I know an individual as an adult who had a tumor on his thyroid. He had to have the tumor and part of his thyroid removed. Luckily the tumor was non-cancerous; however, he will take synthetic hormones for the rest of his life. No insurance company can tell him that he is uninsurable due to the pre-existing conditions clause.
- Annual and lifetime coverage caps on essential benefits were banned on individually held policies.
With this ban, in one given year an individual can only incur a certain amount of costs and the insurer is required to pay the rest. Historically there was an overall cap that insurance companies would only pay up to, say a million dollars, and then the coverage lapsed. Any costs over a million dollars, the insured would then be responsible for.
- An out of pocket maximum cap was required on all individually held policies.
Health insurance typically has an amount of coverage where it is called co-insurance. The insured pays a percentage of costs and the insurer pays a percentage of costs. This cap means that insurance companies can only co-insure with the insured for a certain amount, after which the insurer is responsible for 100% of essential medical costs.
With the ban on this lifetime coverage cap and out of pocket maximums, individuals could determine the highest amount of costs they could incur if in the hospital receiving treatment for any medical issue.
Since we are still in the middle of a pandemic, let’s use COVID as an example of what this means for our Affordable Care Act summary. We may know of individuals first hand, second hand, or have heard stories about individuals who have been hospitalized for days. Some individuals have been in the news for being in the ICU on a ventilator for days, weeks, or months (if you want one example search for Nick Cordero’s story).
With the out-of-pocket maximum is required, and the annual and lifetime coverage caps being banned, individuals who have life insurance could easily determine the financial impact of being in the hospital.
- Individual mandate required all individuals to have insurance coverage or be subject to a tax penalty.
This was easily one of the most talked-about hallmarks of the Act. Insurance relies on the law of large numbers. The larger the pool of individuals covered, the lower the costs of administering the plan are to the insurance company. By having an individual mandate, it was argued that this would incentivize individuals to carry health insurance, especially young, healthy individuals.
The concern with the ACA was that by increasing the accessibility to health insurance to individuals, only older individuals and/or individuals with health concerns would be more likely to carry coverage. So, requiring it of everyone helped minimize the issues.
- Individuals are able to stay on their parent’s insurance plans until the age of 26.
No matter if a dependent is married or unmarried, children can now stay on their parent’s health insurance plans until the age of 26.
I have a number of friends that were enrolled in the Accountancy program at my alma mater. The program was a five-year program, but at the end of the five years, graduates had a Masters in Accountancy. There was a similar program for Social Work students. These individuals didn’t graduate college until the age of 23 if they started college without a gap year and at the age of 18.
For some of these individuals, if there were no ACA, while in school they may have either been faced with the decision not to pay for individual health insurance or carry no health insurance at all. I have two friends who were faced with life-threatening illnesses in college. While individuals don’t expect to be seriously ill in their early 20s it does happen.
- Expanded Medicaid to include individuals with an income below 133% of the poverty line.
This means that for individuals with an income 133% below the poverty line, instead of having to go to the exchange to get health care, they would instead be eligible for Medicaid. This helps low-income earners have health insurance without having to pay for it (except for what they pay in as part of their salary withholdings).
- Prohibit insurance companies from canceling coverage.
Prior to the ACA, insurers could choose to drop coverage at any point on any individual (unless expressly stated otherwise in the policy). This left some individuals without health insurance when they needed it most. Now it is mandated that all insurance policies be non-cancellable.
- Prohibits co-pays or coinsurance on preventative care.
Prior to the ACA, every time you went to the doctor’s office there was likely a copay for any service. Every wellness visit, every blood pressure screening. Now, those copays are prohibited. The ACA prohibits copays for immunizations, wellness visits for children, women, and men. It prohibits copays for mammograms and colonoscopies. Additionally, some medical equipment, such as breast pumps, are provided within the Act.
- Insurers are required to spend premiums on healthcare costs at a rate of 80-85%. If they spend less, then the excess funds must be refunded.
Insurance companies are for profit. For example, UnitedHealth Group (UNH) is listed on an exchange. In order to minimize the profits, and limit an increase in premiums due to the required features under the Act, the Affordable Care Act has languages limiting the profits/markups that insurance companies can require. If health care costs across the plans are not within the 80-85% threshold for those insured by the plan, then the companies must pay back the difference in rebates.
- Includes an Employer Mandate.
All employers with 50 or more full-time employees are required to ensure their full-time employees or will face an assessed tax. This requirement is to encourage employers to continue providing insurance to employees. This is a key factor in ensuring employers didn’t and don’t drop health insurance coverage in the wake of health insurance exchanges.
Affordable Care Act Summary of Events Continued
Ok, back to the timeline of events that changed some of these hallmarks of the original Affordable Care Act. As of February 2016, Congressional Republicans have put up the ACA for a vote on either partial or full repeal of the law on more than 60 occasions. I couldn’t find any more updated numbers, but let me assure you I am not going to recount everything here.
These are the Supreme Court Cases and Acts that have passed and have changed some of the hallmarks in the Affordable Care Act Summary above.
- June 28, 2012 – The Supreme Court ruled that the individual mandate tax was legal, as Congress has the power to pass taxation law. The Supreme Court also included in this decision that it was up to each individual state whether or not to participate in the expansion of Medicaid under the ACA. Here is an updated listing of which states chose to participate in the expansion of Medicaid.
- November 2, 2017 – President Trump signed the Tax Cuts and Jobs Act of 2017 into law.
While this Act had a more widespread impact than just with respect to the ACA, the piece that affected the ACA was that the law lowered the individual mandate penalty/tax to $0. This effectively eliminated the individual mandate required by the ACA.
- November 10, 2020 – The Supreme Court heard arguments alleging the ACA was unconstitutional.
According to Texas and a number of other states, they are stating that because Congress enacted a law that effectively eliminated the individual mandate, the Affordable Care Act is unconstitutional.
According to news outlets, five Supreme Court Justices are going to dissent from that position, and indicate that the Act itself is not unconstitutional just because the individual tax is effectively eliminated. Partially because Congress itself in removing the mandate didn’t repeal the entire Act. There is not a formal opinion on the case, though, so no conclusion has been reached.
Next Week’s Blog
Each week on Tuesday we release a new blog post, like this one. Next week, to continue the discussion about the Affordable Care Act summary, we will cover public sentiment on the Affordable Care Act.
Now that it’s over a decade since the Affordable Care Act was signed by President Barack Obama there has been a significant amount of research on it. We will share if the research supports public sentiments or if research proves the public sentiment to be a myth.
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