Affordable Care Act Basics

The Affordable Care Act (ACA) was designed to reduce the number of uninsured Americans and control rising healthcare costs. It succeeded in the first, mainly by expanding Medicaid coverage, but hasn’t succeeded in controlling costs or improving the quality of care. Due to a court challenge, states have the choice of whether to expand Medicaid to childless adults. States like Connecticut, that chose to expand, have benefitted the most from ACA uninsured reductions.

The ACA also reformed private insurance coverage including, among many provisions, limiting what insurers can spend on administration and profit, requiring coverage of essential care, plain language documents, and creating user-friendly, standardized marketplaces to purchase insurance, Access Health CT in Connecticut. The ACA had little impact on the rates of employer-sponsored coverage for Connecticut residents. Provisions to control Medicare payment rates, support public health, and address workforce shortages were never implemented.

The ACA has survived many attempts to repeal it in Congress or invalidate it with lawsuits. The law now enjoys a stable level of support from most Americans.

Affordable Care Act Deeper Dive

What were the problems in the healthcare system that the Affordable Care Act was designed to fix?

The ACA grew out of frustration that our US healthcare system was fundamentally broken. One in six Americans, and one in eleven Connecticut residents were uninsured in 2009. Uninsured Americans were, and still are, far more likely to skip necessary care, be in poor health, have medical debt, and to declare bankruptcy. Many people couldn’t leave their jobs because individual coverage was very costly, especially for women, people with pre-existing conditions, or seniors not yet eligible for Medicare.

Healthcare costs consumed 17.2% of the US economy in 2009, compared to 13.3% in 2000. Rising healthcare costs were squeezing out other priorities for families, workers, businesses, and government. Insurers and employers were passing more of those costs directly onto consumers in out-of-pocket costs, service cuts, and lost wages. The high costs of preventive care, even with insurance, stopped many people from staying healthy, creating costly, avoidable problems that raised costs for everyone.

Despite all our spending, Americans are not as healthy as residents of other developed countries that spend less per person on healthcare. The US ranks last among developed countries on access to care, equity, administrative efficiency, and health outcomes; however we spend far more per capita on healthcare than other countries.

Frustration with prior efforts to fix healthcare, most recently the failure of the Clinton healthcare plan in 1993, built across the economy to engage stakeholders to act. In 2006, Massachusetts passed expansive health reform that worked to lower the number of uninsured by expanding Medicaid, providing subsidies for individuals and small businesses to afford coverage, and reformed insurance practices.

What were the policy concerns about the Affordable Care Act?

Passage of the ACA was very messy and highly charged. Books have been written on the political ups and downs involved in passing the bill. There were concerns from both conservatives and liberals.

Concerns from the Right included:

• Too much government oversight and regulation will distort the market, so that it doesn’t work for consumers or payers
• Limits on insurer profits will hinder innovations
• There wasn’t enough in the bill to control costs
• The individual mandate was a violation of people’s rights
• The costs of the bill were too high
• States had too little flexibility

Concerns from the Left included:

• There were too many accommodations of industry interests in the bill
• There was no public option – a non-profit government-run insurance plan to compete with commercial insurers and help keep coverage affordable
• There was no consideration of a single-payer coverage plan
• It isn’t universal – not everyone is covered
• The insurance subsidies were too weak to be meaningful for many Americans
• Too much reliance on states
• Leaves out undocumented immigrants

What are the goals of the Affordable Care Act?

The ACA has three basic goals:

• Make affordable health insurance available to more people by providing subsidies
• Expand Medicaid to cover childless adults with household incomes up to 138% of the federal poverty level – in 2022 that is $18,590 for single adults and $31,781 for a household of three
• Support innovations that make healthcare more affordable

What strategies does the Affordable Care Act include to accomplish the goals?

The Affordable Care Act is 906 pages. It includes thousands of provisions. Almost every good idea the framers collected was included in the Act. A detailed summary is here.

While no Republicans in Congress voted for the ACA, the framers included 106 Republican-sponsored amendments.

The ACA’s coverage strategy is a three-legged stool including expanding Medicaid, supporting employer-sponsored health insurance, and creating health insurance exchanges or marketplaces for individuals to buy  individual coverage with subsidies to make it affordable.

Recognizing that healthcare is different between regions and that most healthcare is regulated by state governments, the law sent much of the ACA’s implementation responsibilities and decisions to states.

