Affordable Care Act Pros and Cons You Need to Know

The Patient Protection and Affordable Care Act (known as the Affordable Care Act or “ACA”) was signed into law in March 2010 during the Obama administration. The law took aim at some of the major inefficiencies in American healthcare coverage, particularly the staggering rates of under- and uninsured Americans.

A Balanced Look at the Historic Act Creating Obamacare.

The Patient Protection and Affordable Care Act (known as the Affordable Care Act or “ACA”) and commonly called Obamacare, was signed into law by the Obama administration during March 2010 at a signing ceremony at the White House. The law took aim at some of the major inefficiencies in American healthcare coverage, particularly the staggering rates of under – and uninsured Americans.  It extended affordable health care coverage to millions of previously uninsured Americans. The ACA launched the Health Insurance Marketplace, through which eligible people may find and buy health insurance policies. All ACA-compliant health insurance plans, including those sold through the marketplace, must cover several essential health benefits. It also set the stage for a dramatic medicaid expansion, at least in some states.  It also expanded the scope of the Children’s Health Insurance Program (CHIP).  The ACA has continued to evolve through three presidencies.  It will continue to evolve as time goes on.  The health care system of the United States has continued to evolve under the ACA and all health care providers have felts its impact.

Eliminated Health Care Insurance Discrimination Based on Pre-Existing Conditions

The law also prohibited exclusions for pre-existing conditions, including pregnancy, while it also eliminated discriminatory practices in premium pricing.  It tasked the Department of Health and Human Services to carry out the implementation of the ACA while simultaneously tasking the Social Security Administration with certain tasks related to the law.  In addition, there were requirements and decisions to be made, levied upon each of the states and territories of the United States.  In short, it was the largest change to the U.S. healthcare system in history.  It was designed to improve public health across the board.

The Act Suffered Growing Pains

The Act was not without criticism, however – particularly with regard to the anticipated price tag of such an overhaul. Obamacare also struggled to get going in the online marketplace (healthcare.gov) and created some issues at its intersection with religious liberties.

The law has taken some twists and turns since its inception, and the individual mandate – which assessed a penalty on those who did not hold health insurance – was eliminated in 2018. Further, the current Trump administration has introduced a measure known as short-term health insurance, which is not compliant with the ACA but carries a much cheaper price tag.

Pros and Cons

No law is perfect, but the Affordable Care Act pros and cons expose something we all agree on: healthcare is exceedingly expensive but should be accessible to all.

A Business Look at Obamacare

From a small business owner vantage point, Obamacare has its plus’ and minus’. When it was enacted, employers who did not already provide coverage for employees had to majorly readjust their balance sheet. While Obamacare apparently did the job, resulting in just 0.2 percent of American business with 50+ employees not offering health insurance to full-time employees, small businesses struggled at the outset with the employer mandate, a provision assessing penalties on businesses with 50+ full-time employees that did not comply with providing coverage.

Premium Subsidies to Employers

A pro, however, is the generous tax incentive and credits offered to businesses to help offset the costs of providing health insurance to employees. There are even credits and incentives available to businesses with fewer than 50 employees who opt to provide coverage to workers despite it not being required:

  • Provides small employers with no more than 25 employees and average annual wages of less than \$50,000 that purchase health insurance for employees with a tax credit.

    • Phase I:  For tax years 2010 through 2013, provide a tax credit of up to 35% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium.

    • Phase II: For tax years 2014 and later, for eligible small businesses that purchase coverage through the state health insurance Exchange, provides a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost. The credit will be available for two years. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium.

Reinsurance Program

  • Created a temporary reinsurance program for employers providing health insurance coverage to retirees over age 55 who are not eligible for Medicare. Program will reimburse employers or insurers for 80% of retiree claims between $15,000 and $90,000. Payments from the reinsurance program will be used to lower the costs for enrollees in the employer plan. Appropriated $5 billion to finance the program. (Effective 90 days following enactment through January 1, 2014)

 

As you can see, there are a number of valuable Health Insurance Premium Subsidies that a small business can take advantage of.

At Fiorella Insurance, we value your opinion.

A Negative

Another elephant in the room is the hike in health insurance premiums that occurred once the law fully took effect. It means that, since insurance companies were now required by law to provide certain medical services, prices for policies increased for everyone – even those in the lowest-risk group (single young males with no dependents).

A Positive

By contrast, companies also can’t drop individuals if they happen to fall ill or experience severe injury, and Obamacare also prohibits companies from initiating rate hikes upon consumers.

Responding to COVID and its Ongoing Impact

The American Rescue Plan Act of 2021 , enacted during the COVID-19 pandemic in the United States , expanded subsidies for marketplace health plans. A continuation of these subsidies was introduced as part of the Inflation Reduction Act of 2022.

Pros and Cons by Demographic

The pros and cons of the Affordable Care Act vary depending on a person’s demographic, such as:

1. Older Americans  

Older Americans who benefit from Medicare saw an increase in available services covered under the program, specifically as pertaining to routine doctor visits and preventative care. However, a major con is the reduction in Medicare allocations for home health care (i.e., visiting nurses) – which many older Americans prefer as opposed to leaving their homes for assisted living or long-term care facilities. Also, Medicare deductibles for most older Americans were decreased under the ACA, except for high-earning seniors who experienced an increase instead.

