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The Yesterday, Today and Tomorrow of the PPACA

Aug 19, 2020

The Patient Protection and Affordable Care Act (“PPACA” or “Obamacare”) is a federal statute enacted by Congress and signed into law by President Obama on March 23, 2010. Together with the Health Care and Education Reconciliation Act of 2010 amendment, it represents the U.S. health care system's most significant regulatory overhaul and expansion of coverage since the 1965 passage of Medicare and Medicaid.

At inception, the ACA proposed three main objectives to (1) reform the private insurance market, especially for individuals and small-group purchasers; (2) expand Medicaid to the working poor with income up to 133% of the federal poverty level; and (3) change the way in which medical decisions are made. All three objectives rely primarily on private choices rather than government regulation and are rooted in expectations of rational decision making shaped by incentives, but unfettered by other constraints. The implicit assumption is that individuals and groups will act within these reforms to produce access to medical care at an appropriate price, financed by fair risk-sharing across a large pool. The result will be affordable, quality health care for all.

Although the PPACA intended to attain the aforementioned goals, the assumptions of efficient and fair mechanisms of interchange do not represent reality in many respects. There are many impediments to the underlying choices of all players. As a result, it will be necessary to correct for market failures if this essentially private approach to public policy is to succeed.

Reduce the Number of Uninsured and Healthcare Spending
The PPACA's major provisions came into force in 2014. By 2016, the uninsured share of the population had roughly halved, with estimates ranging from 20 to 24 million additional people covered. The law also enacted a host of delivery system reforms intended to constrain health care costs and improve quality. After the law went into effect, increases in overall health care spending slowed, including premiums for employer-based insurance plans.

The increased coverage was due to both an expansion of Medicaid eligibility and changes to individual insurance markets. Both received new spending, funded through a combination of new taxes and cuts to Medicare provider rates and Medicare Advantage. Several Congressional Budget Office reports indicated that overall these provisions reduced the budget deficit, repealing the PPACA would increase the deficit, and the law reduced income inequality by taxing primarily the top 1% to fund roughly $600 in benefits on average to families in the bottom 40% of the income distribution.

Insurers Made to Accept All Applicants
The Act largely retained the existing structure of Medicare, Medicaid and the employer market, but individual markets were radically overhauled. Insurers were made to accept all applicants without charging based on pre-existing conditions or demographic status (except age). To combat the resultant adverse selection, the Act mandated that individuals buy insurance—or pay a fine/tax—and that insurers cover a list of essential health benefits.

Before and after enactment, the PPACA faced strong political opposition, calls for repeal and legal challenges. In National Federation of Independent Business v. Sebelius, the Supreme Court ruled that states could choose not to participate in the PPACA's Medicaid expansion, although it upheld the law as a whole. The federal health exchange,, faced major technical problems upon its 2013 rollout. Polls initially found that a plurality of Americans opposed the Act, although its individual provisions were generally more popular, and the law gained majority support by 2017. It will be interesting to see how the 2020 presidential election might impact the future of the PPACA.

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Timothy Speiss

Timothy Speiss is a Tax Partner in the Private Client Services Group and Vice President of EisnerAmper Wealth Planning LLC. He chairs our Asia Practice and is a member of the firm’s community service group, EisnerAmper Cares.

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