The Affordable Care Act: Overview, Impact, and Analysis

What Is the ACA?

The 2010 Affordable Care Act, formally known as the Patient Protection and Affordable Care Act (PPACA, HR 3590) and commonly nicknamed "Obamacare," is the most recent major American healthcare reform legislation. The PPACA encompasses the Patient Protection Act, the Affordable Health Care for America Act, and relevant portions of the Student Aid and Fiscal Responsibility Act and the Health Care and Education Reconciliation Act. Additionally, it incorporates revisions to the Food, Drug and Cosmetics Act, the Health and Public Services Act, and other related legislation. Further regulations have expanded upon the ACA since its enactment in March 2010 (Affordable Care Act Summary).

The 2010 ACA represents an extensive and elaborate law designed to transform the U.S. healthcare system by providing quality healthcare coverage within the financial reach of nearly all American citizens, and by curbing the nation's growing healthcare expenditure. Reforms under the Act include new rights, safeguards, and benefits; rules for insurance firms; tax breaks and new taxes; designated expenditure and funding; the creation of new committees and jobs; and education initiatives. It is important to note that, under several provisions, the legislation grants authority to ongoing governmental initiatives — such as the Department of Health and Human Services (HHS) — to continue reforming the nation's healthcare structure. Healthcare reform, therefore, does not begin and end with the ACA alone.

Under this law, risks are spread uniformly across all insured entities in order to end healthcare discrimination and disparities (Affordable Care Act Summary). Previously, individuals could face discrimination in receiving healthcare services on the basis of health status or sex, and health costs could vary disproportionately by age and other factors. Since the ACA's enactment, fee discrepancies charged to patients have been restricted. To enforce this, the Act required every American citizen who could afford Minimum Essential Coverage (MEC) to obtain it beginning in 2014, while a large share of those unable to afford it would be exempted. This was intended to stabilize the national economy and budget through a projected deficit reduction of over $100 billion in the first decade and over $1 trillion in the following decade, by controlling governmental spending and curbing waste, misuse, and fraud. The ACA also established a competitive new healthcare coverage marketplace capable of providing group purchasing power to millions of Americans, enabling them to compare plans and receive cost-related assistance.

All insurance exchange participants contribute to the ACA, and the purchasing power of exchange pools improves the affordability of private healthcare coverage plans. These plans compete for enrollees, which inadvertently helps regulate quality and costs. Small employers can purchase coverage independently and are eligible for tax credits amounting to roughly half of their workforce's health insurance costs, making it more practical for businesses to offer employee benefits. The ACA also prohibits coverage denial on grounds of preexisting conditions, while granting consumers the right to appeal insurance company decisions that deny physician-prescribed treatments. Medical deductions are further curtailed. Millions of households benefit from tax credits that reduce premium costs, allowing them to purchase insurance. Households with incomes below $250,000 stand to see tax cuts totaling several hundred billion dollars. The ACA's healthcare reform is designed to be fully funded, with the deficit projected to decrease by over $100 billion in the next decade.

While the legislation itself can be difficult to interpret directly, most of what the average American understands as "Obamacare" falls under the Act's first title: "Quality Affordable Health Care for All Americans." This section covers nearly all newly offered benefits, protections, and rights; new rules for insurance firms; insurance mandates; exchange provisions; and tax credit rules.

Opposition to the ACA

The central function of the ACA is, in effect, the redistribution of wealth and reform targeted at the healthcare coverage sector. There are clear winners and losers. Although an individual or group may support improved healthcare for populations in genuine need, they may simultaneously hold strong reservations about the Act as the appropriate mechanism for achieving it. Beyond concerns about the Act's effectiveness, the legislation has been disruptive to a significant number of individuals who previously had healthcare access, in ways that include cost, accessibility, quality, and personal freedom (Murch).

Obamacare has, for the most part, remained unpopular with the broader public. What makes this especially striking is that approximately 70% of existing enrollees are covered by Medicaid — a fully subsidized program — meaning they pay nothing out of pocket for their healthcare, and a large share of the remaining 30% also receive subsidized care. Given this, the breadth of opposition to the legislation is particularly notable.

Numerous factors drive widespread negative attitudes toward the Act. Most opponents express some combination of the following concerns (Murch):

• Increased out-of-pocket charges compared to previous coverage
• Frustration with what they perceive as intentional misrepresentation during the plans' promotion
• Concerns about the long-term actuarial sustainability of the Act
• Dissatisfaction with the one-sided manner in which the law was enacted
• Frustration over the wasteful and inefficient nature of the law's rollout
• Objection to being coerced into participating in the insurance market
• Objection to being required to pay for benefits they do not need or want

Total Costs and Budget Impact

A major portion of insurance coverage gains under the ACA comes from growth in Medicaid enrollment. Together with the Children's Health Insurance Program (CHIP), Medicaid currently covers approximately 70 million Americans — a significant increase from the 2010 figure of nearly 52 million. As enrollment grows, expenses for this state-federal joint program will inevitably rise, burdening both state and federal budgets. The Congressional Budget Office projected federal Medicaid spending at approximately $335 billion for fiscal year 2015, with expenditures anticipated to grow by 75% over the following decade, reaching $588 billion by 2025. On average, states cover about 43% of Medicaid costs (O'Neill and Ryan, 2015) — amounting to roughly $181 billion for fiscal year 2012, prior to the implementation of Medicaid expansion provisions — which has since dramatically increased enrollment. Although the total cost of covering the expansion population through 2016 was borne by federal funding (which will continue at 90% thereafter), state budgets are already stretched and may be further strained. Even non-expansion states face costs of up to $700 million due to the so-called "woodwork effect."

