On March 23rd of 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act, a landmark U.S. statute that entails the largest regulatory overhaul and coverage expansion since the enactment of Medicare and Medicaid in the 1960s. Introduced at a time when over 45 million Americans were uninsured, the ACA constituted provisions that required most individuals to have health insurance at the cost of a penalty fee, combat abusive insurance practices, make coverage more easily accessible, and attempted to mitigate increasing healthcare costs. At the vantage point of over a decade since its passage, it’s worth taking a look back on its implications across Medicaid, private, and other sources of healthcare coverage.
Medicaid Expansion
In pre-ACA times, Medicaid was generally inaccessible to non-disabled adults under age 65 unless they had minor children. Henceforth, with the intention of attaining coverage for low-income Americans, the ACA called for all states to expand Medicaid coverage for adults up to age 64 with incomes at or below 138% of the federal poverty level (FPL). The federal government would cover 100% of the increased costs until 2016 and incrementally taper to 90% by 2020.
Under the ACA, if states were to not participate in the Medicaid expansion, Congress was to invoke the Spending Clause to revoke all of their Medicaid funding. However, the Medicaid expansion was rendered optional after the 2012 Supreme Court ruling of NFIB vs. Sebelius, which deemed termination of all Medicaid funding to noncompliant states as unconstitutionally coercive. As of 2022, 38 states and the District of Columbia have implemented the Medicaid expansion. In the 12 states that have not enacted the initiative, there currently exists a coverage gap where 2.2 million people are eligible for neither premium subsidies in the Marketplace due to below-FPL income nor Medicaid.
Marketplace Insurance Subsidies
Furthermore, for individuals without employer or government-funded insurance, the ACA provides subsidies in the private insurance marketplace. Before 2014, insurance companies practiced medical underwriting where they would evaluate whether to accept an applicant for coverage and at what premium rates if they do. Since individual insurance typically bares greater administrative costs than group policies, securing coverage used to be either too inaccessible or costly especially for patients with pre-existing conditions.
Intending to remedy this phenomenon, the ACA provided premium subsidies for individuals with incomes at or below 400% of the FPL, where buyers would spend no more than a predetermined percentage of their income, ranging from 2.06% to 9.78% correlating to their income, on insurance. The cost of a plan that covered approximately 70% of the expected expenses for an insuree in a local insurance marketplace establishes the amount of the provided subsidy. Additionally, the ACA also mandated insurers to reduce copayment of deductible in the form of cost-sharing assistance for individuals making less than 250% of the FPL. Under this provision, a “moderately generous” plan can cover 94% of an insuree’s expected costs.
Marketplace Reforms
Additionally, the ACA transformed the insurance market via a series of reforms targeted at specific existing problems. In establishing “guaranteed issue” and “guaranteed renewal”, the ACA ensured that insurers must accept all applicants at equal premiums regardless of a patient’s pre-existing conditions. Now, the only factors impacting a person’s premium are age, family size, geographical location, and smoking habits. In addition, the law required health plans in the individual and small group markets to cover ten essential health benefits (EHB) that include ambulatory services, emergency services, maternity, and newborn care, hospitalization, and more.
Moreover, in foreseeing the potential of sicker individuals entering the insurance Marketplace due to installment of the guaranteed issue and driving up premiums, the ACA sought to incentivize the healthy population of purchasing insurance to balance out the risk pools. For that reason, the ACA imposed the controversial and now-repealed individual mandate, requiring all Americans to have purchased health insurance by 2014 or pay a financial penalty.
In perhaps its most popular provision known as the dependent-coverage policy, the ACA required all
private insurers to offer coverage to dependent children to up 26 years of age on their parents’ plans. Effectuation of this provision concurred with the beginning of a steep decrease in the uninsured rate among the 19-25 years old demographic. At the highest uninsured rate of any group, 33.9% of adults younger than 26 years of age lacked coverage in 2010. By 2013, this percentage had fallen to 26.5% and eventually to a sub-15% in 2016 in the aftermath of the Medicaid expansion and Marketplace creation.
