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On March 23, 2010, President Obama signed into law the federal health reform legislation known as the Patient Protection and Affordable Care Act (generally just referred to as the Affordable Care Act, ACA, or Obamacare). A primary purpose of the legislation is to assure that almost all Americans have access to affordable health insurance.
This article will describe what the ACA is, how it has reformed health insurance in the U.S., and how the implementation of the ACA has evolved over time.
The key reforms in the Affordable Care Act were designed to significantly decrease barriers to obtaining health coverage as well as accessing needed healthcare services. But the law has been controversial from the beginning, and the bitter partisan divide over healthcare reform has resulted in a less-than-optimal implementation of healthcare reform.
Most of the ACA's provisions took effect in 2014, including health insurance exchanges, premium subsidies for people who buy their own health insurance, guaranteed-issue coverage, essential health benefits, and the requirement that virtually all Americans maintain health insurance coverage—either through their employer, through a public program such as Medicaid or Medicare, or by purchasing coverage in the individual market, either via the exchange or off-exchange.
From 2014 through 2018, there was a penalty that was assessed by the IRS when people didn't maintain health insurance, although that penalty was repealed after the end of 2018, under the terms of the Tax Cuts and Jobs Act, which was enacted in December 2017.
But there is still a penalty for being uninsured in Massachusetts, DC, New Jersey, California, and Rhode Island, as they all have their own requirement that residents maintain health coverage, along with penalties for non-compliance.
Prohibits individual/family and small group major medical health plans from:
Requires all non-grandfathered health plans to:
Requires large employers (50+ employees) to:
Requires individuals to:
Makes coverage and care more affordable with:
Depending on your household income, family size, and state of residence, you may have several coverage options and may qualify for financial help (subsidies). The following are examples of coverage options for 2024.
For Medicaid, CHIP, and BHP eligibility, the 2023 Federal Poverty Level (FPL) numbers will continue to be used in most states until March or April 2024. New FPL numbers are published each January by HHS, but it takes a few months before states start to use them to determine Medicaid and CHIP eligibility for new applicants. By the spring of 2024, all states will be using the 2024 FPL numbers.
For premium subsidy eligibility, the 2023 FPL numbers will be used for any plans with effective dates in 2024, regardless of whether the person applies before or after the 2024 FPL numbers are published. This is because open enrollment for private plan coverage takes place in the fall and early winter, before the FPL numbers are updated for the new year. So to maintain continuity, those FPL numbers continue to be used for people who enroll later in the year, due to a qualifying life event.
Example 1: Eligible for Medicaid in a state that has expanded Medicaid
Annual income:
Example 2: Eligible to buy a subsidized health plan through a state-based health insurance exchange
Projected annual income for 2024 must be above the cutoff for Medicaid eligibility (or at least 100% of the poverty level, in states that have not expanded Medicaid), but not so high that the cost of the benchmark plan would be less than 8.5% of the household's income.
Before 2021 (and after 2025, unless the American Rescue Plan's provisions are extended again), there was a subsidy eligibility income cap equal to 400% of the poverty level. This meant that premium subsidies in 2021 were only available to a single person earning up to $51,040, and to a household of four earning up to $104,800.
But those caps were eliminated by the American Rescue Plan. People with income above 400% of the poverty level are eligible for subsidies in 2024 if the benchmark plan would otherwise cost more than 8.5% of their household income.
So there is technically still an income cap for subsidy eligibility, but it varies from one person to another and from one place to another.
In other words, if you earn enough money that the benchmark plan would cost less than 8.5% of your household income, your income is too high to be subsidy-eligible. But that's going to be a different income level depending on how old you are and where you live, since the cost of health insurance varies with age and location.
Example 3: Eligible to purchase private coverage but without financial assistance
Even with the American Rescue Plan in place, there are still some people who don't qualify for premium subsidies and have to pay full price if they wish to purchase a plan in the marketplace/exchange. This includes the following groups:
As of 2023, about 9% of the people who enrolled in plans through the exchanges nationwide were ineligible for premium subsidies. And although off-exchange enrollment is very low compared with on-exchange enrollment, everyone who enrolls off-exchange is paying full price, as there are no subsidies available outside the exchange.
