The Patient Protection and Affordable Care Act (ACA) is said to be the most comprehensive reform on the U.S. medical system for the last 45 years. According to a paper from the Department of Economics of Massachusetts Institute of Technology, the ACA will revolutionize the non-group insurance market in the country, substantially expand public insurance, and subsidize private insurance coverage. Further, it will increase the federal income from a variety of new taxes, as well as curtail and restructure spending under Medicare.
Also referred as Obamacare, the ACA is comprised of the Affordable Health Care for America Act, the Patient Protection Act, the Health Care and Education Reconciliation Act, the Student Aid and Fiscal Responsibility Act, and several amendments to other laws such as the Food, Drug, and Cosmetics Act and the Health and Public Services Act.
The main objective of the ACA is to make affordable health insurance more accessible to millions of Americans, who are currently not covered by any health plans. Its other objective is to make health insurance cheaper for those already covered. Furthermore, ACA will create several modifications and adjustments regarding the manner in which health care is being funded, systematized, and administered. According to The Commonwealth Fund, these three mechanisms will help expand the access to public and private health insurance by Americans: enforce new market reforms that will establish the minimum standards for coverage; institute new health insurance marketplaces, commonly known as individual exchanges and Small Business Health Options Program (SHOP) exchanges; and widen the qualifications for Medicaid of adults with revenues up to 138 percent of the federal poverty level.
According to a working paper from the National Bureau of Economic Research, ACA will disallow refusals due to pre-existing conditions and other inequitable and prejudiced practices, ensure access to non-group insurance, and set limits on the insurers’ ability to charge differential prices by health status. In addition, under ACA, all individuals in the country are obliged to acquire insurance or be subjected to penalties. In the event that lower income households do not have the means to purchase health insurance, the federal government will subsidize the insurance to make it more affordable. Federal aids can be in the form of expanded Medicaid or through tax credits. These subsidies are financed from the abatement in remunerations on private “Medicare Advantage” programs, reduction in Medicare reimbursement, increase in the Medicare payroll tax, several excise taxes such as the “Cadillac tax”, and other sources of income.
Important ACA Provisions
The federal health reform aims to widen access to insurance, further consumer protections, accentuate prevention and wellbeing, enhance quality and system performance, increase the health workforce, and prevent or repress the surging costs in health care.
- A More Accessible Insurance Coverage
Through ACA, 32 million uninsured Americans will have wider access on private and public insurance. In doing so, the Act obliges employers to cover their workers, compels all Americans to have insurance, and necessitates the institution of a state-based insurance exchanges and temporary high-risk pools, with certain exceptions. Furthermore, ACA will give tax incentives to specific small businesses, expand Medicaid coverage, and enforce the protection of customers, as well as form a national, voluntary, and continuing insurance care program.
- Further the Consumers’ Insurance Protection
Various insurance reforms were enacted in order to outlaw insurance policies from rescinding coverage and from not including children with pre-existing conditions; to restrict lifetime monetary caps on insurance coverage; and to institute state-based rate reviews for unreasonable hikes on premiums, ombudsman program, and share of premiums devoted to medical services.
- Accentuate Prevention and Wellbeing
In preventing illnesses, ACA demands restaurant chains that have more than 20 branches to indicate the calories on their menus and give details on information such as fat and sodium content, upon request. In addition, a Prevention and Public Health Fund; National Prevention, Health Promotion and Public Health Council; and a federal public education campaign on oral health will be instituted.
- Enhance Quality and System Performance
ACA consists of provisions that will enhance the quality and system performance through research, demonstration of projects, venturing in health information technology and collation of data and reporting strategies that will address health differences on the population based on several factors.
- Bolster the Health Workforce
Reforms on graduate medical education training, expansion in scholarships on health profession and loan programs, and support for nurses’ training programs, school-based health centers, and medical homes were seen as the options in increasing and strengthening the country’s health workforce.
- The Surging Costs in Health Care
By intensifying the supervision on health insurance premiums and practices; highlighting prevention, primary care, and efficacious treatments; curtailing frauds and abuse on health care; and administering Medicare payment reforms, the surging costs in health care can be prevented or repressed.
Impact of ACA on Health Plans Sponsored by Employers
The system of acquiring health coverage through the workplace started during World War II. According to National Center for Policy Analysis (NCPA), around 91 percent of the 9.3 million Americans that had acquired health coverage from late 2013 to early 2014 were from employee-sponsored insurance or ESI. Today, the United States Census Bureau estimates that 171 million Americans have ESI. ACA mandates that businesses must provide an extensive health insurance to all of its full-time employees. However, small enterprises, or those with workforce fewer than 50, will not be penalized if they do not follow the said provision.
According to the Congressional Budget Office, the annual cost in covering an individual’s health insurance is at least $5,800; that is an extra $3 per hour, and it is more expensive for family coverage. For entities with more than 50 employees, they are required to subsidize at least 60 percent of the cost of their employee’s minimum coverage plan. In addition, health plans nowadays are required to cover a package of “10 essential benefits”, which is basically more costly.
In order for companies to comply with ACA, employers will increase cost-sharing as much as possible. A consulting firm reported that 69 percent of firms are considering increasing the cost sharing for adult dependents while 54 percent will most likely curtail subsidies for all dependents. Another report shows that some companies will no longer provide spousal coverage while 30 percent of employers may not offer health insurance as an employee benefit. Furthermore, employers are also considering plan cutbacks and canceling other benefit offerings.