Health Care Reform - Affordable Care Act of 2010
This page focuses on some key aspects of the Affordable Care Act - the health
insurance reform legislation that was passed by Congress and signed by President
Obama in 2010, which the Republicans call "Obamacare".
The Act Does Not Force People to Buy Health Insurance
The Affordable Care Act does not force people to buy health insurance; the
"mandate" to purchase insurance (which is to start in 2014) is more of an incentive
than a requirement:
- The mandate does not apply to anyone with income at or below 133% of the poverty
level, and there are a number of other exemptions, including for financial
hardship, religious beliefs, etc.;
- If a person does not purchase insurance they may be assessed a "penalty", which is essentially a tax. The
tax is quite small; no more than $695 a year for a single person or $2085 for
a family of three or more, or 2.5% of family income, whichever is greater; so a
family of four with income of $100,000 would pay only $2256 a year.
- Failure to purchase insurance is not a crime and no criminal sanctions may be
- The only way the IRS is allowed to collect this fine is by withholding it from a
When individuals are uninsured, hospitals and doctors frequently are forced to absorb
the costs of service for these individuals, and then they need to inflate their charges to
those covered by private insurance or Medicare or Medicaid in order to recover the
unreimbursed care of the uninsured. The tax on those who don't buy insurance will partially cover
the cost that they would otherswise pass onto those who are insured. For many years states have required automobile
owners to have liability insurance so that insured motorists or the taxpayers don't get
stuck paying for the damage done by uninsured motorists. The same principle should apply to
health care insurance.
The Act Will Stop Insurance Companies From Rejecting or Dropping Coverage
Because of Medical Conditions or Expenses
The Act prohibits health insurance companies from:
- refusing to provide coverage to any applicant, regardless of their medical
- refusing to pay for medical expenses because of pre-existing conditions;
- dropping coverage because of medical conditions or medical expenses;
- refusing to renew coverage; and
- charging premiums based on the medical expenses of the individual or family
(premiums must be based on expenses for the entire pool of insured).
These requirements on insurance companies are in response to extensive complaints
of abuse, and financial crises for those most in need of care, and are widely accepted as necessary reforms.
We Can't Have One Without the Other: It Would be Extremely Difficult or Impossible to Restrict Insurance
Companies as Noted Above, Unless We Also Have Near-Universal Insurance
- The above restrictions on insurance companies can only work if most people
have insurance coverage. If people knew that insurance companies were required to sell
them insurance regardless of pre-existing conditions, many would take advantage of the
system by waiting to buy insurance until they require expensive health care.
This is likely to drive up premium costs to make insurance unaffordable for most,
and could result in the collapse of the health insurance industry.
- So the new restrictions on insurance companies and the new incentives to buy
insurance go together as a package. If we were to drop the incentive to buy
insurance we also would need to drop or significantly change these prohibitions on insurance
companies related to pre-existing conditions.
The Act Provides Substantial Financial Aid to Buy Insurance
- Those with incomes at or below 133% of the Federal poverty level will be eligible for Medicaid
coverage and do not need to buy insurance (if your state agrees to expand Medicaid coverage, which is fully paid by the Federal government for the first three years).
- Those with incomes up to 400% of the poverty level will receive advance tax
credits (paid directly to the insurance company) to pay for a portion of their insurance premiums. For example, those with
incomes up to 133% of the poverty level will pay no more than 2% of their
income for health insurance, while the remainder will be paid through tax
credits. Assuming the 2011 poverty level of $10,890 for a single person, and
assuming income at $14,157 (130% of poverty level), the out-of pocket cost for
health insurance premiums would be $283 a year ($23.58 a month).
- The financial assistance declines as income increases. For example, if a single
person made $27,225 (250% of the poverty level), the out-of-pocket cost for
premiums would be $1,715 a year ($143 a month). A family of four with
income of $55,875 (250% of the poverty level) would have to pay no more than
$3,520 a year ($293 a month).
Other Major Benefits Include Continued Coverage for Older Children on Parents'
- Although many provisions of the Act won't be fully implemented until 2014, an
immediate benefit for many is the requirement that insurance companies permit
adult children under the age of 27 to remain on their parents' policy. This is a
major benefit for young adults who are struggling to establish their careers with
The Act Will Reduce Health Insurance Costs for Everyone
- By providing incentives for most people to carry health insurance, it will spread
health care costs across a wider base, including many relatively healthy people,
thereby reducing premiums for everyone.
- In addition to the incentives to individuals to buy insurance, the Act provides
incentives to businesses, large and small, to provide group coverage for their
- The Act will establish Affordable Insurance Exchanges which will encourage
competition among insurance companies and permit individuals to purchase
coverage at the lowest possible costs.
- The Act also promotes an aggressive research and development program to
encourage implementation of payment and delivery system reforms to help
constrain cost growth, and provides for several additional actions to reduce the
rate of increase in health care costs in the United States. This is an issue that
impacts the ability of all of us to receive affordable health care. And it affects
the competitive position of American companies in the world market because
per capita health care costs in America are much higher than in the rest of the
world. The Organization for Economic Co-operation and Development (OECD)
report on Health Data in member countries shows that in 2007 the total spending
for health care in the United States accounted for 16% of the country's GDP, the
highest share among the OECD countries and almost double the OECD average.
The Act is Based In Part on a Republican Proposal, And is Not Even Close to
- The legislation as finally passed was based in part on earlier Republican
proposals to mandate that everyone purchase health insurance. The idea was first
proposed by the conservative Heritage Foundation in 1989, and was twice
introduced as proposed legislation by Republicans in Congress in the 1990s as
an alternative to President Clinton's proposed reforms. Mitt Romney, as
Governor of Massachusetts, promoted the individual insurance mandate and
called it "a personal responsibility principle".
- Rather than establish a single payer system for health care, as is used in Canada,
which would have greatly reduced business for health insurance companies, the
Act will increase business to health insurance companies by encouraging and
supporting more people to buy insurance.
- The Act does not replace private insurance companies with public insurance; it
does not replace private doctors with government-employed doctors; it does not
replace private hospitals with government hospitals. The accusation that the
legislation is "socialized" medicine is entirely bogus.
- It is clear that the Republican opposition to the Affordable Care Act was motivated
by their efforts to prevent the reelection of President Obama, and they have
intentionally lied about the impact of the legislation in attempts to demonize
President Obama and Democrats.
The Republican Alternative
- Republicans want to repeal the Affordable Care Act, and bring to an end all
government efforts to expand health care coverage and reduce the growing cost
of health care in America. Fortunately, that is not going to happen.
- Republicans claim that health care costs can be controlled if we just let
competition in the marketplace work. They offer no evidence that price
competition will control health care costs. Experience shows the contrary;
hospitals and doctors do not compete for patients based on the price of their
services. And insurance companies have not been able to constrain increased
hospital and doctor costs - they have passed those increases along to the insured
through increased premiums (or they found ways to avoid paying benefits to
patients, such as dropping patients with high costs or claiming that the costs
were not covered due to pre-existing conditions). For the past 60+ years
hospitals and doctors and insurance companies have had ample opportunity to
compete for the business of individuals and employers, and the cost of health
care has just kept going up at a rate far exceeding cost increases in other
- Republicans claim that the Affordable Care Act is a failure because it has not yet
reduced health care costs, ignoring the fact that most of the provisions of the Act
have not yet been implemented, and key provisions will not become effective