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Charles Munyi has over eight years of experience as a personal finance writer. He wrote about insurance, banking, budgeting, products, services, and more for The Balance and Investopedia. Charles completed the Good with Words: Writing and Editing Course through the University of Michigan. He also holds a bachelor's degree in electrical engineering from the Multimedia University of Kenya.
Updated on April 20, 2022 In This Article In This Article
The Patient Protection and Affordable Care Act is a law that contains comprehensive health insurance reforms designed to help achieve near-universal, affordable health coverage.
The Patient Protection and Affordable Care Act (ACA) is a comprehensive health-reform law enacted by former President Barack Obama on March 23, 2010. The law seeks to improve access to affordable health coverage for everyone through cost-sharing reductions and premium tax credits. It also provides rights and protections against abusive insurance company practices.
Learn more about the Patient Protection and Affordable Care Act, how it works, its advantages and disadvantages, and more.
The Patient Protection and Affordable Care Act is a law that contains comprehensive health insurance reforms designed to help achieve near-universal, affordable health coverage. The law’s provisions create premium and cost-sharing subsidies, lay new rules for the health insurance industry, and create a new market for health insurance purchasing. Consumers are also protected from detrimental insurance industry practices, such as denying coverage due to a preexisting health condition.
On March 23, 2010, President Obama enacted the ACA, putting in place reforms that guarantee access to near-universal, affordable health insurance coverage from birth through retirement. More than 10 years since its enactment, the ACA has reduced the number of uninsured Americans by 20 million and extended vital consumer protections to over 100 million citizens.
The U.S. Department of Health & Human Services reported in June 2021 that a record number of Americans—31 million—had health coverage through the Affordable Care Act. Since the law’s coverage expansions took effect, every state in the country has seen a reduction in uninsurance rates. More than 11 million people enrolled in an ACA Marketplace plan as of February 2021, and 14.8 million newly eligible people enrolled in Medicaid through the ACA’s expansion of eligibility to adults as of December 2020.
Consisting of nine distinct legislative titles, the Affordable Care Act has four major reforms.
The ACA’s Patient’s Bill of Rights ended medical underwriting and preexisting-condition exclusions, so insurance companies are unable to deny you or charge you more for coverage based on your health status or medical condition. The law also scraps lifetime dollar caps on essential health benefits and the annual dollar limit on what insurers spend for your coverage.
Under the ACA’s Patient’s Bill of Rights, insurers can no longer drop your health coverage because of an error you made on your application.
The ACA provides more affordable coverage by reducing health care costs and requiring accountability for health care dollars. Its 80/20 rule generally requires that insurance companies spend at least 80% of your premium dollar on health care and quality improvements; otherwise, they must issue a rebate.
The ACA has also tightened the review of rate increases by mandating that insurance companies justify their reasons for raising insurance rates by 15% or more before they enforce the rate changes.
Depending on your household income, you may be able to lower your monthly premiums through subsidies like cost-sharing reductions and tax credits. For instance, if your income is between 100% and 400% of the federal poverty level (FPL), you’re probably eligible for premium subsidies that will lower your monthly payments. In addition, the American Rescue Plan Act (ARPA), which took effect in 2021, extended eligibility for premium tax credits to some taxpayers with income above 400% of the FPL through 2022.
The ACA not only provides better access to care but also offers a range of health insurance choices.
For starters, it gives you access to several recommended preventive health services, including diabetes, cancer, and blood screenings, without requiring any additional cost-sharing in the form of deductibles or copays. Second, young adults who fail to secure health coverage through their jobs can remain on their parents’ health plans until they are 26 years old.
The ACA law improved access to health care by creating the Health Insurance Marketplace (HIM). HIM is a federal- and state-level one-stop-shop online exchange where you can purchase a private health insurance plan directly from insurers that matches your needs.
The Affordable Care Act strengthens Medicare for over 61 million Americans who rely on the program by fighting fraud, adding benefits, and improving care for patients. The health care law provides relief for seniors with a coverage gap in their prescription drug costs. Seniors can receive recommended preventive services like diabetes screenings and flu shots for free.
The ACA also helps reduce waste—as well as curb fraud and abuse in public programs—through tougher screening procedures, prolonged oversight periods for new suppliers and providers, and stronger penalties.
Low-income families, qualified pregnant women, qualified children, and individuals receiving Supplemental Security Income are automatically eligible for the Medicaid program. Still, the ACA enabled states to expand Medicaid to cover nearly all low-income Americans under age 65. Eligibility for children was extended to at least 133% of the federal poverty level in every state, and most state jurisdictions were given the option to extend eligibility to adults who meet that income level, as well.
As of November 2021, 38 states and Washington, D.C., have adopted the Medicaid expansion. ARPA encourages nonexpansion states to do the same by providing an additional temporary fiscal incentive for implementing the ACA Medicaid expansion.
You can apply for or change your 2022 ACA health insurance during the open enrollment period that runs through Jan. 15, 2022. If you don’t enroll in a health plan by that date, you won’t secure coverage unless you have a qualifying special event.
You can apply for ACA health coverage in any of these ways:
The Patient Protection and Affordable Care Act altered the health insurance landscape with numerous insurance reforms, but it has since undergone several changes. In 2017, legislation was passed to revoke the mandate that required most people to either have health insurance or pay a tax penalty. The mandate removal went into effect in 2019.
Under the Trump administration, short-term plans were re-introduced in 2018, allowing for policies that provided coverage for as little as a few months to up to 364 days. While these policies present lower premiums than ACA-compliant plans, they are not governed by the rules of the ACA; therefore, insurers can be more selective in their coverage offerings.
For example, these plans are not subject to the prohibitions on preexisting condition exclusions or lifetime and annual dollar limits. Many such plans also exclude benefits for prescriptions, maternity care, preventive care, mental health services, and substance abuse treatment.
The ACA has also placed a limit on the amount of cost-sharing that families and individuals can pay for care annually. It now places maximum annual out-of-pocket spending limits on Marketplace plans, with lower limits for cost-sharing-reduction plans. In 2022, the maximum out-of-pocket limit is $8,700 for individuals and $17,400 for families.
In 2022, individuals with an income of up to 150% of the federal poverty level won’t contribute to their premium. Meanwhile, a contribution of up to 8.5% of the household income is required for those with income above 400% of the federal poverty level. Before July 2021, consumers at 150% of the FPL had to contribute more than 4% of their household income for the benchmark plan.
