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Obamacare History – Past, Present & Future of Affordable Care Act (ACA)

After months of wrangling over his sweeping proposal to overhaul America’s creaky health care system, compromise legislation known as the Patient Protection and Affordable Care Act — shortened as the “Affordable Care Act” or ACA, and popularly known as Obamacare — landed on then-President Barack Obama’s desk on March 23, 2010. At the signing ceremony, a hot mic picked up then-Vice President Joe Biden telling Obama the achievement was a “big [expletive] deal.”

Adult language aside, Biden was right. Spending related to health care accounted for approximately one-sixth of total U.S. gross domestic product in 2010, according to the Centers for Medicare and Medicaid Services (CMS), and its share has only grown in the years since. With provisions that profoundly affect the health insurance industry and health care delivery in general, the ACA was among this century’s most influential pieces of federal legislation.

At the highest level, per the U.S. Department of Health and Human Services (HHS), the Affordable Care Act had three primary objectives:

  1. To broaden access to affordable private health insurance.
  2. To expand the Medicaid public health insurance program to cover all adults under 138% of the federal poverty threshold.
  3. To lower the overall cost of health care delivery.

To achieve the first objective, the ACA compelled all Americans to obtain health insurance coverage (the “individual mandate”) and established a network of federal and state “exchanges” — health insurance marketplaces — for consumers not covered by employer-sponsored plans while simultaneously requiring many employers to provide affordable, ACA-compliant group health insurance plans to employees (the “employer mandate”). To meet the second, it provided the lion’s share of funding required for state-level Medicaid expansions and tasked state legislatures, and in some cases voters themselves, with authorizing the remainder.

To reach the third, the ACA enshrined some important — and popular — protections for American health care consumers, including the requirement that insurance plans provide free preventive care and cover preexisting conditions without increasing premiums, as well as premium tax credits that effectively capped the cost of health coverage for low- and middle-income individuals and families.

A decade on, Obamacare’s record on these three primary objectives is decidedly mixed. The number of Americans with health insurance coverage did increase markedly in the years following the ACA’s passage but slipped after the elimination of the individual mandate, according to the Kaiser Family Foundation (KFF). Most states expanded Medicaid, but about a dozen holdouts remain, per the KFF, to the detriment of millions of lower-income residents. Free preventive care and coverage for preexisting conditions are among the ACA’s most popular provisions, according to a KFF poll, but the CMS data shows health care costs continue to creep upward.

Moreover, even as its overall popularity has increased, the ACA remains controversial in certain quarters. Successive legislative changes, most notably the Tax Cuts and Jobs Act of 2017’s elimination of the individual mandate, have weakened the law. Legal challenges to the ACA persist, as well. A sweeping lawsuit brought by the Texas state attorney general and detailed by the Texas Tribune, could gut the law if the U.S. Supreme Court rules in the plaintiffs’ favor in 2021.

Needless to say, the ACA’s final chapter is not yet written. To truly understand what the future might hold for U.S. health care policy — and for us as American health care consumers — we first need to understand where Obamacare came from, how the law’s implementation impacted the U.S. health care system, and how legislative and legal processes have changed the ACA since its passage.

Development of the Affordable Care Act: Precursor Laws and Negotiations Between the Legislative and Executive Branches

The Affordable Care Act can trace its roots back to the early 1990s, to a similarly sweeping health care reform proposal advanced by the administration of then-President Bill Clinton.

The Clinton Plan

Like the ACA, the so-called Clinton Plan was a market-based compromise that hoped to preserve the basic structure of America’s employer-based health care system while lowering health care costs and reducing the country’s uninsured rate — the proportion of Americans without health insurance. Led by future U.S. Senator and presidential candidate Hillary Clinton, the White House was heavily involved in drafting and negotiating the legislation it hoped would form the basis for its plan.

Amid near-unified opposition by Republican members of Congress and widespread public skepticism, the Clinton Plan did not become law. Moreover, the plan’s failure likely contributed to the Democratic Party’s loss of control of the U.S. House of Representatives in the 1994 elections, according to a 1995 analysis by Health Affairs. The political fallout closed the door on major health care reform for the remainder of the Clinton administration, although the passage of the Children’s Health Insurance Program in 1997 was a meaningful victory for advocates of expanded coverage.

