Money then and now: the Affordable Care Act and the rising cost of health care

We just launched Money Archives, a new experience where we digitize decades of our printed Money magazines. This is the fifth and final article in a series of stories that examine how personal finance – and our coverage of it – has changed over time.

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In 2010, the entire country seemed to be focused on one thing: the enactment of a sweeping and deeply controversial piece of legislation called the Patient Protection and Affordable Care Act, otherwise known as Obamacare.

In the May issue of that year, Money delved into the intricacies of what has come to be known as the ACA, analyzing its provisions and how it could achieve its lofty goal of insuring nearly all Americans.

Before the ACA, an estimated 16% of Americans did not have health insurance. Insurers could deny coverage to anyone with a pre-existing condition and had much more leeway to cancel someone’s plan if they got sick. Insurance companies also had the power to set annual or lifetime limits on how much they would spend on patients.

The law essentially prohibits these practices. It also expanded Medicaid eligibility, provided tax credits to help pay premiums, and allowed young adults to stay on their parents’ plans until age 26. All of this has helped reduce the uninsured rate, which was 8% at the start of 2022, an all-time low.

But, as we reported in our 2010 article, the ACA failed to address some important issues, and the financial burden on patients resulting from high health care costs was chief among them. As we said in our story, “the huge increase in per capita spending on doctors, hospitals and pills” has had a direct impact on government and population budgets.

Over the past two decades, health care costs have risen faster than almost any other industry, rising about 110% since 2000. (Prices of all other consumer goods and services have risen 71% over the same period.) And, while insurance will cover some of these costs, the portion that must be paid for by patients – including premiums, deductibles and even covered medications – may still be unaffordable for a lot.

The price of health

Cynthia Cox, vice president of the Kaiser Family Foundation (KFF), a nonprofit health policy research organization, says the US healthcare system is better off in many ways because of the ACA.

“People have more affordable coverage and more people are covered,” Cox says. “But we continue, as a society, to spend far more on health care than any other country.” said

She notes that one of the main problems is that American hospitals, doctors and pharmaceutical companies charge much higher prices for their services and products.

While most countries may strictly regulate the prices that healthcare providers are allowed to charge, there is no such regulation here, and price negotiations between insurance companies and healthcare providers healthcare in the United States is largely taking place behind closed doors.

This can result in widely varying prices for patients with similar health insurance policies, even within the same hospital. A 2021 New York Times report found that a colonoscopy at the University of Mississippi Medical Center cost $2,144 if the patient had an Aetna plan, compared to $1,463 for a Cigna plan and $782 if the individual had no insurance.

What we pay out of pocket

Surging health care costs are certainly reflected in the amount customers pay for health insurance premiums. Take, for example, the monthly premiums for a mid-tier plan for a 40-year-old male, which rose from $273 in 2014 to $438 in 2022. Some states have seen even more drastic changes: in Iowa , for example, the average went from $253 to $502 over the same period.

Average monthly premium for a 40-year-old male (all states)

US average 2014	$273
US average 2022	$438

Average Monthly Premium for a 40-Year-Old Male (Iowa)

2014 Iowa Average	$253
2022 Iowa Average	$502

From its inception, the ACA attempted to offset the cost of premiums by providing tax credits, but only to those earning up to four times the federal poverty level. (That would be $54,360 for individuals and $111,000 for a family of four in 2022.) However, earning even $10 above that threshold was disqualifying, meaning many middle-class households n were not eligible for a break. “Even if you had to pay, say, 20% of your income for insurance, there was still no help available for you,” Cox said.

The American Rescue Plan Act (ARP) of 2021 temporarily suspended this income threshold so that people earning more than four times the federal poverty level could qualify for assistance. That provision, which capped annual bonus spending at a maximum of 8.5% of one’s income, was extended by the Biden administration through 2025.

When it comes to out-of-pocket expenses, the ACA has placed limits on the amount a patient must pay under their plans. These limits are high, however, and are expected to increase each year. For example, in 2022, this maximum disbursement is set at $8,700 for an individual and $17,400 for a family. In 2023, this cap will be even higher – $9,100 for an individual and $18,200 for a family.

The ACA and the price of prescriptions

The ACA has established that health plans should include prescription drug coverage. Under its provisions, insurance companies had to cover at least one drug in every category and class on the official list of approved drugs, and pharmaceutical companies had to offer increased discounts to reduce the cost of drugs covered by Medicaid.

However, in practice, the cost of the same drug varies considerably between plans and insurers, depending on the co-payments and coverage required. And, as the price of prescription drugs has risen, the financial burden on patients has increased.

In 2022, Congress passed the Inflation Reduction Act (IRA), an attempt to regulate the price of prescription drugs. The law allows the government to negotiate the costs of certain Medicare-eligible drugs and to cap out-of-pocket expenses for seniors. It also requires companies to pay rebates to Medicare if they raise the price of their drugs faster than the rate of inflation.

Due to the provisions of the IRA, the Department of Health and Human Services will negotiate prices for 10 drugs in 2023. This number will increase each year until 2029, when 60 drugs will be subject to negotiated prices. While it may seem limited, Cox sees this legislation as a significant step toward drug price reform, especially since there has been such reluctance to regulate health care prices directly before.

“I think people are starting to recognize that’s why our healthcare system is so unaffordable. It’s because we don’t have any of these regulations that other countries have,” Cox suggested.

“There’s an even bigger challenge that the new law is only beginning to address: how to rein in exploding health care costs. Otherwise, this law can’t work in the long term.”

As we reported in Money’s 2010 breakdown of the law, the price of health care was an issue the ACA didn’t — or perhaps couldn’t — tackle. Twelve years later, the problem remains.