When the ACA was enacted in March 2010, the Congressional Budget Office estimated that the legislation and associated reconciliation measures would reduce the federal deficit by $143 billion from 2010 to 2019 (O'Neill and Ryan, 2015). This net decrease would result from $788 billion in new spending on health coverage provisions, offset by $511 billion in reduced Medicare and other expenditures, and $420 billion in new revenue from taxes and service fees. The CBO also predicted a reduction in the number of uninsured individuals by 27 million over the same period, with 24 million exchange enrollments and a mean exchange subsidy per person of $6,000 — amounting to a total coverage cost of $358 billion through exchanges over one decade.

Conclusion and Proposed Changes

It has been aptly stated that Obamacare is an initiative U.S. citizens love hating. Ever since its enactment, the ACA has garnered widespread disapproval. Kaiser Family Foundation monitoring surveys have found that support for and opposition to the legislation has fluctuated without any clear trend, ranging between 33% and 53% (Obamacare: Is It Good or Bad for Americans). At the same time, Americans have strongly supported a number of specific ACA provisions, such as allowing dependents under age 26 to remain on their parents' health insurance, prohibiting denial of coverage based on preexisting conditions, and requiring organizations with at least 50 employees to provide insurance.

At present, approximately 11 million previously uninsured Americans have gained coverage, with the uninsured rate falling to a record low of 12.9% from a previous 18%. Despite significant website problems at launch and the refusal of as many as 22 states to expand the Medicaid program, the ACA has produced measurable results — a fact that is difficult to dispute. Healthcare expenditure growth has also decelerated. Despite predictions that the ACA would accelerate healthcare inflation, the opposite has occurred. Government actuaries report a half-percentage-point deceleration in healthcare spending growth (Obamacare: Is It Good or Bad for Americans), and estimates from PricewaterhouseCoopers project the growth rate will continue to slow. While costs are not falling outright, the cost curve has bent meaningfully.

Employer behavior has also been more stable than critics predicted. A Society for HRM and Employee Benefit Research Institute survey found that just 1% of companies planned to drop employee health benefits for 2015, with no meaningful difference between small and large corporations. Companies have been adjusting their benefits structures — increasing copayments and deductibles, for example — but such trends predated the ACA's passage. Individuals are also taking on greater personal responsibility for their healthcare decisions. Ironically, the individual mandate — the most strongly opposed provision of the ACA — originated as a conservative policy concept.

The ACA is not without significant flaws. Among its most notable shortcomings is its failure to adequately address the problem of exorbitant overall healthcare spending. The rollout has been challenging. Nevertheless, on balance, the ACA has produced meaningful benefits for a substantial number of American citizens.

Several targeted reforms could strengthen the law considerably. Congress should resolve the legislative ambiguity that produced the so-called "family glitch" — or direct the IRS to interpret the relevant Internal Revenue Code sections in a way that extends market tax credits to working families. This change alone could provide subsidized healthcare access to as many as 4.7 million individuals. The IRS should also improve its guidance to Advance Premium Tax Credit (APTC) applicants, particularly regarding credit calculations and the reconciliation process, so that more of the estimated 4.8 million eligible taxpayers are protected from overpayment (Jost and Pollack, 2015).

Congress should also amend the ACA to expand eligibility for cost-sharing reductions and reduce out-of-pocket limits for moderate-income individuals and families. Similarly, minimum required coverage and value standards should be strengthened to ensure workers enjoy a baseline level of protection through employer-sponsored coverage. Such reforms would make healthcare insurance more affordable for millions more Americans.

RAND Corporation experts recently explored two options to address the family glitch. The first would allow all family members — including working members with access to affordable individual coverage — to qualify for APTC when employer-sponsored family coverage is unaffordable as a whole. The second option would extend APTC subsidy access only to dependent family members. A third possibility would offer subsidized child-only policy coverage to workers who lack access to reasonably priced family plans. Urban Institute researchers John Holahan and Linda J. Blumberg conducted similar analyses and arrived at consistent findings. The RAND estimate for the first option — granting all family members eligibility — would provide subsidized coverage access to 4.7 million individuals, reducing the number of uninsured by approximately 1.5 million, at a net federal cost increase of $8.9 billion (roughly 9% above the existing $104 billion baseline). The second option would extend subsidized coverage to 2.3 million individuals, reduce the uninsured count by approximately 700,000, and carry a net federal cost increase of $3.9 billion (Jost and Pollack, 2015). Pursuing these reforms would represent a meaningful step toward fulfilling the ACA's core promise of affordable, accessible healthcare for all Americans.

References

"Affordable Care Act Summary." Obamacare Facts: An Independent Site for ACA Advice. Web. 14 Sep 2016.

Fuscaldo, Donna. "ACA Changes: More Small Business Owners to Offer Coverage, Face Increased Compliance." U.S. News Health. 2016. Web. 15 Sep 2016.

"Health Insurance Exchanges." Health Plans & Dental Coverage — Aetna. Web. 15 Sep 2016.

Jost, Timothy and Harold Pollack. "Key Proposals to Strengthen the Affordable Care Act." The Century Foundation. 2015. Web. 15 Sep 2016.

Murch. "Why Are Some Americans Opposed to the Affordable Care Act (Obamacare)?" Quora. Web. 14 Sep 2016.

"Obamacare: Is It Good or Bad for Americans?" Bankrate.com. Web. 15 Sep 2016.

O'Neill, Tara and Conor Ryan. "Five Years After Passage: The ACA by the Numbers." American Action Forum. 2015. Web. 15 Sep 2016.

Stark. "How the Affordable Care Act Impacts Medicare, Medicaid." WHNT.com. 2013. Web. 15 Sep 2016.

"The Pros and Cons of Obamacare." Healthline. Web. 15 Sep 2016.