Romneycare

With no federal overhaul forthcoming, the health care reform nexus moved to the states. Ironically, credit for the most consequential development of the post-Clinton Plan years lies with Obama’s rival in the 2012 presidential election: Mitt Romney — who signed the law that would become a partial basis for Obamacare in 2006 — as governor of Massachusetts. Several key provisions of the law, popularly known as “Romneycare,” would have analogues in Obamacare:

  • A mandate that the vast majority of Massachusetts residents have health insurance coverage
  • A mandate that most employers with more than 10 full-time employees provide employer-sponsored health insurance coverage
  • Free health insurance (through tax subsidies) for residents earning under 150% of the federal poverty level
  • Subsidized health insurance (also through tax subsidies) for residents earning under 300% of the federal poverty level

Although Romney would later distance himself from his namesake and vocally opposed Obamacare during the 2012 election, Romneycare clearly helped lay the groundwork for the Affordable Care Act. “Without Romneycare, I don’t think we would have Obamacare,” Romney wrote in 2015, according to NPR — a difficult statement for any high-profile Republican aspiring to higher office to make at the time. (In 2018, Romney won the election for Utah’s open U.S. Senate seat.)

The Obamacare Compromise

President Obama made health care reform the top policy priority of his first term. According to retrospectives by the Commonwealth Fund and The Atlantic, Obama learned some important lessons from the failure of the Clinton Plan: namely, that his team would need to engage Republican members of Congress early on, get buy-in from health care industry stakeholders — especially health insurance companies, pharmaceutical companies, and providers — and give their Democratic allies in Congress space to draft compromise legislation that would attract widespread support within the caucus and, it was hoped, bipartisan support.

Obama’s efforts to engage Republicans proved unsuccessful, so the drafting of the bill that would become the Affordable Care Act was largely an exercise in negotiation and compromise among Democratic factions in the House and Senate. On one side of the debate were proponents of a truly dramatic overhaul modeled after single-payer health care systems like those of Canada or the United Kingdom, where the U.S. government would be the primary or sole provider of health insurance coverage. On the other were proponents of more incremental, market-based reforms like Romneycare. In the middle were advocates of a hybrid approach that blended Romneycare-like elements with a “public option” — a government-run insurance option, possibly modeled after Medicare, for consumers unable or unwilling to procure private health insurance.

With Republican opposition and mounting skepticism from industry stakeholders and the broader public threatening a repeat of the Clinton Plan’s demise, Obama pressed Congress to reach a compromise that could pass the U.S. House and Senate. With no public option and a health insurance framework anchored in a network of state and federal government “marketplaces,” that eventual compromise looked much more like Romneycare than the more ambitious proposals modeled after Canadian or European systems.


Obamacare Becomes Law: Passage, Implementation, and Backlash

The Affordable Care Act became law in March 2010. To allow time for employers, health care providers, and government agencies to prepare, many of the law’s most consequential provisions weren’t set to take effect until January 1, 2014. These delayed provisions included the Medicaid expansion, tax subsidies for individual market health insurance coverage, and the employer and individual mandates, according to a summary by the National Council of State Legislatures.

A number of key Obamacare provisions did go into effect in 2010, some of which remain among the law’s most popular features today:

  • Requiring coverage without premium increases for individuals with preexisting conditions, and creating temporary high-risk pools for individuals denied health insurance coverage because of such conditions
  • Allowing young people to remain on their parents’ health insurance plans until age 26
  • Prohibiting lifetime caps on insurance coverage and limiting annual insurance coverage caps

Early Legal Challenges to Obamacare and the Legality of the Individual Mandate

Obamacare opponents brought an avalanche of legal challenges in the weeks and months following passage, leaving open the question of whether the law’s delayed provisions would ever go into effect.

According to a 2011 report by the New Jersey Hospital Association, opponents filed at least 20 separate lawsuits during this period, although most were struck down in lower courts. Of those that found success, Florida, et al. v. Department of Health and Human Services, et al. and  Virginia v. Sebelius both saw district court judges declare Obamacare’s individual mandate unconstitutional.

The U.S. Supreme Court heard a consolidated case challenging the individual mandate during its 2011-12 term. In late June 2012, a 5-4 ruling by the court affirmed the mandate’s constitutionality. Although the decision was a victory for Obamacare’s proponents and ensured that the delayed provisions would take effect, the court’s interpretation of the individual mandate as a “tax” laid the groundwork for future legal challenges.

A Rocky Rollout

The Supreme Court’s upholding of the individual mandate did not guarantee smooth sailing for Obamacare’s rollout. Indeed, the late 2013 debut of the federal Health Insurance Marketplace was marred by technical glitches and policy cancellations contradicting President Obama’s infamous promise that Americans wary of the Affordable Care Act would be able to keep their health insurance plans and doctors following its implementation. (Obama and senior members of his administration made this claim more than three dozen times between 2009 and 2013, according to PolitiFact.)

With regards to the marketplace rollout itself, a Harvard Business Review retrospective identified perennial problems with government-run IT projects, lack of experienced project management, poor leadership — manifesting in poor communication and lack of clarity around roles — and schedule pressure to launch the system by the legally mandated deadline. Hundreds of thousands of people who expected to be able to sign up for health insurance when the marketplace launched were unable to do so, according to HBR.