The strategies include:

• Mandates for both employers with over 50 full-time workers to offer good health benefits and for all Americans to secure coverage. However, the individual mandate was effectively repealed in 2017 as part of tax reforms, but it doesn’t appear to have made any difference in coverage rates
• Reform insurance to ensure basic services are covered, limit insurers’ administrative costs and profits, spread premium costs across populations, require state review of premium increases, and ensure everyone can get coverage
• Create health insurance exchanges for individuals and small businesses – marketplaces that make buying coverage more affordable with subsidies and easier to understand
• Expand Medicaid to lower-income adults without children, at state option due to a Supreme Court decision
• Improve the quality of healthcare
• Emphasize prevention and wellness
• Support healthcare workforce expansion
• Experiments to change the way healthcare is paid to reward better care and control costs

What does the Affordable Care Act mean for consumers?

The ACA brought healthcare coverage to millions of Americans, many who’d never had it before. In 2020, just 4.8% of Connecticut residents were uninsured, well below 9.4%, the rate in 2013 before the ACA was implemented. Between 2013 and 2019, there were 126,000 fewer state residents without healthcare coverage.

Because of the ACA, Americans have many more opportunities for coverage, and coverage is more comprehensive and a better value.

• Medicaid was expanded to include childless adults with qualifying incomes, at state option. Connecticut was the first state to exercise this option
• Meaningful insurance coverage is available on Connecticut’s health insurance exchange, AccessHealthCT, with subsidies for people with qualifying incomes
• People cannot be denied health insurance because they have a pre-existing health condition, such as surviving cancer or pregnancy
• Premiums cannot be based on anything but age (within limits), tobacco use, and geography. Gender is no longer a basis for setting insurance premiums
• Created limits on insurance deductibles and total annual out-of-pocket costs
• Waiting periods for health insurance to start after being hired are limited to 90 days
• Employers with 50 or more full time employees must offer decent health benefits to workers
• Parents of children up to age 26 may continue to cover them under their employer-sponsored plan. Young adults are the most likely to be uninsured.
• Preventive care is zero cost for patients – no copays or co-insurance, and it must be covered outside deductibles.
• Insurers cannot cap covered medical costs by year or over a lifetime.
• Insurers cannot retroactively cancel coverage just when you need it, without evidence of fraud.
• People buying insurance can be sure that it will cover essential health benefits, such as hospital and emergency care, when they need them, and health insurance documents must be written in basic English and understandable.
• Funding for Connecticut’s Office of Healthcare Advocate. OHA is available to all state residents to help with problems accessing care. Connecticut’s existing ombudsman’s office was a model for the ACA to create offices in every state.

Connecticut’s reduction in uninsured residents was largely because Connecticut chose both the ACA options to expand Medicaid to low-income childless adults and to operate a state-based health insurance exchange, Access Health CT.

Connecticut was the first state in the nation to embrace the ACA option to expand Medicaid to childless adults in 2014, creating the new HUSKY Part D eligibility category. In 2021, HUSKY Part D covered 369,658 state residents.

AccessHealth CT, Connecticut’s ACA health insurance exchange, provides affordable coverage to over 100,000 state residents. More than four out of five enrollees get subsidies to help afford health insurance.     

Who was left out of Affordable Care Act protections and coverage?

The ACA left out undocumented immigrants. The uninsured rate among Connecticut non-citizens is four-fold higher than for citizens. Immigrants without legal status in the United States are barred from enrolling in AccessHealthCT coverage and Medicare. Because the state cannot get federal matching funds for undocumented immigrants in Medicaid, Connecticut like most states, did not cover immigrants without legal status. In 2021, the state changed the law to cover children to age 8 that are income eligible, regardless of immigration status under Medicaid starting in 2023. In 2022, that eligibility was increased to age 12, and children initially covered will continue with coverage through age 19. The state must pay the full costs of coverage for these children.

What does the Affordable Care Act mean for providers and health systems?

The ACA benefitted healthcare providers broadly, especially as more patients have comprehensive coverage, but also increased provider responsibilities.

Benefits for providers included:

• Reductions in the uninsured and limits on patient cost-sharing mean that providers do not have to collect as much payment from patients and have less bad debt.
• Primary care providers benefitted by ACA increased Medicaid payment rates. Connecticut has continued the higher primary care Medicaid rates beyond the federal time limit.
• There is support for health information technology costs and implementation.

