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The Pros and Cons of the Affordable Care Act (Obamacare)

Calculator and stethoscope on financial statement concept for finance health check or cost of healthcare

Your view of the pros and cons of the Patient Protection and Affordable Care Act (ACA, commonly referred to as Obamacare) may depend on your political preferences. It may also depend on what role you believe the federal government should play in providing healthcare access for Americans.

More than a decade later, Americans largely approve, or disapprove, of the Affordable Care Act based on party lines. According to a 2023 Kaiser Family Foundation poll, 90% of self-identified Democrats approve of the Affordable Care Act, while 70% of self-identified Republicans disapprove of it.

Discussing the pros and cons of Obamacare will not avoid disagreement. Your priorities will likely play a significant role in how you weigh the benefits and drawbacks of the Affordable Care Act. Yet, when asked about specific provisions, most Americans prefer certain aspects of the ACA. Below is a nonpartisan summary of those pros and cons.

The ACA is a significant and unprecedented act of Congress. It would take entire books to thoroughly review all the impacts of the 900-page healthcare reform law. But the law has indisputably transformed America's healthcare system. Fortunately, the law's most significant and controversial aspects can be summed up briefly.

The Structure of the Affordable Care Act

Initially, there was confusion over whether the Affordable Care Act and "Obamacare" are the same. They are. Obamacare is a term coined by opponents of the law.

The Affordable Care Act first centered around a so-called "three-legged stool." This allowed insurers to make money while providing more comprehensive insurance coverage. The Affordable Care Act has three original pillars:

  • To regulate insurers so they provide better coverage for more Americans, including those with preexisting conditions
  • To require that everyone, especially healthy Americans, purchase health insurance to spread out costs (the "individual mandate")
  • To help low-income people afford health insurance through subsidies and Medicaid expansion

If we require private health insurance companies to cover everyone, including Americans with preexisting conditions, we also need healthy Americans to buy health insurance so insurers can remain profitable. By helping low-income Americans with subsidies, more Americans can get health insurance.

In 2017, the Tax Cuts and Jobs Act eliminated the tax penalties for people who did not buy health insurance. The Act became effective in 2019. The full impact of this is not yet clear. So far, the healthcare system has remained functional.

Benefits of the Affordable Care Act

The Affordable Care Act has increased the number of insured Americans. It has also improved the coverage offered by health insurance companies. Millions of previously uninsured Americans have obtained health insurance because of the ACA.

Better Health Care Coverage

Before Obamacare, there weren't many standards for what a health insurance company could and could not cover. As a result of Obamacare, health insurance now generally covers more procedures, including mental health and maternity care.

One of the most well-known and popular features of the Affordable Care Act is its rule preventing health insurance companies from denying coverage for people with preexisting conditions. Preexisting conditions may include heart disease, diabetes, and others. Before the ACA, anyone looking for insurance who already had a health issue could be denied coverage or face exorbitant rates. Insurers can find it unprofitable to take on patients with preexisting conditions. It's estimated that one in four Americans have a preexisting health condition.

The ACA also opened more avenues to get health insurance coverage. Before Obamacare, most Americans got healthcare through their employment. Now, anyone can purchase health insurance on the health insurance marketplace or health insurance exchanges. The "marketplace" is a federal website where you can get more information on available healthcare plans, compare coverage options, learn your eligibility, and sign up for a plan. The open enrollment period starts on November 1 every year. It ends on January 15 of the following year.

The ACA has also impacted young adults. Before the Affordable Care Act, young adults lost their parent's health insurance after they turned 21. Now, young adults can stay on their parent's insurance until they are 26.

Expanded Medicare and Medicaid

The Affordable Care Act has also expanded Medicare coverage. For example, the Affordable Care Act closed the so-called Medicare "donut hole." Before the ACA, people on Medicare Part D could lose coverage after spending a certain amount on medication. The Affordable Care Act gradually reduced the donut hole. As of 2020, it was gone. Medicare continues to help pay for medication regardless of the amount already spent. It does not pay the total cost of medication.

Thirty-seven states also expanded Medicaid programs. Many Americans below the federal poverty line can get health insurance coverage.

