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Obamacare: the Affordable Care Act (ACA)

Learn how the ACA improved coverage and made it more affordable through income-based subsidies. Find ACA-compliant plans now, during open enrollment.

What is Obamacare?

The Patient Protection and Affordable Care Act – commonly referred to as the Affordable Care Act (ACA) and also known as Obamacare – is a sweeping piece of legislation passed by the 111th Congres and signed into law by President Barack Obama in 2010.

The law was intended to improve the affordability and quality of health insurance in the United States.

The ACA includes numerous provisions intended to make coverage affordable for and accessible to millions of Americans who struggled to pay for individual coverage – many of whom could not buy individual coverage at any price due to pre-existing medical conditions.

The law sharply reduced the number of uninsured Americans. And although the uninsured rate increased under the Trump administration’s watch, enrollment in marketplace plans reached an all-time high in 2022, and so has Medicaid/CHIP enrollment.

How the ACA makes coverage more affordable


ACA’s premium subsidies (premium tax credits)

As of early 2021, more than 9.7 million Americans were receiving Obamacare’s premium subsidies. And the subsidies have been made larger and more widely available since then, thanks to the American Rescue Plan.

The premium subsidies – which are actually tax credits – offset the cost of premiums for any metal-level ACA-compliant health plan available through an ACA marketplace.

Subsidy eligibility is largely based on income, but there are a handful of other factors, including immigration status, age, and access to government-sponsored or employer-sponsored coverage. Here’s a full explanation of premium subsidy eligibility. Here’s how to calculate your subsidy.

Americans not eligible for premium subsidies include individuals whose employer offers comprehensive “affordable” coverage, those who are eligible for Medicaid, premium-free Medicare Part A, or another government program, and individuals who are incarcerated or not legally present in the U.S.


ACA cost-sharing reductions

In addition to the premium subsidies, the ACA also provides cost-sharing reductions (CSR) – also known as cost-sharing subsidies – which reduce out-of-pocket spending for eligible enrollees who select Silver plans in the marketplace/exchange. In 2021, 48% of exchange enrollees – more than 5.4 million Americans – were receiving CSR. That’s almost certainly increased since then, as the American Rescue Plan made Silver plans more affordable for enrollees whose income makes them eligible for CSR. Here’s an explanation of eligibility for cost-sharing subsidies.


Obamacare’s Medicaid eligibility expansion

Millions of Americans have been able to enroll in Medicaid since 2014 through the ACA’s expansion of Medicaid eligibility. The Supreme Court made the expansion optional for states, but as of early 2022, 38 states and the District of Columbia had accepted federal funding to expand Medicaid – providing coverage for nearly 20 million Americans.


ACA’s ‘80/20 Rule’ – Medical Loss Ratio

Obamacare established the Medical Loss Ratio – the 80/20 Rule – which forced health insurance companies to devote more premium dollars to medical care for policyholders, as opposed to administrative costs. When insurers don’t meet these requirements, they have to issue refunds to policyholders. In 2021, more than $2 billion in rebate checks were sent to American consumers.

The ACA also requires Medicare Advantage plans to spend at least 85% of revenue on medical costs and quality improvements, although rebates in the case of non-compliance are issued to the federal government instead of enrollees.


An escape from crushing COBRA premiums

The Affordable Care Act added a new alternative to COBRA. COBRA gives employees the option of continuing their group coverage after leaving a job or otherwise losing access to their employer-sponsored coverage. (State continuation provides this option in many states for people who work for smaller employers.)

Since the mid-1980s, COBRA provided a realistic way for people to maintain coverage while between jobs if they had pre-existing conditions and were unable to qualify for medically underwritten individual health coverage. COBRA allowed these individuals to keep the same coverage they had at their job, but the coverage was expensive, since the employee assumed the full price of the plan – including the portion the employer had been paying.

Obamacare’s guaranteed issue provision assured coverage eligibility for these individuals – and also ensured that their new individual-market coverage is as comprehensive as group coverage (for example, the inclusion of maternity coverage – which wasn’t part of most individual market plans prior to 2014). For most enrollees, coverage under the ACA is also affordable, thanks to premium subsidies. And – depending on income levels after leaving a job – some of these individuals now qualify for expanded Medicaid with free or very low-cost premiums.

As a result, the law freed Americans from “job lock” allowing them to pursue self-employment and entrepreneurship, confident that they have access to comprehensive, affordable coverage on the individual market.


Effective rate review

Before the Affordable Care Act was implemented, some states tried to ensure that premiums on state-regulated health plans were actuarially justified, but others did very little – and residents in some states were getting fleeced by some insurers. Obamacare implemented a system that requires an actuarial review of any proposed rate increase of 10% or more (this threshold has since increased to 15%), and details are published so consumers can see them.

Most states handle the rate review process themselves, but as of 2022, the federal government conducts the rate review process in Oklahoma and Wyoming. (Texas was on this list until 2022, when their new rate review program took effect.)