New responsibilities for providers under the ACA include:

• There is more reporting and accountability for the quality of care, including patients’ experience of care.
• The need to expand capacity to meet the needs of more Americans with healthcare coverage. Providers responded by hiring more staff, relying more on advanced practice clinicians, and expanding facilities and hours of service. The ACA included some provisions to expand clinical capacity, but they weren’t fully implemented.
• To keep non-profit status, hospitals must assess the health needs of their community and develop a plan to address them. In the needs assessment, hospitals must solicit input from a wide range of community members and organizations. The plan to address the problems must identify and prioritize community health problems, resources to address them, and evaluate the impact. The plan must be made public. Connecticut hospitals’ community health needs assessments are listed here.

What does the Affordable Care Act mean for employers?

For employers, as for many stakeholders, the ACA included both supports and new responsibilities.

• Businesses with 50 or more full time employees must offer meaningful health benefits to their workers or risk paying a penalty.
• Small businesses can qualify for tax credits on their health benefit costs.
• Small businesses can purchase good coverage for their workers on the state health insurance exchange, AccessHealthCT in Connecticut.
• Better information on the costs and quality of health insurance they purchase for workers
• Must allow parents to keep children on their coverage to age 26

There were concerns when the ACA passed that expanded public options for coverage, including Medicaid and federally subsidized health insurance for lower income households, that employers would stop offering coverage to employees. However, employer-sponsored coverage for Connecticut residents had been declining before the ACA expansions were implemented in 2014. The ACA had little impact on employer-sponsored coverage for Connecticut residents.

What does the Affordable Care Act mean for state governments?

Because of the tortured process to pass the ACA, many implementation decisions and actions were left to the states. However, states were also given substantial funds to help.

States had to make decisions about whether to expand Medicaid to childless adults with qualifying incomes. In the first few years, the full costs of the expansion were reimbursed by the federal government, eventually lowering to 90% reimbursement. States that chose to expand Medicaid have had to find funding to cover the other 10%. Connecticut was the first state to adopt this option, and in 2021 369,658 state residents were covered by the ACA Medicaid expansion. As of November 2022, 40 states and the District of Columbia have expanded Medicaid under the ACA. 

States also had to decide if they would create their own health insurance exchange.  Connecticut created AccessHealthCT to encourage and assist consumers and small businesses purchasing health insurance. Consumers can only get insurance subsidies and cost sharing protections if they purchase coverage through the exchange. States received substantial grants to set up exchanges. Over 100,000 state residents have insurance coverage through AccessHealthCT. AccessHealthCT also assesses Medicaid eligibility, providing a central source of information and applications for both programs.

What does the Affordable Care Act mean for insurers?

Insurers benefitted from the ACA with a large increase in business. Between 2013 and 2019, an extra 93,000 Connecticut residents have insurance coverage through a private plan. Similarly, drug companies and other healthcare industries benefitted from substantial increases in demand for their services and products. To fund the expansions, the ACA also imposed new taxes on insurers and drug companies.

The Affordable Care Act made important changes to regulations governing insurers including:

• Insurers may not base premiums on pre-existing medical conditions — such as heart disease, diabetes, or history of cancer
• Insurers can only base premiums on age (within limits) and geography
• Sets a minimum medical loss ratio – Insurer spending on administration, profits, and quality is limited to 20% of total premiums collected for individual and small group plans (50 or less members) and 15% for larger groups
  • If they don’t spend at least 80 or 85% on medical care, insurers must return the remainder to consumers and employers in rebates or discounted rates for next year
• Children can stay on their parents’ plans until age 26
• Insurers must offer health insurance to anyone who applies, and must renew coverage
• Insurers cannot set annual or lifetime dollar limits on healthcare bills
• The federal government sets limits on deductibles and maximum out-of-pocket costs for consumers, updated each year
• The waiting period for health benefits to start after employment must be 90 days or less
• Insurance documents must be available to consumers in plain language
• Employers with over 50 full-time workers must offer health benefits or pay a fine
• Created consumer assistance programs in every state – Anyone in Connecticut experiencing problems with insurance can contact our state Office of Healthcare Advocate.

Under the Affordable Care Act, health insurance must cover essential services

including:

• Hospitalizations
• Outpatient care such as office visits
• Prescription drugs
• Emergency care
• Pregnancy, maternity, and newborn care
• Lab tests and services
• Preventive care to keep patients well
• Care to manage chronic conditions and maintain health 
• Rehabilitative services
• Dental and vision care for children

The state of Connecticut also requires some insurance plans to cover other services.

How does the Affordable Care Act affect Medicaid?

Connecticut Medicaid enrollment grew substantially when the state expanded Medicaid under the Affordable Care Act. Enrollment increased 46% from 640,362 enrollees 2013, before Connecticut’s Medicaid expansion, to 934, 966 members in 2015.

