Affordable Care Act Definition: Everything You Need to Know
The simple Affordable Care Act definition is best explained as the ACA or Obamacare. 8 min read
Affordable Care Act Definition
The simple Affordable Care Act definition is best explained as the ACA or Obamacare. It is a legislation passed in 2010 that changed how Americans enroll in and receive health care coverage. The legislation of the Affordable Care Act is overseen by the U.S. Department of Health and Human Services.
Officially known as the Patient Protection and Affordable Care Act, the legislation was first passed as a bill by Congress and signed into law by former President Barack Obama on March 23, 2010, as a piece of the agenda for health care reform by the Obama administration. It was upheld by the Supreme Court on June 28, 2012.
Affordable Care Act
The Affordable Care Act (ACA) requires individuals who reside legally in the United States to have health care insurance, with some exceptions, such as financial hardship or religious belief.
The ACA requires employers to provide employees with health care coverage, although there are some exceptions for small employers. The Patient Protection and Affordable Care Act law included several provisions to take effect over a matter of years, including:
- The prohibition of health insurers from denying coverage due to preexisting conditions
- The establishment of health insurance exchanges
- The expansion of Medicaid eligibility
ObamaCare (the Affordable Care Act) is a U.S. health care reform law that expands and improves access to care and curbs spending through regulations and taxes. The Affordable Care Act focuses on:
- Giving more Americans the access to affordable health insurance;
- Improving the quality of health care and health insurance;
- Regulating the health insurance industry; and
- Reducing overall health care spending in the United States
The law contains hundreds of different provisions that address different aspects of "the health care crisis" in the United States. The Affordable Care Act works with the Health Care and Education Reconciliation Act of 2010, which reforms many things when it comes to student loans.
Background of the Affordable Care Act Law
During enactment, the Congressional Budget Office estimated the new law would reduce the federal deficit by nearly $145 billion in the first 10 years and between 0.25 and 0.5 percent of GDP or gross domestic product thereafter.
Associated costs of the new amendments are offset by many taxes, such as increased taxes on items and services like indoor tanning, hearing aids, and eyeglasses. As of March 2016, over 20 million Americans benefited from insurance coverage under this law, according to government data.
What Does ObamaCare Do?
ObamaCare set up a Health Insurance Marketplace (HealthCare.Gov) where Americans can purchase federally regulated and subsidized health insurance during open enrollment. ObamaCare has also expanded employer coverage to millions of employees. If employers have more than 50 full-time employees they must offer "affordable" coverage to their employees. Should they refuse, they must pay $2,000 monthly for each employee.
After September 23, 2010, insurers are prohibited from establishing lifetime or "unreasonable" annual limits on the dollar value of "essential" benefits that include:
1) Ambulatory Patient Services
2) Emergency Services
3) Inpatient Hospitalization
4) Maternity and Newborn Care
5) Mental Health and Substance Abuse Services
6) Prescription Drug Coverage
7) Rehabilitative and Habilitative Services
8) Laboratory Services
9) Preventive and Wellness Services, and Chronic Disease Management
10) Pediatric Oral and Dental Care
Individuals must purchase a policy as of January 1, 2014 if they can afford it. Otherwise, they will be fined $695 or 2 percent of their income.
What does ObamaCare Prohibit for Insurers?
There are many prohibitions that the ACA defines in its policies. For starters, insurers can't search for errors or other mistakes applications and use those errors to deny payment for services.
As of January 1, 2014, insurers are also required to provide coverage for nondependent children up to age 26. By December 31, 2013, insurers were officially required to refund portions of premiums if their "non-claims" costs exceed 20 percent (for group plans) or 25 percent (for individual plans).
As one of the 10 essential health benefits, ambulatory patient services must be provided by all insurance companies and included in all insurance plans. Insurance companies cannot cap or limit the amount of claims or amount of money in a lifetime or yearly.
Appeal is the process created by insurance companies and the federal or state exchange marketplaces to have a decision re-reviewed. The benefit year is the period of time in which your health insurance plans run where insurance companies may adjust your monthly premium or other included services at the start of a new benefit year.
What does ObamaCare Prohibit for Employers?
The ACA ensures employers cannot limit the eligibility for company coverage based on full-time employee wages. However, employers are allowed to vary premiums by up to 30 percent for participating disease-prevention or health programs. The act reimburses about $5 billion to employers toward health benefits for retirees and their families.
ObamaCare has created a nationwide program for background checks on employees of long-term care facilities and providers, as well.
What are Some of the Benefits Included in the ACA?
As of January 1, 2011, Part D beneficiaries must be given a 50 percent discount for brand-name drugs purchased during the coverage gap (or "donut hole") by drug manufacturers. However, alternative medicine is not typically covered by insurance policies.