Caps on out-of-pocket costs

Under Obamacare, health plans have to cap enrollees’ out-of-pocket exposure for in-network care at a level that’s set each year by the federal government. (Plans can have out-of-pocket caps that are lower than the federally determined amount, but not higher.) Prior to the ACA, individual-market plans sometimes had out-of-pocket limits of $20,000 or more, or no limits at all. For 2022, the cap is $8,700 for a single person, and $17,400 for a family.


More affordable coverage for small businesses

Under Obamacare, small businesses that provide employees with health insurance may be eligible for an ACA-created tax credit to make offering coverage more affordable.

How Obamacare makes it easier to select health coverage


What are health marketplaces and how do they help consumers shop for coverage?

Health insurance marketplaces – also referred to as health insurance exchanges – were established to help American consumers easily compare coverage details and costs across a wide range of qualified health plans. These policies, which are all ACA-compliant, must meet standards established and enforced by the federal government and state governments.

The ACA called for the creation of an exchange – or marketplace – in each state, but marketplace implementation (including the type of marketplace) varies by state. As of 2022, there are 18 state-based exchanges, three federally supported exchanges, six state-partnership exchanges, and 24 federally facilitated exchanges. See information about your state’s health insurance marketplace.

A key goal of the marketplaces was to provide coverage explanations in easy-to-understand, standardized formats, along with uniform definitions of health insurance terminology. Plans are categorized under metal level classifications based on their actuarial value, and catastrophic plans are also available to eligible enrollees.


How does Obamacare help small business provide coverage for their employees?

Included in the exchange options is an enrollment platform called SHOP (Small Business Health Options Program) – a tool that allows small businesses to compare plans and enroll in coverage for their employees. But SHOP plans proved to be much less popular than individual market plans, and most states no longer have SHOP plans available. In some states, however, there are still thriving SHOP markets.


What are the ACA’s CO-OPs (Consumer Operated and Oriented Plans)?

The ACA also created nonprofit health insurance co-ops – private, nonprofit, state-licensed health insurance carriers – that offer ACA-compliant plans in individual and small-business markets. But only three CO-OPs are still operational in five states.


What is ACA’s Basic Health Program?

Two states – New York and Minnesota – offer the ACA’s Basic Health Program option for people with incomes too high for Medicaid eligibility and for legal immigrants not eligible for Medicaid because of the five-year waiting period.

How the ACA changed coverage standards


How does the ACA help consumers with pre-existing conditions?

Obamacare put coverage standards in place to prevent insurers from discriminating against applicants – or charging them higher plan premiums – based on an individual’s pre-existing medical conditions or gender. Before the implementation of the ACA, Americans with pre-existing conditions could find it expensive – or impossible – to buy health coverage in the individual market. The law also eliminated waiting periods that employer-sponsored plans would impose before starting coverage of pre-existing conditions, and allows employers to impose waiting periods of no more than three months before full-time employees must be offered health coverage.

Under the ACA, all policies are guaranteed issue – which means that health coverage is guaranteed to be issued to applicants regardless of their health status, age or income. Prior to 2014, coverage on the individual market in most states was not guaranteed issue. Instead, insurers based eligibility for coverage on an applicant’s medical history.


Did the Affordable Care Act improve employer-sponsored coverage?

Obamacare also mandated minimum value standards for employer-sponsored plans offered by large employers (in most states, that means 50+ employees). Large employers are required to offer affordable coverage that provides minimum value, which means it can’t be a “mini-med” or type of plan with gaping holes in the coverage. Employers that don’t comply face potential penalties under the employer mandate.

How plan benefits are improved in ACA-compliant plans


Essential health benefits

ACA-compliant plans come with a long list of benefits – embodied in Obamacare’s essential health benefits (EHB). Under the Affordable Care Act, all individual and small-group major medical plans must include coverage of the following EHBs:

  1. hospitalization
  2. ambulatory services
  3. emergency services
  4. maternity and newborn care
  5. services for those suffering from mental health disorders and problems with substance abuse
  6. prescription drugs (including brand-name drugs and specialty drugs)
  7. lab tests
  8. chronic disease management, “well” services and preventive services, including vaccinations (certain preventive services are covered at no cost to the enrollee)
  9. pediatric dental and vision care for children
  10. rehabilitative and “habilitative” services which include helping a person keep, learn or improve functioning for daily living.

Free services
While that list alone may seem impressive, it’s even more impressive when you look at the long list of preventive healthcare services that are covered FREE under ACA-compliant plans:

  • FREE colonoscopies
  • FREE route cholesterol and blood pressure checks
  • FREE birth control
  • FREE routine vaccinations
  • FREE breastfeeding supplies
  • FREE screening for gestational diabetes
  • FREE pap smears and HPV tests
  • FREE screenings for HIV, Gonorrhea, and Hepatitis
  • FREE tobacco cessation
  • FREE Rh incompatibility screening for pregnant women

Although large group plans are not required to cover the ACA’s essential health benefits, the requirement that health plans fully cover a wide range of preventive care does apply to large group plans as well as small group plans and individual market plans (including student health plans, which are regulated under individual market rules).