Medicaid enrollment rose another 19% during the COVID pandemic to reach over a million members by 2021. During the pandemic many people qualified when they lost their jobs and their incomes dropped. In addition, the federal government increased funding to the state for the program with the condition that states not remove anyone from the program during the pandemic. In 2023, as the pandemic wanes, the Department of Social Services will be reassessing Medicaid recipients’ eligibility and the numbers are expected to go down.

A provision of the ACA temporarily increased Medicaid primary care physician payment rates to equal Medicare. There is some evidence nationally that the fee bump increased access to care for members, and more providers accepting Medicaid patients. Connecticut was one of a few states that continued that rate increase, in full or in part.

How does the Affordable Care Act impact Medicare?

The ACA had several impacts on the  Medicare programs and for beneficiaries. The Act removed the “donut hole” or coverage gap in Medicare Part D prescription drug coverage in 2020. Under the donut hole, beneficiaries were responsible for the full cost of their prescriptions above a limit, even though they were still paying monthly premiums. While the donut hole is gone, beneficiaries may be still be responsible for part of their prescription costs.

To improve the quality of care, the ACA reduced payments to hospitals for preventable readmissions or hospital-acquired infections.

The ACA also ended overpayments to Medicare Advantage managed care plans. This reduced incentives for plans to attract healthier beneficiaries and leave those with more complex needs in the traditional program. However, since the Act passed experts estimate that Medicare Advantage payments are again skewed toward managed care plans. There are proposals to adjust payments again.

What reforms addressing quality, cost control, and healthcare delivery are in the Affordable Care Act?

To help control healthcare costs, the ACA created the CMS Innovation Center. CMMI has broad powers to develop and test new payment and healthcare delivery models. The goals are to improve patient care,  lower costs, foster equity in healthcare, and reduce misalignment in the system to improve health outcomes. CMMI has launched over 50 new payment and delivery models. Four models that worked are being expanded throughout the healthcare system. CMMI plans to re-focus on equity, reduce the number of overlapping model tests, give providers more options to accept financial risk, improve evaluation to ensure CMS isn’t overpaying for some models, and take a broad view of reform.

CMS has also created the Quality Payment Program, to link payments with better patient care. The ACA also created a national quality improvement strategy to support development of meaningful quality metrics to improve patient safety, engage patients and communities in their care, promote care coordination, promote prevention and best practices, and make care more affordable.

Only one in twenty healthcare treatments has high quality supporting evidence that it is effective and safe. To expand comparative effectiveness research on which treatments work, the ACA created a non-profit Patient-Centered Outcomes Research Institute. PCORI funds researchers, sets priorities for which treatments to evaluate, and gives patients and others information they can use in making healthcare choices. PCORI’s work has been controversial since the beginning, especially for healthcare industries. To address the concerns, the ACA prohibits the use of PCORI’s findings being “construed as mandates for practice guidelines, coverage recommendations, payment, or policy recommendations.” PCORI has been a leader in shifting the focus to outcomes that matter to patients by engaging patients at every step of their work. PCORI has awarded $3 billion for over 2,000 research projects. However concerns have been raised that PCORI’s findings have not been adopted by healthcare providers in their practice. Also, due to lobbying, Congress prohibited PCORI from considering the costs of treatments in their evaluations. The independent non-profit Institute for Clinical and Economic Review, ICER, is a national leader in comparative effectiveness research that includes developing value-based price ranges for treatments.

Did the Affordable Care Act work?

The ACA had three main goals – to increase Americans’ healthcare coverage, to control the growth of healthcare costs, and to improve the quality of care.

There is overwhelming evidence that the ACA has achieved the goal to expand Americans’ healthcare coverage. Twenty million more Americans have coverage since the ACA was implemented, most through Medicaid expansions. The percent of uninsured Connecticut residents dropped from 9.1% in 2012 to 5.9% by 2016 due to Connecticut’s decisions to expand Medicaid under the ACA and to develop a state-based health insurance exchange, Access Health CT. While there are still millions of uninsured Americans, the ACA made a significant difference in coverage and saved lives.

There is less evidence that the ACA had an impact on controlling the growth of healthcare costs. Healthcare costs consumed 17.2% of the US economy in 2009. However, in 2019 healthcare accounted for 17.6% of the US economy and it is expected to continue rising after the COVID pandemic ends. While premium increases have moderated since the ACA, consumer costs for coverage and cost sharing to access care has continued to rise, beyond affordable levels for many Americans.

Most federal innovations in payment and delivery reform created under ACA authority have not been successful in either controlling costs or improving the quality of care.

