As a student traveling to the USA, you must buy sufficient health insurance coverage. It is a good thing to have because none of us can predict our health and when we shall require medical attention.
When shopping for healthcare insurance plans in the USA, you often come across the terms “Affordable Care Act” and “ACA-compliant” plans.
What is the Affordable Care Act or ACA? What are its features and provisions?
In this article we will provide an overview of the Affordable Care Act (ACA), exploring its key provisions, benefits, and how it impacts international students traveling to the USA.
What is the Affordable Care Act (ACA)?
The Affordable Care Act (ACA), is a groundbreaking healthcare law signed into effect on March 23, 2010. It is also widely known as Obamacare since it came to be during his administration.
The main goal of the ACA is to make health insurance more affordable for all Americans. Unlike other Western nations, the USA has never had a national health insurance plan or universal healthcare system.
The Affordable Care Act sought to remedy the situation by adopting a unique approach towards private insurance in healthcare.
Also Read: Study Abroad Guide for Indian Students 2024
Understanding Affordable Care Act
To understand the effects of the Affordable Care Act, you have to understand its core components. In this section, we will explain how the Affordable Care Act works.
The Affordable Care Act sought to give every American health care coverage by encouraging them to buy health insurance. Since private health insurance is expensive, the government contributes a part of the premium in various ways.
Key Objectives of the ACA
Increase Access to Health Insurance
The ACA aims to make health insurance available to more people by expanding Medicaid eligibility. It also sought to create health insurance marketplaces where individuals can purchase affordable plans. This was done through subsidies, known as premium tax credits, which lower costs for households with low income.
Improve Quality of Care
The ACA also focuses on quality over quantity in healthcare delivery. This encourages providers to improve patient outcomes rather than the volume of services provided. In simple terms, it placed more stress on how many got better, instead of how many received treatment.
Control Healthcare Costs
Healthcare in the USA is very expensive. A knee surgery costs $40,000 and a LASIK eye surgery costs $7,000 for both eyes. In India, it costs INR 3 lakhs ($9,600) and INR 80,000 ($956) respectively
By introducing cost-control measures, through payment reforms and preventive care, the ACA has tried to reduce healthcare spending while offering high-quality care.
Protect Consumers
The ACA also has multiple protection mechanisms inside its framework. No longer can insurance companies deny coverage due to preexisting conditions. Lifetime limits on coverage are also strictly prohibited.
Affordable Care Act requirements
The ACA does not specify who has to buy health insurance. Rather it specifies who is exempt from buying a healthcare plan.
You don’t have to buy health insurance if:
- You belong to a religious group that doesn’t believe in accepting benefits from health insurance
- You’re an undocumented immigrant
- You’re in prison
- You’re part of an Indian tribe
- Your income is exceptionally low
- If the cheapest insurance costs more than 8.16% of your income
- If you have been denied Medicaid
Everyone else has to buy insurance through healthcare plans offered by insurance companies and employers. In 2017 the penalty was $695 per adult for not buying a healthcare plan.
Also Read: International Student Health Insurance USA 2024: Complete Guide
Is it mandatory for international students to purchase an ACA-compliant plan?
We first need to define what an ACA-compliant plan is.
ACA-compliant health insurance refers to plans that meet the requirements of the Affordable Care Act (ACA). These plans must provide some essential benefits, such as:
- Coverage for preventive care through vaccinations, and checkups
- No lifetime or annual coverage limits
- Coverage for pre-existing conditions
- Access to hospitalization, mental health care, and prescription drugs
- Limits on out-of-pocket expenses for patients
Now we answer: do international students need ACA-compliant insurance?
It depends on the following:
- International students are exempt from the ACA requirements at the federal level. But certain states like New Jersey, California, Massachusetts, Rhode Island, and Washington, D.C. still enforce individual mandates.
- Some educational institutions in the USA require international students to purchase ACA-compliant insurance as a condition of enrollment.
- International students on F, J, and M, visas are considered non-resident aliens for the first five years of their stay. After that, they need to buy an ACA-compliant healthcare plan.
- There is also the issue of practicality. ACA mandates what is needed if one is ill. There is no reason not to sign up for an ACA-compliant plan. You are assured to receive at least essential health benefits when you do.
Key features of the Affordable Care Act
The Affordable Care Act (ACA) has multiple features and provisions that make healthcare more accessible and affordable in the United States. Here is a look at what makes it effective:
Individual Mandate
When the Affordable Care Act came into effect every American was required to buy healthcare insurance. Otherwise, they would face an income tax penalty.
Note that in the USA everyone who earns over $400 is required to file a return by April 15 of each year. This more or less means everyone has to file a tax return and if they had not purchased health insurance they would have to pay a fine.
Employer Mandate
The employer mandate of the ACA requires certain employers to provide health insurance to their employees. It applies to employers with 50 or more full-time employees. Employers must offer health insurance or face a penalty.
Essential Health Benefits
ACA requires that healthcare insurance plans offer at least a set of essential health benefits. These include:
- Ambulance services
- Emergency services
- Hospitalization
- Pregnancy, maternity, and newborn care
- Mental health and substance use disorder services
- Prescription drugs
- Rehabilitation services
- Preventive and wellness services
- Chronic disease management
- Pediatric services
Guaranteed Issue and Pre-existing Conditions
Under ACA no one can be denied coverage and all pre-existing conditions have to be covered from the very first day. This meant insurers could not deny anyone coverage based on their medical history or past substance abuse or chronic conditions.
