What The Affordable Care Act Means For Families

Health care has always been a huge priority for the American family, so it comes as no surprise that many are now wondering how the Patient Protection and Affordable Care Act (ACA) will impact their lives. In America, the average family consists of two parents, along with approximately two children. [1] Incomes vary, of course, with the average income for a household being $50,500. [2]

Coverage before the ACA

The number one concern for most families is simply obtaining health care coverage. Before the ACA, it was estimated that 40.3 million Americans lacked health insurance; nearly one-in-five Americans under the age of 65 did not carry health care insurance. [3]

The coverage problem was caused by a number of factors, according to a Kaiser Foundation study.

First, health care costs were skyrocketing before the ACA, which made premiums unaffordable for millions of Americans. Many families went uninsured because they were not wealthy enough to afford premiums on their own, but had incomes that were too high to qualify for Medicaid.

Second, those who could not obtain health insurance from an employer often struggled to get insurance in the private market due to pre-existing condition exclusions used by health care insurance companies.

This problem grew worse after the recession of 2007. Many unemployed parents lost their health care coverage, a problem that cascaded down to their children. [4] Those who lacked insurance could still obtain some care, but the care was inadequate and often costly. For example, an uninsured child or parent who got sick would have to be stabilized in the emergency room, but an uninsured person who came down with cancer would not typically have their chemotherapy provided. An uninsured family who was injured in a car accident would be treated for their immediate injuries in an emergency room, but not receive any covered necessary physical rehabilitation afterwards.

Coverage after the ACA

The ACA attempts to increase the health care insurance coverage for families in a number of ways.

First, the ACA aims to increase coverage by making it illegal for insurance companies to “rescind” the policy of a family member who is costing the company too much. Before the ACA, it would not be uncommon for a health insurance company to drop coverage once the claims for one family member reached a high level. [5]

Second, the ACA makes it illegal for health insurance companies to exclude families on the basis of pre-existing conditions. With this provision, millions of American families with pre-existing conditions, such as asthma or diabetes, are now be able to purchase insurance on the private market. [5]

Third, the ACA provides support to poorer families, including those who do not qualify for Medicaid. Under the ACA, unemployed families or families who cannot receive insurance through their employers and make less than 400 percent of the Federal Poverty Level receive tax credits to offset their insurance premiums, so that no household pays more than a certain percentage (no more than 10 percent) of annual income on health insurance. The family receives, in effect, premium support payments from the government. The lowest income families have nearly all of their premiums paid for in the form of a tax credit.

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. [5]

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. [6]

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. [7]

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. [8]

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.

[1] http://quickfacts.census.gov/qfd/states/00000.html
[2] http://www.deptofnumbers.com/income/us/
[3] http://kff.org/uninsured/issue-brief/reversing-the-trend-understanding-the-recent-increase-in-health-insurance-coverage-among-the-nonelderly-population/
[4] http://health.usnews.com/health-news/managing-your-healthcare/economics/articles/2011/12/13/loss-of-health-insurance-much-likelier-for-adults-this-recession
[5] http://www.hhs.gov/healthcare/facts/timeline/timeline-text.html
[6] http://kff.org/infographic/the-requirement-to-buy-coverage-under-the-affordable-care-act/
[7] http://kaiserfamilyfoundation.files.wordpress.com/2013/01/7670-03.pdf
[8] https://www.healthcare.gov/how-does-the-health-care-law-protect-me/#part=10

Ryan Witt is a freelance writer covering all things St. Louis Cardinals. His work can be found on Examiner.com.


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