Prescription drugs are one of the 10 "essential benefits" required by law, but brand name drugs are far more expensive, and your insurance company may require you to pay more (copay or out of pocket) for these than generic drugs, which are usually cheaper.
The ACA created the bronze plan, considered the lowest regular plan offered under the act and will usually cover 60 percent of claim costs. It also provides the percentage of the total cost of a claim that you are responsible to pay after you have met your deductible.
This act also allows for multiple health insurance policies. For instance, if you have Medicare coverage and coverage from an employer, the determination of which policy will pay for particular claims is defined as per the care coordination. It also allows the health insurance policy to not only cover you, but also your children or significant other, as those additional members are considered dependents.
Breaking Down Some ACA Components
There are quite a few segments and stipulations that make up the Affordable Care Act. It's important to become familiar with them, especially when considering adding someone to your insurance policy.
Advanced Premium Tax Credits
One of the provisions in the Patient Protection and Affordable Care Act is advanced premium tax credits. These tax credits are sent from the government to individuals' health insurers (and only those who are eligible) to reduce having to pay monthly premium payments.
The tax credit amount received depends on income, if eligible. If your income falls near the top, you will pay more; if it falls near the bottom, you will pay less. If you qualify, you do not need to pay the full amount of your premium since it's a payment made to the insurance provider directly.
To qualify for the advanced premium tax credit, you must be ineligible for public coverage (Medicaid and Children's Health Insurance Plan - CHIP), have a modified adjusted gross income that falls between 100-400 percent of the federal poverty level (FPL), and not be able to get qualified health insurance through an employer, and;
If the amount of advance-credit payments is less than the tax credit they should have received, a refundable credit will be given on an individual's federal income tax return. However, if the advance payments for the year are more than the credit amount, individuals will have to repay any excess advance payments with their tax returns.
Minimum Essential Coverage
A fee of 1 percent of yearly household income or $95 per person ($47.50 for children), whichever is greater, may be incurred by those who do not maintain minimum essential coverage. The minimum essential coverage fee increases each year.
Vision or dental care coverage, specific disease or condition coverage, workers' compensation, and plans that solely offer discounts on medical services don't quailfy as minimum essential coverage under the Affordable Care Act. A penalty fee may be incurred by individuals without minimum essential coverage. Although some with limited incomes and other special circumstances may not have to pay.
Financial Responsibility Law
Financial responsibility law requires an individual to prove that he or she is able to pay for damages resulting from an accident. A financial responsibility law does not specifically require the individual to have insurance coverage; instead, the law requires the individual to demonstrate the financial capacity to pay, even if the individual is not at fault.
Financial responsibility laws exist because not all states have a compulsory insurance law. Many states consider an individual with an insurance policy to be compliant with a financial responsibility law since most insurance policies have a minimum coverage that meets the state standard.
President Trump on the Affordable Care Act
On January 20, 2017, in his first executive order after taking office, President Donald Trump signaled his intention to defund the Affordable Care Act, saying executive agency heads should "delay the implementation of any provision or requirement of the act that would impose a fiscal burden on any state."
The intention of President Trump's order to defund Affordable Care Act (ACA) is to signal the first phase of Republican efforts to repeal and replace the ACA. Rolling back the law was one of Trump's central campaign promises aimed at reducing the fiscal burden on the government.
Trumpcare is the colloquial name for the American Health Care Act (AHCA), a proposed replacement for the Affordable Care Act (also known as ObamaCare), that House Republican leadership unveiled on March 6, 2017. It would have repealed the individual mandate, which imposes tax penalties on those who don't acquire health insurance. The tax penalties on those who don't acquire health insurance would have been scrapped retroactively to January 1, 2016.
The American health care bill would have barred the use of tax credits toward plans that pay for abortions, with exceptions for rape, incest and situations that endanger the mother's life. The American Health Care Act would also have prohibited federal funding for Planned Parenthood for one year from the date the bill was enacted.
Trumpcare would have suspended the "Cadillac tax" on high-cost employer-provided group health insurance from 2020 – when it is scheduled to go into effect under ObamaCare – to 2024 and have eliminated most other taxes imposed by ObamaCare.The original American Health Care Act bill would have stopped the expansion of state Medicaid programs after 2020 and capped federal funding for state Medicaid programs based on spending per enrollee in 2016.
The American Health Care bill planned to maintain several popular provisions of ObamaCare, including a provision preventing insurers from denying coverage based on preexisting conditions and another that allows children to stay on their parents' plans until age 26.
The Congressional Budget Office (CBO), a nonpartisan research arm of the legislature, published an analysis of the proposal on March 13, which found that 18 million more Americans would be without health insurance in 2018 under the American Health Care Act, compared to the forecast under current law, a figure that would rise to 24 million by 2026. Much of the forseen reduction in coverage would have come from eliminating the individual mandate, which would lead younger and healthier customers to go without insurance.
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