Coverage for Young Adults
Young adults can remain on a joint health plan with their parents till they turn 26. This is irrespective of their marital status, parenthood, or any other living condition.
Minimum Coverage Requirements
Health insurance plans must meet certain minimum coverage standards under ACA.
- Bronze plans cover 60% of healthcare costs.
- Silver plans cover 70% of healthcare costs.
- Gold plans cover 80% of healthcare costs.
- Platinum plans cover 90% of healthcare costs.
As the buyer moves from Bronze to Platinum, the premium rises and out-of-pocket expenses fall.
Preventive Care
Healthcare plans have to provide vaccinations, health checkups, and counseling for some conditions and addictions without any copay.
Subsidies and Cost-Sharing
The Affordable Care Act provides a cost-sharing subsidy to help offset out-of-pocket healthcare costs. To qualify, one must meet the following conditions:
- Meet the low-income threshold as defined by the Act
- Not covered by an employer-sponsored health insurance plan
- Not eligible for Medicare
Pros and Cons of the Affordable Care Act
Like any major piece of legislation, the ACA has had both positive and negative impacts. Here’s a breakdown of the key pros and cons of the ACA:
Pros of the Affordable Care Act (ACA)
Increased Coverage
The ACA has reduced the number of uninsured Americans. It has also expanded Medicaid eligibility and created an affordable health insurance marketplace.
Coverage for Pre-Existing Conditions
Insurers can no longer deny coverage or charge higher premiums if a patient has pre-existing medical conditions. This benefits millions of people with chronic illnesses who otherwise could not access healthcare.
Subsidies
The ACA provides financial assistance to help low-income individuals afford health insurance. This makes insurance coverage more accessible to many who couldn’t afford it.
Essential Health Benefits
Insurance plans have to offer a set of “essential health benefits”. These include hospitalization costs, ambulance costs, preventive measures, prescription drugs, maternity care, and emergency care.
Medical Loss Ratio
Insurers are required to spend at least 80% of the premium earned on providing healthcare services. This limits their profit earning to a reasonable level after meeting administrative costs.
Better Health Outcomes
By expanding access to healthcare, and through preventive care, the ACA has improved health outcomes. There is early detection of heart diseases and other life-threatening conditions and, better management of chronic conditions.
Cons of the Affordable Care Act (ACA)
Increased Premiums
It was expected that premiums would reduce due to a larger customer base. But that has not happened. Middle-income individuals have seen higher premiums in the individual market.
Medicaid Expansion Gaps
The Supreme Court ruled that Medicaid expansion under the ACA was optional for states. As a result, millions of low-income Americans in some states have no coverage.
Administrative Complexities
ACA brought in new rules and there has always been a problem with compliance. The new regulations added significant administrative complexities for businesses and insurers.
Employer Mandates
The ACA requires businesses with 50 or more full-time employees to provide health insurance. This increased costs for employers and many small businesses no longer have any incentive to hire full-time workers.
Also Read: Insurance on education loan
Latest updates regarding the Affordable Care Act
The Affordable Care Act (ACA) was passed in 2010. Since then several significant changes have happened. These amendments have been through court rulings as well as legislative measures.
Medicaid Expansion Decision (2012 Supreme Court Ruling)
The original law required all states to expand Medicaid to very poor individuals (income < 138% of the Federal Poverty Level). However, in 2012, the US Supreme Court ruled that the federal government could not make individual states expand the scope of Medicaid.
As of 2024, 40 states and Washington D.C. have expanded Medicaid to cover those who earn < 138% of Federal Poverty Levels. The remaining ten states have not.
Tax Cuts and Jobs Act, 2017
In 2017, US Congress passed the Tax Cuts and Jobs Act, which effectively eliminated the $650 penalty for not buying healthcare insurance.
Administrative Changes
The Trump administration made multiple changes to ACA insurance marketplaces which caused new sign-ups to go down.
Expansion of ACA Subsidies, 2021
The Biden administration passed The American Rescue Plan Act (ARPA) in March 2021. It significantly increased subsidies for marketplace insurance plans.
The Affordable Care Act has been a contentious issue between rival political parties in the USA. While it has improved coverage and outcomes, the Act has been unable to make insurance more affordable. A decade after it came into effect, the USA still has the weakest healthcare system among developed nations.
This reiterates the fact that whether your university mandates it or not you must have healthcare insurance when you study in the USA.
Choosing the right plan, however, can be a huge challenge. With numerous options available, and terminology like copay and deductibles, you may miss out on essential benefits or end up paying too much. Some students end up paying ₹3 lakhs more per year due to inadequate research.
That’s where GradRight helps.
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FAQs
ACA-compliant means healthcare plans that adhere to the rules and regulations laid down in the Affordable Care Act.
Some of these rules include:
– Coverage of doctor visits and hospital stays
– Prescription medications
– Ambulance services
– Payment for vaccine etc
ACA is an acronym for Affordable Care Act, a legislation passed in 2010, which came into effect in 2014. It is popularly known as Obamacare.
Large employers and insurance companies have to submit mandatory reports to the Internal Revenue Service (IRS) under the Affordable Care Act (ACA).
ACA reporting ensures everyone who is not exempt and earns more than $400 annually has some form of health insurance coverage.
ACA insurance refers to health insurance plans that comply with the provisions of the Affordable Care Act. They have to offer a mandatory set of essential services as outlined.
