Nine years after its passage in 2010, people are still discussing the Affordable Care Act’s pros and cons. Of course, the answers can be moving targets as the ACA (commonly known as Obamacare) is still largely a work in progress.
Nevertheless, it’s still worthwhile to lay out the pros and cons of the ACA to decide whether entering its health insurance marketplace will work for you.
Here’s a quick summary of the main ACA pros and cons (details below).
Benefits of the ACA:
- Pre-existing conditions coverage
- Subsidized health insurance
- Health Insurance Benefits for Employees of Small Businesses
- Essential health benefits
- No lifetime or annual limits
- Kids can stay on a parent’s plan longer
(Unintended) Consequences since the ACA was implemented:
- Some full-time employees lost their jobs or had hours reduced.1
- Insurance companies cancelled non-compliant plans rather than update them.2
- Major medical health insurance is still unavailable to many3 + the uninsured rate is climbing again.4
Affordable Care Act Pros
Pre-existing Conditions Coverage
One of the most popular features of the ACA is guaranteed coverage for people with pre-existing conditions.5 According to a 2016 study by the Kaiser Family Foundation, about 52 million people have a pre-existing health condition. Before Obamacare, they likely would not have been able to get health insurance.6
Under the ACA, insurance companies can’t reject you, charge higher rates or refuse to pay for essential health benefits for any condition you had before your coverage started. They also can’t drop you or raise your premiums if you get sick after you’ve enrolled.
You probably know that critical and costly conditions like cancer, diabetes, lupus and epilepsy count as pre-existing conditions.7 But did you know that even conditions like depression, acne, asthma, anxiety and sleep apnea could have counted as pre-existing conditions and resulted in denial of coverage, exclusion of the condition, and/or higher costs depending on the insurance company?8
And what about pregnancy? Pregnancy is treated as a pre-existing condition, which means that if even if you were pregnant before you enrolled in an ACA-qualifying major medical plan, you cannot be rejected or charged more because of your pregnancy.9
According to conservative estimates, around 27% of adults under the age of 65 had health conditions that would have made them uninsurable based on pre-ACA underwriting practices that were used in almost all 50 states in 2015.10
Some more generous estimates put the percentage of non-elderly Americans with pre-existing conditions as high as 50% when including conditions such as arthritis, asthma, high cholesterol, hypertension and obesity (for which individuals may have still been able to obtain coverage but at a higher cost or with specific exclusions relating to their pre-existing condition).11
Subsidies Could Mean $0 Premiums for Some, Access to Lower Out-of-Pocket Costs for Others
Obamacare subsidies can make getting health insurance less expensive, if you qualify.
According to the Kaiser Family Foundation, 4.2 million uninsured people could get a bronze level ACA plan for $0 in monthly premiums after factoring in premium tax credits that they qualify for in 2019.12
Even though $0 premium bronze plans are mathematically possible, in practice it may not be desirable for many since bronze plan deductibles are quite high, averaging $6,258 a year.13
However, many individuals and families that are eligible for the no-cost premium bronze plans are also eligible for significant cost-sharing reductions if they instead enroll in a silver level plan (which have lower deductibles),14 and to which both the cost sharing reductions and premium tax credits can be applied.
The two forms of subsidies that are part of the ACA: premium tax credits and cost sharing reductions, are complex topics that we can’t fully cover here. However, we have discussed ACA subsidies and the income limits to qualify, as well as the federal poverty level in other posts.
You can also learn more about the different ACA plan metal levels.
Check out our ACA Subsidy Calculator to calculate your potential subsidy.
Health Insurance Benefits for Employees of Small Businesses
There’s no doubt that the ACA has had a positive impact on the owners and employees of small businesses, consider this data from October 2018:
- More than 5.7 million small business employees or self-employed workers are enrolled in the ACA marketplaces.
- More than half of all ACA marketplace enrollees are small business owners, employees or are self-employed and the uninsured rate among this group fell by 10% following the implementation of the ACA.
- The rate of small business health insurance premium increases fell by half following implementation of the ACA.
- Prior to the ACA, small businesses and their employees represented a disproportionate share of the working uninsured. In 2011 (2 years prior to the ACA taking effect) 6 out of 10 of the country’s uninsured workers were self-employed or worked at companies with fewer than 100 employees.15
Medicaid expansion in many states, the creation of the individual marketplace and the stabilization of small business health insurance premiums have helped improve accessibility and affordability of health coverage for employees of small businesses16 (which are technically defined as companies with as many as 1,500 employees depending on sector and other factors).17
Essential Health Benefits (for Women, Men and Children)
Obamacare requires all ACA-qualifying major medical insurance plans to cover essential health benefits, including coverage for emergency, hospitalization and laboratory services to name a few.18
The essential health benefits were defined in the ACA in order to qualify what minimum essential coverage had to include since, prior to the ACA, health insurance policies being marketed as “major medical” or “comprehensive” coverage varied greatly in what they covered, excluded and charged extra for.19
For many women and couples looking to start families, the essential benefits can be even more important. Before the ACA, only 12% of health policies available to a 30-year-old woman on the individual market offered maternity benefits according to 2012 (pre-ACA) research done by the National Women’s Law Center.20
And women paid more for their health insurance, with or without maternity benefits included. Nearly a third of the pre-ACA plans examined in the study found that 25- and 40-year old women were charged at least 30% more than men for the same coverage.21
Now, ACA-compliant major medical plans must cover pregnancy, maternity and newborn care (both before and after birth) is one of the essential health benefits.22
The essential benefits include coverage for many preventive services for all adults such as cholesterol screenings23 that may be able to provide early detection and reduce your risk of developing a more serious health condition like heart disease.24
The essential health benefits also cover important childhood development and health screenings and basic medical services like autism screening, behavioral assessments, and immunizations to name a few.25
No More Lifetime or Annual Limits
Obamacare eliminates lifetime and annual coverage limits.26
When Obamacare passed, 91 million Americans had employer-sponsored plans that included lifetime limits.27 Common lifetime limits were $1 million or $2 million, after which a policy would no longer pay any benefits even for covered healthcare services.