Despite early concerns, the ACA did not lower employer-sponsored coverage, nor did it lower profits for insurers or other healthcare industries.

The ACA has improved Americans’ health outcomes, mainly through the coverage expansions. Due to improved access to care, there have been improvements in health status, chronic disease burden, maternal and neonatal health, and mortality.

What changes have been made to the Affordable Care Act and why?

Several important changes to the original ACA plan have been made by the Supreme Court, Congress, and administrative action or inaction.

The ACA has survived numerous legal challenges, some based on technicalities, that ended in the Supreme Court. Probably the most important was in NFIB vs. Sebelius. In 2012, the Supreme Court mainly upheld the constitutionality of the ACA. The Court found that the individual mandate was constitutional under Congress’s authority to levy taxes. However, the Court also ruled that the ACA’s requirement that all states expand Medicaid was only constitutional if it was optional for states. As of November 2022, all but ten states have elected to expand Medicaid to childless adults. In several cases objecting to the ACA’s requirement that insurance plans cover contraceptive care, the Supreme Court has expanded the categories of employers who may be exempted from the requirement.

In 2017, Congress essentially did away with the ACA individual mandate that required every American get health coverage, either through their employer, purchasing private health insurance, or through public programs such as Medicare or Medicaid. In a much larger tax bill, Congress lowered the tax penalty for non-coverage to zero. Economists had long argued that the mandate was essential to ensure that healthy people joined insurance pools to keep costs reasonable for everyone. But they were wrong. There has been little impact of losing the mandate – it did not jack up premiums nor did it lead to an increase in uninsured rates.

The ACA’s Cadillac Tax was repealed in 2019 after two delays in implementation. The Cadillac Tax was designed to discourage overly generous health plans. The goals were to lower healthcare spending by limiting employer tax advantages for increasing benefits and to fund other parts of the ACA. The tax was to be significant – 40% of the plan’s value over a set threshold to be paid by the either the insurer or employer. The thresholds were $10,200/year for individual coverage and $27,500 for family coverage when the ACA passed but indexed to inflation and adjusted for some plans. It was estimated that by 2025 the tax would’ve applied to one in four workers with employer health benefits.

Recognizing the underfunding of public health, and the resulting increases in preventable health problems, the ACA created the Prevention and Public Health Fund. The Fund is to be used “for expanded and sustained national investment in prevention and public health programs to improve health and help restrain the rate of growth in private and public health care costs.” Originally, there was a promise of $2 billion in funding each year to the Fund by 2015. However, four times Congress has cut and diverted resources to other, unrelated spending. To date, the Fund has never received more than 50% of promised funding.

The National Healthcare Workforce Commission, created in the ACA to address shortages of critical healthcare providers, has never been funded. However, Congress did fund substantial workforce efforts in COVID relief bills targeted at supporting the public health workforce, providers in underserved communities, and behavioral health providers.

To help control costs in Medicare, the ACA created the Independent Payment Advisory Board. The IPAB was to have 15 independent expert members, and if per capita costs grew over a benchmark, they would make recommendations to Congress to lower Medicare cost increases. The proposals could not ration care, increase revenues, or change eligibility, benefits, or beneficiary cost sharing. To avoid intense lobbying by provider groups opposing prior attempts to control Medicare costs, the ACA requires the IPAB recommendations to be implemented unless Congressional passes an alternative that saves as much money. Members were never appointed to the IPAB and Medicare costs never grew more than the benchmark that would have triggered IPAB recommendations. Under intense lobbying from providers concerned about their revenues and limited Congressional ability to moderate the recommendations, the IPAB was repealed in 2018.

What do Americans think of the Affordable Care Act now?

Americans’ opinions about the ACA have been sharply different and heated since before its passage. But since 2017, more Americans have a favorable opinion of the ACA. Most provisions of the ACA have the support of a majority of Americans.

Opinions are still sharply divided along partisan lines. Democrats are five times more likely to have a favorable view of the ACA.

Protections for people with pre-existing conditions are very popular as 47% of Americans have or live with someone who has such a condition.

Trends

• The ACA is probably politically stable now.
• Temporary increases in insurance subsidies implemented under COVID have been continued until 2025 under the 2022 Inflation Reduction Act
• Beginning in 2023, the “family glitch”, a provision of the ACA that disqualified families from coverage subsidies in the insurance exchange if one family member is offered “affordable” coverage at work for themselves, even if family coverage is not affordable. The problem affected 5.1 million Americans, mainly children of low-income workers.