The Affordable Care Act (hereafter, ACA), signed into law by President Barack Obama in March 2010, represents the most significant reform to the U.S. health insurance and health care markets since the establishment of Medicare in 1965. The health care reform in the U.S. was partly driven by two factors: first, a large fraction of the U.S. population does not have health insurance (close to 18% for 2009); second, the U.S. spends a much larger share of the national income on health care than the other OECD countries (health care accounts for about one sixth of the U.S. GDP in 2009). There are many provisions in the ACA whose implementation will be phased in over several years, and some of the most significant changes started taking effect from 2014.
In particular, four of the most important pillars of the ACA are as follows:
(Individual Mandate) All individuals must have health insurance that meets the law's minimum standards or face a penalty when filing taxes for the year, which will be 2.5 percent of income or $695, whichever is higher.4
(Employer Mandate) Employers with 50 or more full-time employees will be required to provide health insurance or pay a fine of $2,000 per worker each year if they do not offer health insurance, where the fines would apply to the entire number of employees minus some allowances.
(Insurance Exchanges) State-based health insurance exchanges will be established where the unemployed, the self-employed and workers who are not covered by employer-sponsored health insurance (ESHI) can purchase insurance. Importantly, the premiums for individuals who purchase their insurance from the insurance exchanges will be based on the average health expenditure of those in the exchange risk pool. Insurance companies that want to participate in an exchange need to meet a series of statutory requirements in order for their plans to be designated as "qualified health plans."
(Premium Subsidies) All adults in households with income under 133% of Federal poverty line (FPL) will be eligible for receiving Medicaid coverage with no cost sharing.7 For individuals and families whose income is between the 133 percent and 400 percent of the FPL, subsidies will be provided toward the purchase of health insurance from the exchanges.
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