A 2010 law that enacted the most significant regulatory overhaul of the
American healthcare system since passage of Medicare and Medicaid in 1965. It
is also referred to as the Affordable Care Act (ACA) or as
"Obamacare."
Following are the highlights of the PPACA.
- Health insurance market reforms: Among the reforms include: (1) health
insurance policies are barred from having annual or lifetime coverage limits;
(2) insurers must cover all applicants, with new minimum policy standards,
and offer the same rates regardless of preexisting conditions or gender; (3)
those with preexisting conditions cannot be denied coverage; (4) health
insurers may not drop insureds who develop a medical condition; (5) parents
with children up to the age of 26 can cover them under their own
policies.
- Individual mandate: Everyone in the United States must purchase health
insurance or pay a penalty to the Internal Revenue Service (IRS) on their
income tax return. Exemptions will be granted for financial hardship,
religious objections, American Indians, prison inmates, those without
coverage for less than 3 months, undocumented immigrants, people with incomes
below certain tax filing thresholds (currently $9,500 for individuals and
$19,000 for married couples), and those for whom the lowest cost plan option
exceeds 8 percent of household income.
- Medicaid expansion: As of 2013, every state has different Medicaid
eligibility requirements based on income, age, gender, dependents, and other
specific requirements. Starting in 2014, states have the option, but not the
obligation, to expand Medicaid eligibility levels to 138 percent of the
federal poverty level (FPL). The expansion covers the gap for those who earn
too much to qualify for Medicaid but not enough to qualify for subsidies
available under the individual mandate.
- Insurance exchanges: Directs states to establish insurance exchanges
where individuals and small businesses can compare various insurers'
healthcare plans, band together to form larger purchasing groups, and obtain
coverage at more affordable rates. In states that choose not to establish
such exchanges, the federal government will do so.
- Premium subsidies: Provides sliding-scale subsidies that reduce the cost
of coverage. To be eligible for a premium subsidy, household income must be
between 100 percent and 400 percent of the FPL. (Below 100 percent of FPL,
the household qualifies for Medicaid. Above 400 percent of FPL, subsidies are
no longer available.)
- Large employer mandate: Requires employers with more than 50 full-time
employees to offer "affordable" coverage to their workforce or pay
an annual penalty to the IRS. "Full-time" employees are defined as
working 30 hours or more per week (which means the law does not apply to
part-time workers). The amount of the penalty depends on whether the employer
does or does not offer coverage and whether any of the employees receive a
premium credit for purchasing individual or family coverage on a state-based
exchange.
- Small employer subsidies: Offers a modest tax credit to small employers
to help defray some of the cost of purchasing health insurance for their
employees. To be eligible, a small business must meet the following criteria:
(1) 25 full-time employees or fewer (meaning tax credit subsidies are
unavailable for companies with between 26 and 50 employees); (2) average
annual wage less than $50,000; and (3) employer contributes at least 50
percent to the premium cost.