11 facts about the Affordable Care Act

June 24, 2012

In the past week, both Alec MacGillis and Sabrina Tavernise have written articles touching on how little the uninsured actually know about the Affordable Care Act. Given that polling shows the law remains unpopular even as its component parts -- with the notable exception of the individual mandate -- are very popular, it seems they're not alone. So here's a refresher on some of the law's most significant policies and consequences:

1. By 2022, the Congressional Budget Office estimates (pdf) the Affordable Care Act will have extended coverage to 33 million Americans who would otherwise be uninsured. Here's the graph:

2. Families making less than 133 percent of the poverty line -- that's about $29,000 for a family of four -- will be covered through Medicaid. Between 133 percent and 400 percent of the poverty line --  $88,000 for a family of four -- families will get tax credits on a sliding scale to help pay for private insurance.

3. For families making less than 400 percent of the poverty line, premiums are capped. So, between 150% and 200% of the poverty line, for instance, families won't have to pay more than 6.3 percent of their income in premiums. Between 300 percent and 400 percent, they won't have to pay more than 9.5 percent. This calculator from the Kaiser Family Foundation will let you see the subsidies and the caps for different families at different income levels.

4. When the individual mandate is fully phased-in, those who can afford coverage -- which is defined as insurance costing less than 8 percent of their annual income -- but choose to forgo it will have to pay either $695 or 2.5 percent of the annual income, whichever is greater.

5. Small businesses that have fewer than 10 employees, average wages beneath $25,000, and that provide insurance for their workers will get a 50 percent tax credit on their contribution. The tax credit reaches up to small businesses with up to 50 employees and average wages of $50,000, though it gets smaller as the business get bigger and richer. The credit lasts for two years, though many think Congress will be pressured to extend it, which would raise the long-term cost of the legislation.

6. Insurance companies are not allowed to discriminated based on preexisting conditions. They are allowed to discriminate based "on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5. to 1 ratio)."

7. Starting in 2018, the law imposes a 35 percent tax on employer-provided health plans that exceed $10,200 for individual coverage and $27,500 for family coverage. The idea is a kind of roundabout second-best to capping the tax code's (currently unlimited) deduction for employer-provided heath insurance. The policy idea is to give employers that much more reason to avoid expensive insurance policies and thus give insurers that much more reason to hold costs down.

8. The law requires insurers to spend between 80 and 85 percent of every premium dollar on medical care (as opposed to administration, advertising, etc). If insurers exceed this threshold, they have to rebate the excess to their customers. This policy is already in effect, and insurers are expected to rebate $1.1 billion this year.

9. The law is expected to spend a bit over $1 trillion in the next 10 years. The law's spending cuts -- many of which fall on Medicare -- and tax increases are expected to either save or raise a bit more than that, which is why the Congressional Budget Office estimates that it will slightly reduce the deficit. (There's been some confusion on this point lately, but no, the CBO has not changed its mind about this.) As time goes on, the savings are projected to grow more quickly than the spending, and CBO expects that the law will cut the deficit by around a trillion dollars in its second decade. Here's its graph, which covers the period between 2012 and 2021:

The ACA's taxes and spending cuts make it a slight deficit reduce in its first decade. (CBO)

10. In recent years, health-care costs have slowed dramatically. Much of this is likely due to the recession. Some of it may just be chance. But there's also evidence that the law has accelerated changes in the way the medical system delivers care, as providers prepare for the law's efforts to move from fee-for-service to quality-based payments.

11. The law's long-term success at controlling costs will likely hinge on its efforts to change the way health care is delivered, most of which have gotten very little attention. They include everything from encouraging Accountable Care Organizations to spreading medical homes to penalizing hospitals with high rates of preventable infections to creating an independent board able to quickly implement new reforms through the Medicare system. A partial list of these efforts can be found here.

Acknowledgments: Much of the information in this post comes from the Kaiser Family Foundation's excellent summary of the Affordable Care Act's provisions.

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