And for any essential health benefit that is covered under a large group plan (which includes most of the benefits on most plans), there cannot be any annual or lifetime benefit caps.


Coverage on your plan for adult children


Improved plans for college students

And also thanks to Obamacare, health plans offered to college students are just as comprehensive as the ACA-compliant plans offered to everyone else.

Obamacare’s consumer protections/ anti-discrimination


Protection from discrimination

Section 1557 prohibits discrimination in health plans – including discrimination based on gender identity or sexual orientation. That has been a boon to the LGBT community.

The Trump administration rolled back those consumer protections with a new rule that was issued in 2020, but the Biden administration announced in May 2021 that Section 1557 requirements would once again include a prohibition on discrimination by health care entities based on sexual orientation or gender identity. And HHS has included clarification of the non-discrimination rules in the proposed Benefit and Payment Parameters for 2023.


A level playing field for women

Because Obamacare prohibits discrimination because of a pre-existing or newly diagnosed condition, it also means women can’t be denied coverage if they’re pregnant or be forced to pay a higher premium just because they’re women (health plans in the individual market used to routinely reject applications from expectant parents — both male and female — before the ACA’s reforms were implemented).

Another major improvement under Obamacare is birth control access – with plans required to fully cover (ie, with no cost-sharing) at least one version of every FDA-approved method of birth control for women.


Ease of claim appeals

Under Obamacare, there’s an internal appeals process, and if that doesn’t work,  consumers have the right to an external review by an independent organization.


Protection from rescission

Under the ACA, rescission (retroactive cancellation of your coverage) by a health insurance company is prohibited – unless your application was fraudulent or included intentional misrepresentation.

How and when to enroll in the Affordable Care Act / Obamacare:

During open enrollment

Although coverage under the ACA is now guaranteed issue, there’s a trade-off: enrollment in ACA-compliant individual market plans is limited to an annual open enrollment period (November 1 to January 15 in most states).

Individuals who want to enroll in an ACA-compliant plan (including a CO-OP in areas where they’re still available) have the choice of enrolling through a state health insurance marketplace or off-exchange (outside of the marketplace), although premium subsidies and cost-sharing reductions are not available outside the exchange. Learn how plan design and pricing may differ off-exchange.

Outside of ACA open enrollment

Outside of the annual OEP, individuals who have qualifying life events can enroll during a special enrollment period. These qualifying events include:

In most cases, the applicant must have had minimum essential coverage in place prior to the qualifying event in order to be eligible for a special enrollment period, so some qualifying events only allow for coverage changes (as opposed to gaining coverage after being uninsured).

Who can enroll in an ACA-compliant plan?

The intent of the Affordable Care Act was to cover as many Americans as possible with comprehensive, major medical health insurance plans. To be eligible to enroll in a plan through the ACA’s health insurance exchanges, you must be lawfully present in the U.S. and you can not be currently incarcerated.

Immigrants can enroll in individual health plans during the open enrollment period, just like any other lawfully present U.S. resident – and lawfully present immigrants are eligible for ACA’s premium subsidies.

Do you have to enroll in an ACA-compliant plan?

The ACA’s individual mandate penalty was eliminated after the end of 2018 – meaning that a federal penalty no longer applies to people who are uninsured in 2019 and later. However, some states have implemented their own individual coverage mandates.

For the most part, coverage needs to be ACA-compliant in order to meet the requirements of an individual mandate, but if you still have a grandmothered or grandfathered health plans (neither of which are required to be fully compliant with the ACA), you can keep your plan for as long as it continues to be available.

Frequently asked questions about dental insurance


How much does dental insurance cost?

For people who purchase their own stand-alone dental coverage, premiums are most commonly in the range of $20 to $50 per month. There are plans as low as $10/month, but to have any real coverage for major services, such as crowns and bridges, you should expect to pay at least $35/month.

If a family is purchasing coverage through the health insurance exchange, the premiums associated with pediatric dental coverage may or may not be offset by premium tax credits (premium subsidies). Here’s more about how that works, depending on whether the health plan has integrated pediatric dental benefits.


Is there a waiting period for dental insurance?

Dental insurance policies often have a waiting period between the coverage start date and the date when certain types of dental work can start. Insurance carriers require these waiting periods – typically ranging from six months to a year – to discourage consumers from buying coverage only when they anticipate a procedure.


Does dental insurance cover cosmetic treatments and procedures?

Typically, dental insurance will not cover dental treatments that are considered essentially cosmetic and not medically necessary. It’s important to check your dental coverage before arranging for treatments that may be deemed cosmetic by your insurer.


Will dental insurance cover services provided by my dentist?

It’s important that you know whether or not your dentist is in-network as choosing an in-network dentist will likely lower your out-of-pocket costs compared to out-of-network providers. But regardless of whether your dentist is in-network or not, you should always check in advance to see which treatments offered by your dentist are covered by your dental policy.


Steve Anderson, healthinsurance.org’s editor and content manager, has been writing about health insurance and health reform since 2008. Steve is also co-founder and editor of medicareresources.org. In previous lives, he worked as a community journalist, public relations manager and director of public affairs.

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