The causes of the policy cancellation debacle were more complex and the number of Americans affected even greater: anywhere from about 15% to 80% of some 14 million consumers with health insurance policies on the individual market when the rollout began would have to find new policies, according to CBS and NBC reports cited by Ballotpedia.

The Backlash That Followed

Together, the two issues contributed to a widespread feeling among Americans that the Affordable Care Act had failed a crucial test. Public attitudes toward the law soured; a HealthAffairs tracking poll summarized by The American Journal of Managed Care found support for the ACA below 40%, on average, between October 2013 and November 2016.

In the run-up to the 2014 midterm elections, Obama’s opponents sensed an opportunity. Republicans, then still in the minority in the U.S. Senate, ran — in part — on a promise to “repeal and replace” Obamacare. The gambit paid off: The GOP gained control of the Senate and increased its majority in the U.S. House of Representatives, dooming Obama’s second-term agenda.

Most if not all Republican candidates for U.S. president adopted the “repeal and replace” mantle during the 2016 election campaign, which kicked off in early 2015. Future President Donald Trump kept the message front and center during the campaign’s closing days, per CNN, vowing to “immediately repeal and replace Obamacare” in an extraordinary Congressional special session.


Obamacare During the Trump Administration: Legislative Changes, Court Cases, and Newfound Popularity

It’s not clear whether President Trump won the 2016 election because or in spite of his promise to “repeal and replace” Obamacare. Not long after taking office, though, he and GOP allies in Congress tried to make good on the slogan.

In 2017, with Trump’s backing, Congressional Republicans introduced a “skinny repeal” to cripple the ACA without a comprehensive replacement to mitigate the fallout for American health care consumers and providers. The effort failed in the U.S. Senate with the late Sen. John McCain, a Republican, casting the decisive “no” vote, per Kaiser Health News.

The Elimination of the Individual Mandate and Other Legislative Changes to Obamacare

The failure of “skinny repeal” effectively ended Republicans’ efforts to destroy the ACA by legislative means. Later in 2017, however, Congressional Republicans did succeed in doing what the Supreme Court chose not to do five years earlier: eliminate the individual mandate.

They did so by turning the Supreme Court majority’s rationale for upholding the ACA against it. Because the court interpreted the individual mandate as a tax, it could be eliminated as part of a broader change to the U.S. tax system. The Tax Cuts and Jobs Act of 2017 (TCJA), the most dramatic overhaul of the U.S. tax code in a generation, presented a golden opportunity.

The version of the TCJA that President Trump signed into law left the individual mandate on the books but zeroed out the penalty for noncompliance, rendering it a dead letter. Beginning in the 2019 tax year, Americans who chose not to purchase individual health insurance coverage (or declined employer coverage, if available to them) no longer faced financial penalties. Notably, the TCJA did not eliminate the employer mandate, but an analysis by Health Affairs found that fewer Americans would choose to pay for employer-sponsored coverage in the individual mandate’s absence. Indeed, since marking a multidecade low in 2016, the U.S. uninsured rate has crept upward, reaching 9.2% in 2019 according to the Center on Budget and Policy Priorities.

Executive Branch Efforts to Weaken the Affordable Care Act

Following the TCJA’s passage, Trump falsely claimed to have repealed Obamacare, per The New York Times and other sources. Elimination of the individual mandate notwithstanding, this was not true. The bulk of the law remained in place.

However, in the months and years that followed, the Trump administration did take meaningful steps to weaken the Affordable Care Act. A Brookings Institution analysis identifies five such steps:

  • Reducing marketing and logistical support for the ACA’s insurance exchanges, including a 50% reduction in the open enrollment period’s length
  • Reducing subsidies to insurance companies offering ACA-compliant marketplace plans
  • Making it easier for insurers and employers to offer cheaper, skimpier health insurance plans that don’t comply with the ACA
  • Promoting enrollment waivers that could reduce insurance enrollment and coverage
  • Discouraging legal immigrants from enrolling in Medicaid

The Status of Medicaid Expansion

One qualified bright spot for the Affordable Care Act during the Trump Administration is the ongoing expansion of Medicaid coverage in the states. According to a running tally from the Kaiser Family Foundation, 36 states and the District of Columbia had expanded Medicaid as of January 2020 — most by legislation but some by popular referendums.

This does leave a “coverage gap” — the number of Medicaid-eligible Americans not covered by the program due to state inaction on the expansion — of about 5 million consumers. This number shrank a bit in 2021, when two former holdouts (Missouri and Oklahoma) officially joined the ranks of expansion states. But the path to coverage in other “non-expansion” states is less clear.


