The Affordable Care Act (ACA) is the health insurance reform law that provides comprehensive coverage to millions of Americans who previously didn’t have access to affordable, quality care. The law is financed through a combination of premium tax credits for people who buy insurance on the ACA Marketplace, cost-sharing reductions that help people with low incomes pay for out-of-pocket costs, and savings from the Medicaid program.
The ACA also requires individuals and families to have insurance coverage or pay a penalty. Many people purchase their own private insurance through the ACA Marketplaces or, in some cases, through their employer. The ACA includes rules that limit how much insurance companies can charge for certain plans and also limits the ways they can vary those premiums based on age, location, family size, tobacco use and other factors. It also requires that the individual and small business ACA marketplaces publicly justify any rate increases significantly.
When the ACA was first passed, public opinion of the law was very mixed. However, as time has gone on and as the ACA has become more well-known, public opinion has shifted to more support for the law and its protections for those with preexisting conditions. During the 2016 election cycle, the ACA faced many challenges from those who wanted to repeal or fundamentally alter the law. Although a number of those proposals were eventually defeated in Congress, the Trump administration eliminated federal funding for the ACA’s marketplace subsidies and reduced federal oversight of the ACA’s individual and small business marketplaces.
Despite the aforementioned challenges, enrollment in ACA-compliant marketplace plans is at its highest level ever. However, people with low incomes are still paying significantly more than they should for their marketplace coverage. The ACA’s original cost sharing reduction payments were a key part of keeping marketplace premiums affordable for those with the lowest incomes, and they have been temporarily extended by the Inflation Reduction Act through the end of 2025. If these subsidies are allowed to expire, people purchasing marketplace coverage will face significant increases in their monthly premiums and some will be priced out of the market entirely.
The number of uninsured people in the United States has dropped dramatically since the ACA’s implementation. In 2013, there were 45.2 million uninsured Americans; in 2022, that number had dropped to 26.4 million—an historic decline. Federal and state policymakers must build on these gains by continuing to expand financial assistance for people who purchase ACA marketplace coverage, and by establishing a pathway to affordable coverage for the more than 1.6 million people in the ten non-expansion states who are currently caught in a gap between Marketplace coverage and existing eligibility for federally subsidized Marketplace coverage or Medicaid.
The ACA was designed to be budget neutral, with its insurance subsidies and expansions of public programs being financed through a series of taxes and fees on individuals, employers, insurers, medical devices and some businesses in the health sector, as well as savings from the Medicare program. Some of these fees and taxes have since been repealed or reduced to zero, including the individual mandate penalty, a medical device tax, and a Cadillac tax on high-cost employer plans.