The Affordable Care Act also known as the ACA or Obamacare was signed into law in 2010, but it will not take full effect until 2020. The ACA is nearly 1,000 pages long, and no one can predict the final effect once it provisions are fully enacted. One thing is clear: the way we obtain healthcare insurance in America is still in flux.
Primary Provisions of the ACA
1. Guaranteed Issue
In the past, insurance providers could deny coverage to people with existing conditions. Under the ACA, health insurance providers cannot deny coverage based on existing conditions. The long-term impact of this provision is unknown, but in the short term, health insurance premiums have generally increased.
2. Minimum Standards
Under the ACA, every insurance policy must provide certain “essential health benefits”. For example, children may now be covered by their parents insurance until age 26. This has made health insurance premiums trend upward.
3. Individual Mandate
People have always been free to purchase health insurance or not. In an effort to make rates lower for everyone, the ACA requires most individuals to purchase health insurance or pay a noncompliance penalty. The idea behind the provision is that covering young, healthy people who do not use their health insurance services will allow providers to reduce their rates. While health insurance coverage rates have increased from 82% to 89% since the ACA became law, we still do not have the universal coverage the act was intended to provide.
4. Health Insurance Exchanges
In the past, most people have only a few health insurance options to choose from. People who did not receive health insurance coverage through their employees were often forced to pay much higher rates or go without health coverage. Now, individuals can purchase health insurance through an exchange operated by their state or federal government at rates comparable to employee-provided group coverage. Unfortunately, the government has little incentives to operate efficiently; the insurance exchanges have been costly to manage.
5. Low Income Subsidies
Health insurance is expensive; under the Affordable Care Act, individuals and households with income less than 400% of the federal poverty level are eligible for government subsidies. This has led to increased coverage rates, but the cost to the federal government has been high. The federal government is expected to spend around $660 billion on health insurance subsidies in 2016.
6. Medicaid Expansion
Nearly 5 million senior citizens are covered by Medicaid. Medicare also provides coverage to nearly 4 million people with disabilities. While Medicaid has been instrumental in improving the lives of many low-income seniors, it has been a major cost to state governments since its creation in 1965. The Affordable Care Act allows more people to qualify for Medicaid, and has increased costs to the states. These costs are partially offset by federal government subsidies.
7. Medicare Payment Reforms
Under the old Medicare system, payments for medical services are based on a “for-service” model. In the new system, payments are bundled. For instance, if you had a knee replacement, you would receive separate bills from the hospital, the surgeon and the anesthesiologist. Under the new system, you would receive a single bill for the entire procedure. This provision is well-intentioned, but it could have unforeseen ramifications.
The Affordable Care Act has been the law for nearly 3 years, but the long-term impact of this comprehensive health insurance reform remains unclear. The primary concern for most businesses is to remain in compliance with the act.