What’s Next for the Affordable Care Act? Pending Court Cases and Proposals to Improve or Replace Obamacare

The Affordable Care Act has been the law of the land for more than 10 years now, but its future remains as uncertain as ever amid ongoing legal challenges and public ambivalence about the state of American health care. Even if the U.S. Supreme Court allows the ACA to remain in force, our health care system could be in for significant changes in the years to come.

California v. Texas

California v. Texas is the most significant challenge remaining to the Affordable Care Act’s legality.

This new case challenges the individual mandate’s constitutionality following the elimination of the tax penalty for noncompliance, per the KFF. The plaintiffs contend that, because the individual mandate no longer produces any revenue for the government, it’s no longer legally enforceable. They further argue that Congress’s failure to include a provision in the ACA allowing the bulk of the law to stand if one portion is ruled unconstitutional — a concept known as “severability” — means the individual mandate’s elimination renders the entire law unenforceable.

The U.S. Supreme court heard oral arguments in California v. Texas on November 10, 2020. Supporters of the ACA feared that the court’s conservative majority — made stronger by the recent replacement of the liberal justice Ruth Bader Ginsburg with the conservative Amy Coney Barrett — would sympathize with the plaintiffs’ severability claims. They were instead heartened by justices’ apparent skepticism of these claims in audio of the proceedings. Court observers such as SCOTUSblog now believe that the court is unlikely to strike down the ACA in its entirety in a ruling expected sometime in the first half of 2021.

Policy Proposals and Draft Legislation to Improve or Replace Obamacare

California v. Texas is not the only near-term catalyst for major changes to the Affordable Care Act. However the Supreme Court chooses to rule in that case, an ever-changing collection of health policy proposals and draft legislation promises to keep the health care debate lively for the foreseeable future.

These proposals range from ambitious and possibly unrealistic schemes to move the entire American health care system to a single-payer model, to reincarnations of the “public option” that nearly made it into the final version of the Affordable Care Act, to incremental tweaks designed to improve care, increase health insurance enrollment, or reduce costs within the existing ACA framework.

Some of these proposals appear in President Joe Biden’s health care plan:

  • A Public Health Insurance Option for Most or All Americans. Biden’s plan calls this “a public health insurance option like Medicare” without clarifying whether it would be a separate program or simply an expansion of optional Medicare coverage to all Americans. The idea of extending Medicare coverage to all Americans — Medicare for All, as it’s known — is popular with prominent liberal members of the Democratic Party, and with nearly 70% of Americans according to a Hill-HarrisX poll conducted in April 2020.
  • Premium-Free Public Health Insurance for Low-Income Americans in States That Haven’t Expanded Medicaid. State failures to expand Medicaid coverage mean about 5 million Americans who’d otherwise be eligible for Medicaid are not, according to the Kaiser Family Foundation. Biden’s plan would offer a “premium-free public option” to these people, regardless of the status of Medicaid expansion where they live.
  • Expanded Eligibility for Premium Tax Credits (Subsidies) and More Generous Subsidies for Those Who Qualify. Biden’s plan would decrease the maximum share of income Americans pay for health insurance by strengthening the ACA’s premium tax credits, which currently subsidize insurance costs for low- and middle-income Americans, and making all Americans eligible for them.
  • Restrictions on Surprise Medical Billing. Biden’s plan would prohibit health care providers such as hospitals from charging higher out-of-network rates to patients who can’t control which providers they see, which tends to be the case during hospitalization. This would curtail a major source of unexpectedly high health care bill bills.
  • Price Controls for Certain Prescription Drugs and Other Regulations Targeting the Pharmaceutical Industry. Biden’s plan would take several steps to regulate prescription drug prices for some patients, including controlling initial pricing for drugs without market competition and requiring drug companies to negotiate favorable pricing with Medicare.

Some of these proposals, such as mitigating prescription drug costs, could likely be achieved without legislation. Others, such as modifying the ACA’s premium tax credits and expanding Medicare eligibility, would probably require legislation — legislation the present Republican majority in the U.S. Senate is unlikely to pass.


Final Word

Like America itself, the American health care system is a work in progress. Federal and state politicians have worked for decades — with varying degrees of success — to increase coverage, reduce cost, and create a fairer playing field for health care consumers.

Although the Affordable Care Act has made some progress toward these goals, universal coverage and truly affordable care remain distant dreams. Far too many Americans continue to do without health insurance. The unlucky ones face financial hardship — eye-popping medical bills that drag down their balance sheets for years, forcing some to declare bankruptcy. (A 2018 study published in the New England Journal of Medicine found a significant correlation between hospitalization and bankruptcy.)

It’s safe to say that the ACA won’t be the last attempt to improve the American health care system by legislation. Precisely how its successors look, and what they mean for American health care consumers, are trickier questions.

Brian Martucci
Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he's not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

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