Depending on the type of health insurance you already had, you may or may not have experienced changes as a result of the ACA.
If your source of health coverage was already an employer plan, these are some of your options:
Stay in your employer plan: If your employer continues to offer health insurance, you can keep it.
Shop for a health plan through the health insurance exchange in your state: If you own a small business, or your employer offers coverage that doesn't provide minimum value, or if your plan is not considered affordable, you can look for better options in the exchange.
(Small business plans are no longer available in the exchanges in most states, but ACA-compliant small business plans can be purchased directly from insurers, with or without the help of a broker).
If your source of health insurance is an individual policy that you purchased for yourself and/or your family before 2014 these are your options:
Keep your current plan: If your health plan continues to offer the same coverage, you can renew it (these plans can remain in force, but cannot enroll new customers in the individual market, or new businesses in the employer-sponsored market).
Grandfathered plans (in force by March 23, 2010) can remain in existence indefinitely, as long as the insurer continues to renew them—which they are not required to do. Grandmothered plans (effective dates after March 23, 2010, but before the end of 2013) are currently allowed to remain in force until further notice, under guidance that was issued in 2022.
Shop for coverage through the insurance exchange in your state: Depending on your income (as determined by the ACA's modified adjusted gross income calculation) and the plans available in your area, you may qualify for federal tax credits to help offset the cost of your premium.
Note that you can only purchase individual major medical coverage (through the exchange or outside the exchange) during the annual open enrollment period, or a special enrollment period triggered by a qualifying life event.
If you are on Medicare, your options may not have changed significantly, but your drug-related costs might have decreased if you need enough medication that you reach the donut hole, and your access to services may have improved:
Your basic (or guaranteed) benefits and eligibility have not changed: The ACA did not change the eligibility rules for Medicare or the basic framework of benefits that it provides.
Medicare Advantage: Federal subsidies for Medicare Advantage plans have been reduced, which initially resulted in speculation that the plans would become less robust and lose enrollees. But Medicare Advantage enrollment has continued to increase in the years since the ACA was signed into law. The plans are more popular than ever, with about 48% of all Medicare beneficiaries enrolled in Medicare Advantage plans as of 2023.
Access to services: Medicare now covers annual wellness visits, thanks to the ACA's preventive care benefit mandates.
Prescription drug coverage: The prescription drug coverage gap (Medicare Part D doughnut hole) was eliminated as of 2020. But plans can still have different benefits above and below the initial coverage limit, and the donut hole concept is still important in terms of how medication costs are calculated toward reaching the catastrophic coverage threshold.
As of 2024, due to the Inflation Reduction Act, there is no longer any out-of-pocket cost for covered drugs after a Part D enrollee reaches the catastrophic coverage level (i.e. exits the donut hole).
The ACA has changed many aspects of the American health insurance system. The effects were most noticeable in the individual/family (self-purchased) market and for Medicaid eligibility. But ACA rules also apply to employer-sponsored health insurance and some aspects of Medicare. Although the ACA has faced numerous challenges, it has been upheld three times by the Supreme Court and is now an integral part of the U.S. health care system.
If you have health insurance in the United States, you've probably experienced some changes as a result of the Affordable Care Act. Although the ACA has always been controversial, its primary provisions are all aimed at strengthening consumer protections and increasing the number of Americans who have health coverage.
The ACA prevents insurers from excluding coverage for pre-existing conditions or charging people higher premiums based on their medical history. It also ensures that people with individual/family or small group coverage are able to enroll in robust coverage, and it provides financial support to make self-purchased coverage affordable to millions of Americans. It also expanded eligibility for Medicaid, ensuring health coverage for millions of low-income people.
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
By Michael Bihari, MD
Michael Bihari, MD, is a board-certified pediatrician, health educator, and medical writer, and president emeritus of the Community Health Center of Cape Cod.