2. Low-Income Americans

Medicaid Eligibility Expansion

The pros far outweigh the cons when it comes to healthcare for low-income Americans under the ACA. First, the Act greatly expanded Medicaid eligibility and health care coverage for adults and seniors alike, creating mandatory essential health benefits that must be covered. Further, many states opted to initiate expanded Medicaid coverage, which permits those earning up to 138% of the Federal Poverty Limit (FPL) to access Medicaid for themselves and their dependents. 

Note 1:  The Federal Poverty Level is defined by the social security administration.  You can find the current definition of the FPL on the health insurance marketplace.

Note II. All U.S. citizens and legal residents with income up to 133% of the poverty line , including adults without dependent children, would qualify for coverage in any state that participated in the Medicaid program.

Unfortunately, not all states opted to expand Medicaid to cover those living on just 138% (or less) above FPL, causing many to be unable to afford a self-pay plan through their employer or through the marketplace. Although, those states that did opt to expand coverage did so in order to afford 15 million more Americans the opportunity to access full health care coverage.

3. Women

Obamacare exponentially increased the number of services, both preventative and curative, that benefit women’s health. The Affordable Care Act created mandatory essential health care benefits that include screenings and testing for all women’s cancers, reproductive counseling and contraception, prenatal care, post-natal care, lactation support and all care relating to childbirth. Many of these preventive care and screenings for women are valuable services mandated to be at no cost to the patient.

Fiorella Insurance Agent can help you choose insurance that’s right for you.

Discussed further below, there exists controversy concerning the mandate to cover contraceptive healthcare in light of religious liberties – which is a con for some employers and those individuals with such convictions.

The Marketplace

The Affordable Care Act also created what is known as the marketplace – which allows for private sector insurance carriers to compete for business for those needing a health insurance policy. There is the federal marketplace exchange, found on www.healthcare.gov, where potential enrollees nationwide can shop for coverage. Then, about one half of states have opted to create their own exchanges – while one-half have not. These states that have opted out of the state-executed exchanges have left it to the federal government to administer the marketplace, which has not always gone smoothly. As a result, federal tax dollars have been used to administer the online marketplace in these states, resulting in fees for the insurance providers, and ultimately increased premiums.

Co oP

  • Created the Consumer Operated and Oriented Plan (CO-OP) program to foster the creation of non-profit, member-run health insurance companies in all 50 states and District of Columbia to offer qualified health plans. To be eligible to receive funds, an organization must not be an existing health insurer or sponsored by a state or local government, substantially all of its activities must consist of the issuance of qualified health benefit plans in each state in which it is licensed, governance of the organization must be subject to a majority vote of its members, must operate with a strong consumer focus, and any profits must be used to lower premiums, improve benefits, or improve the quality of health care delivered to its members. (Appropriate $4.8 billion to finance the program and award loans and grants to establish CO-OPs by July 1, 2013)

Multi-state plans

Creation and structure of health insurance exchanges

  • Created state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which individuals and small businesses with up to 100 employees can purchase qualified coverage. Permitted states to allow businesses with more than 100 employees to purchase coverage in the SHOP Exchange beginning in 2017. States may form regional Exchanges or allow more than one Exchange to operate in a state as long as each Exchange serves a distinct geographic area. (Funding available to states to establish Exchanges within one year of enactment and until January 1, 2015)

Insurance market and rating rules

  • Require guarantee issue and renewability and allow rating variation based only on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5. to 1 ratio) in the individual and the small group market and the Exchange.
  • Require risk adjustment in the individual and small group markets and in the Exchange. (Effective January 1, 2014)

Other Pros and Cons

The overwhelming pro to the Affordable Care Act is the provision of comprehensive healthcare coverage to millions of Americans – adults and children alike – who would not otherwise qualify for coverage due to pre-existing conditions or inability to pay. Further, forcing insurance companies to provide minimum essential health benefits has created a competitive marketplace where shoppers can search for the highest level of care at the lowest cost.  The act expanded Medicaid coverage for low-income individuals and allows young adults to remain on parents’ policies until the age of 26.

Religious liberty concerns remain a con for many conservative Americans, as faith-based business owners have challenged the mandate to provide coverage for certain women’s health services – including contraceptives, treatments known as “abortifacients,” and termination of pregnancy. Litigation is ongoing on these issues and will likely continue until a mutually-acceptable arrangement is met.

Excise Tax

The ACT imposed an excise tax on insurers of employer-sponsored health plans with aggregate values that exceed \$10,200 for individual coverage and \$27,500 for family coverage (these threshold values will be indexed to the consumer price index for urban consumers (CPI-U) for years beginning in 2020).  There were many targeted excise taxes.  For example, there was excise tax of 2.3% imposed on the sale of any taxable medical device. Excise taxes from the Affordable Care Act raised \$16.3 billion in fiscal year 2015. \$11.3 billion came from an excise tax placed directly on health insurers based on their market share. Annual excise taxes totaling $3 billion were levied on importers and manufacturers of prescription drugs.  All of these excises taxes went toward paying for the program and bending the cost curve.

Pros Outweigh the Cons

When it comes to availability of care, the pros outweigh the cons under the Affordable Care Act. While no law is without flaws – including Obamacare – this legislation was the result of long overdue consideration of healthcare coverage in America.

Fiorella Insurance broker or agent can help you figure out what information you’ll need, what documents to submit if you need to, and decide which plan is best for you and your family.

At Fiorella Insurance, we value your opinion. Please contact us today for comprehensive benefits advice – we look forward to working with you!

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