Improved Health Outcomes

There are also signs of improved health outcomes because of the Affordable Care Act. For example, the ACA prevents hospitals from charging for infections that come from a hospital stay. Hospital infections are one of the leading causes of death in the U.S. Hospitals now lose money from patients who become infected during their stay. As a result, infection rates have lowered dramatically in recent years.

Proponents of the law also argue that it has improved cancer detection and preventative care. This has led to lower healthcare costs and better patient outcomes for cancer and other medical conditions. This includes access to prescription drugs. Before the Affordable Care Act, many people went without needed medication. Or they paid higher costs out-of-pocket. Increased access to prescription drugs also leads to better health outcomes.

In the last several years, insurance premiums under Obamacare have also improved.

Affordable Care Act Cons

Requiring health insurance companies to provide extra coverage has raised some people's insurance prices. This includes their insurance premiums. Those who prefer minimal insurance pay more for better coverage. The Affordable Care Act also raised the marginal tax rate for some Americans.

Impact on Small Businesses

Much of the concern voiced by critics involves small businesses. The Affordable Care Act provides incentives, such as tax credits, for businesses to keep their employee count artificially low. This is because businesses with 50 or more employees must provide health insurance for their employees. This can affect how many people small businesses can hire as full-time employees.

Limited Choices

Initially, 14 states refused to expand Medicaid programs. This led to decreased coverage in those states. As a result, many people at or below the poverty level do not receive preventive services. Today, that number has dropped to 10 as more states have expanded Medicaid coverage.

Shortly after the Affordable Care Act passed, Americans could not always keep their existing doctors. Insurers did not cover some healthcare providers under the ACA. After the Affordable Care Act passed, some Americans found it difficult to find insurance in a health insurance marketplace. There are also fewer insurers offering plans. This is due to concerns over whether insurance companies could profit from providing plans. While still a concern, now most Americans can find a health insurance plan in their area.

Healthcare Is Still Expensive

The Affordable Care Act has allowed more Americans to have health insurance. But the underlying cost of medical care hasn't gone down. Even insured Americans often have trouble paying for medical expenses. Further, 66.5% of all bankruptcies in the U.S. involve medical debt.

The Individual Mandate

Another key (and controversial) aspect of the Affordable Care Act, as originally passed, was the individual mandate. Under the ACA, Americans who did not buy insurance had to pay a penalty on their taxes. Even after it passed, the penalty could be less than the cost of paying deductibles. Some taxpayers chose to pay the penalty. However, the Tax Cuts and Jobs Act removed the penalty in 2017. Americans who choose to go without health insurance do not face any consequences.

The Affordable Care Act has continued to function without the individual mandate. But there are concerns about whether insurers can continue to provide coverage if enough Americans choose not to get healthcare. In 2019, 400,000 fewer people signed up for health insurance on a health insurance marketplace than the year before. But, during the most recent enrollment (2022-2023), 3.2 million new enrollees found coverage on the insurance market.

The individual mandate has also faced many legal challenges. This includes efforts to repeal the law. The Supreme Court upheld the individual mandate as Constitutional in 2012. The Supreme Court considered the individual mandate again in 2020 but did not rule on its Constitutionality.

Did Obamacare Improve Healthcare in the U.S.?

The ACA has primarily functioned as designed. At its simplest, more and better coverage costs more money. You may believe the federal government should help Americans get decent health insurance plans. If so, you likely approve of the Affordable Care Act.

You may, however, believe that the federal government should not play a role. If so, then you likely disapprove. You may believe that the Affordable Care Act interferes with the free market. You may also believe the ACA raises taxes and premiums for people who could independently find health insurance.

Many of the issues discussed in this article are vigorously debated. For example, folks in favor of keeping the Affordable Care Act or instituting a single-payer healthcare system argue that it lowers the cost of healthcare and saves taxpayers money. Folks opposed to the Affordable Care Act argue that it is unaffordable and increases costs. The U.S. healthcare system is very complicated. This article does not take a stance on either side.

Need Help Understanding Your Rights Under the Affordable Care Act? Contact an Attorney

Health insurance is complex. The Affordable Care Act is no exception. If you have questions about insurance coverage, contact a healthcare law or insurance attorney. They can answer legal questions about the Affordable Care Act.

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