Many people never came close to reaching these lifetime limits. But for those with chronic conditions, serious illnesses or injuries, or children born with significant medical needs the potential to hit these lifetime limits was a very real risk they faced.
Kids Can Stay on a Parent’s Plan Longer
Children can stay on a parent’s plan until the age of 26.28 Before the ACA, many insurance companies dropped young adults from their parents’ health plans as soon as they were no longer considered a “dependent” according to the IRS definition, which was when they were no longer a full-time student.29
This left many part-time college students, college graduates and other young adults with no health insurance. In fact, before the ACA, about 30% of young adults were uninsured – a higher rate than any other age group.30
Because the ACA extended the age that adult children could remain on a parent’s plan, between 2010 and 2013, an additional 2.3 million previously uninsured young people gained coverage. And by 2016, 6.1 million young adults between 19 and 25 gained coverage.31
Learn about different health insurance options for college students and young adults.
Affordable Care Act Cons
The passage of the ACA was most certainly a shift in the right direction for a country with 16.1% of adults uninsured prior to the ACA being signed into law.32
However, that doesn’t mean that there weren’t some consequences, many unintended, and “growing pains” (e.g., challenges in Federal and State courts that are ongoing even today), as a result of rolling out such an ambitious plan.
Below, we’ll outline some of the challenges experienced after the ACA was enacted.
Some Full-Time Employees Lost Their Jobs or Had Hours Reduced
While almost certainly an unintended consequence of the ACA, it does appear to have resulted in an estimated 250,000 positions having been eliminated by small businesses trying to avoid the employer shared responsibility provision (commonly referred to as the “employer mandate”) according to a 2017 report by the National Bureau of Economic Research.33
Additionally, some 500,000 workers in retail, hospitality and food services were forced into part-time employment so that companies could avoid the employer mandate.34 Many of these individuals may have been able to enroll in plans on the ACA exchange, possibly with the help of ACA subsidies if their income qualified them.
Conversely, higher skilled jobs were added in the healthcare sector to help meet the increasing demand for healthcare services since more people are insured, nurses were in particularly high demand.35
It’s not known exactly what the ongoing impacts are of the ACA on the affected service and hospitality industries, but the trend from 2012 to 2016 indicated that the share of businesses with fewer than 50 employees grew from 37% to 45%.36
Insurance Companies Cancelled Non-Compliant Plans Rather Than Update Them
Another unintended result of the initial rollout of the ACA was that around 2.6 million Americans “lost” their existing health insurance plans during the first ACA open enrollment period in 2014 according to HealthAffairs.
That’s about 18.6% of people with non-group health insurance policies.37
How did that happen?
Insurers chose to cancel non-compliant plans and force existing customers to find different coverage rather than make customers’ existing policies ACA-compliant (and charge customers the resulting higher premiums).
In addition, many people were required to enroll in a new policy under the individual mandate. Often times, this new policy came with a higher monthly premium than they were previously paying because it covered more services as required by the ACA.38
As a result of the ACA, many of those 2.6 million people qualified for subsidies or Medicaid and actually have more comprehensive coverage today than they did before the ACA.
Major Medical Health Insurance is Still Unavailable to Many + The Uninsured Rate is Climbing Again
For some people, health insurance is still too expensive even with the ACA. According to the Kaiser Foundation, in 2017, 45% of adults who did not have health insurance said they remained uninsured because the cost of coverage was too high.39
The ACA Marketplace average unsubsidized benchmark individual premium (aka the second lowest cost Silver plan) for the U.S. in 2019 is $477.40 Many Americans, especially those in the middle class that do not qualify for subsidies or tax credits, find it very challenging to pay this much every month for health coverage.
Middle class Americans don’t find themselves in this situation because of the ACA. There are more complex economic forces at work, including holdover from the 2007-2009 economic recession.
For example, from 2009 to 2019, average hourly employee earnings grew only modestly (2.3%) annually and real (inflation-adjusted) wages hardly grew at all, failing to track with the increases in workers’ productivity.41
In addition, from 2007 to 2014, healthcare costs for middle class families increased 25%, even while their income decreased on average, from $77,000 annually in 2000 to $73,000 in 2014.42
The uninsured rate in America is also ticking back up again, since the repeal of the federal tax penalty for going without ACA-qualifying health insurance was passed in December of 2017.
In 2016, the U.S. hit an all-time low of only 10.9% of adults uninsured. Since then, the percent of uninsured has risen steadily each quarter to 13.7% at the end of 2018.43
It remains to be seen if and how much it will climb again for Q1 2019, since the federal tax repeal took effect Jan. 1, 2019.
Did the ACA cause the greater economic problems that many Americans face? No. In fact, the ACA most likely helped more people get health insurance coverage during a time of serious financial hardship and uncertainty for many.
But the current parameters around who qualifies for subsidies under the ACA means that many Americans still don’t feel that health insurance is affordable to them and more are going without it.
Summary + Next Steps
We’ve covered some basic Obamacare pros and cons that may impact you or your decision to enroll in a major medical plan. Looking for more information? Check out:
- Is an ACA-compliant major medical plan your best option?
- What non-ACA insurance options are available?
In addition to the resources above, you can call 866-278-1464 to speak with a health insurance agent to discuss your options.