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Families & the ACA: What the Affordable Care Act Means

8/7/2013, noon
Courtesy of the White House

Fourth, the ACA allows parents to include their children on their health insurance policy up to age 26. Previously, many college students and young workers found themselves too poor to buy their own insurance, but unable to be covered under their parents’ policy. The ACA mandates that all group policies must also now allow parents to cover their children during the transition time from high school to fully-employed, self-supporting adult.

Finally, the ACA mandates coverage for all families. With some exceptions, those who decide not purchase health insurance are subject to an annual penalty tax, starting at $95 per adult or one percent of family income, whichever is greater. By 2016, the penalty will be $695 or 2.5 percent of their income, whichever is greater. There are a number of waivers. Groups who will be able to obtain a waiver include those who are poor enough to not have to file a tax return, members of an Indian tribe, those who can prove sincere religious objections to the requirement, and those who can demonstrate that insurance premiums would exceed eight percent of their income.

Costs before the ACA

As mentioned earlier, the costs for health care before the ACA were increasing for the average American family. A number of factors contributed to the increasing prices including, but not limited to, the lack of cost control incentives for providers, the high costs of emergency room coverage for the uninsured–expenses which were inevitably transferred to the insured–and high profits and administrative costs for health insurance companies.

Both the uninsured and insured were hit particularly hard by chronic or catastrophic health problems. Even with insurance, high deductible and limits on policy coverage left many unable to pay for their care. For those without insurance, payment was sometimes all together impossible.

Costs after the ACA

The ACA attempts to address these problems in a number of ways.

First, the ACA expands preventative coverage through both direct funding (over $15 billion in health prevention programs) and by mandating health insurance plans cover certain preventative care, such as annual wellness exams for seniors. The idea behind these efforts is to catch health problems in the early stages, when they tend to be much less costly to address.

Second, the ACA replaces the old model of payment to a payment system based on “quality outcomes.” In the past, providers would be financially rewarded for performing tests and treatments on a patient regardless of the results. The ACA makes payments more dependent on the quality of the care provided, as opposed to simply the quantity.

Third, the ACA attempts to reduce costs by making the current paper-based health care system electronic, which theoretically should make it more efficient.

Fourth, the ACA mandates that approximately 80 percent of the premiums health care insurance companies receive go directly toward paying for patient care. The idea behind this mandate is to reduce the money going to profits and administrative areas. Companies who do not spend 80 percent of the premiums they collect on health care claims are forced to send consumers a rebate. Millions have already received a rebate from their health care insurance company based on the law’s mandate.

If these measures work as they were designed, health care costs and premiums will still rise, but not at the high rate previously projected before the ACA.

Early data suggests that the ACA is already having some effect on slowing the rate of health care cost increases, but it is still early, and the law will ultimately be judged on how it affects costs over decades, not just years.