Basic Health Program (BHP)
Section 1331 of the ACA enables states to create a Basic Health Program (BHP), a health benefits coverage program that serves as an alternative to the Health Insurance Marketplace for low-income residents whose income fluctuates above and below Medicaid and Children’s Health Insurance (CHIP) levels. Since then, the program has been implemented in New York and Minnesota. Under this plan which will include at least the ten essential health benefits mandated by the ACA, monthly premium and cost-sharing charged to enrollees will not be greater than a qualified health plan (QHP) Marketplace alternative.
Effects on Coverage Expansion
In the metric of expanding coverage in the US, the ACA was largely successful. According to a 2019 US Department of Health and Human Services (HHS) report, enrollment data from late 2020 and early 2021 indicates that approximately 31 million persons gained coverage related to ACA provisions.
The breakdown is as follows:
- 11.3 million Marketplace plan enrollees as of February 2021
- 14.8 million new Medicaid enrollees due to eligibility expansion as of December 2020
- 1 million persons enrolled in ACA’s Basic Health Program
- Close to 4 million persons, known as the “woodwork group”, who had been eligible but previously weren’t covered, are now incentivized to take up Medicaid due to heightened awareness of ACA’s coverage options, reduced administrative barriers to applying, and the individual mandate.
Acting in tandem with cost-sharing reductions, premium subsidies have substantially decreased premiums and deductibles for those in the lower-income range. In 2019, 87% of the 10.6 million Marketplace plan enrollees benefited from such premium subsidies. Furthermore, in a 2017 study published in the Journal of Health Economics, researchers accredited 40% of the coverage gains to these exchange premium subsidies. However, enrollments, on an annualized basis, since 2015 have been consistently hovering around 10 million persons, which is 60% below previous Congressional Budget Office (CBO) projections. Moreover, in guaranteeing lower- and middle-income employees access to individual market plans with premium tax credits, the ACA had inadvertently prompted 2 million workers to be dropped from their existing employer-sponsored insurance by 2017.
Deviations from ACA’s Design
However, the full effects of the Medicaid expansion couldn’t be realized partially due to the coverage gap previously discussed, but also due to Section 1115 waivers issued by President Trump’s administration. Section 1115 of the Social Security Act allows states to impose premiums and increase cost-sharing among new requirements on Medicaid expansion enrollees. In 2018, based on benefiting state governments “in their efforts to improve Medicaid enrollee health and well-being through incentivizing work and community engagement”, the Trump administration approved work requirements of between 80 and 120 hours a month in 13 states. Limited data is available on the coverage loss of these Section 1115 waivers. However, in the case of Arkansas where the waiver was active from June 2018 to March 2019, over 18,000 people, or roughly 25% of those subjected to the work requirement, many of whom were working but were unaware of how to report to Medicaid authorities, were disenrolled from Medicaid after failing to comply. Henceforth, though not a direct intention by the ACA’s crafters, opponents of the ACA have criticized it for being subject to turbulences of the “big government”.
Additionally, the repeal of the individual mandate in December of 2017 is expected to disincentivize healthier people from acquiring coverage in the Marketplace and drive up premium prices. In a comparison of pre- and post-repeal insurance levels, research has found a 24% increase in the likelihood of becoming newly uninsured in states with no federal or state mandate.
What’s Next?
Under the American Rescue Plan of 2021 (ARP), households above the 400 percent FBL received premium tax credits to improve affordability in the Marketplace. The ARP had increased access to zero-premium plans on the federal healthcare marketplace from 43 percent to 62 percent of uninsured non-elderly adults, as well as access to low-cost plans (under $50 monthly premium) from 57 percent to 73 percent. By the end of the 2022 Open Enrollment Period, Marketplace enrollment had reached an all-time high of 14.5 million people. However, if not extended, the expansion provision is set to expire in 2023. A recent HHS report projects that 3 million current insurees, 15% of the individual market population, will become uninsured in that scenario.