STAT E O F T H E A RT R E V I E W

Obamacare: what the Affordable Care Act

means for patients and physicians
Mark A Hall, Richard Lord
Center for Bioethics Health and
Society, Wake Forest University,
A B S T RAC T
Winston Salem, NC 27157-1063,
USA
The Affordable Care Acts core achievement is to make all Americans insurable, by
Correspondence to: M A Hall requiring insurers to accept all applicants at rates based on population averages
mhall@wakehealth.edu
Cite this as: BMJ 2014;349:g5376
regardless of health status. The act also increases coverage by allowing states to
doi: 10.1136/bmj.g5376 expand Medicaid (the social healthcare program for families and people with low
income and resources) to cover everyone near the poverty line, and by subsidizing
private insurance for people who are not poor but who do not have workplace
coverage. The act allows most people to keep the same kind of insurance that they
currently have, and it does not change how private insurance pays physicians and
hospitals. Although the act falls short of achieving truly universal coverage, nine
million uninsured people have received coverage so far. Market reforms have not
hurt the insurance industrys profitability, prices for individual insurance have been
lower than expected, and government costs so far have been less than initially
projected. The act expands several ongoing pilot programs in Medicare that reform
how doctors and hospitals are paid, but it does not directly change how private
insurers pay healthcare providers. Nevertheless, it has set into motion market
dynamics that are affecting medical practice, such as limiting insurance networks to
fewer providers and requiring patients to pay for more treatment costs out of pocket.
In response, many hospitals and physicians are forming closer and larger affiliations.
Further time and study are needed to learn whether these evolutionary changes will
achieve their goals without harming the doctor-patient relationship.

Introduction and what it aims to achieve. It then provides a summary of

Not since the civil rights era has a federal social initiative the acts major impacts on patients and physicians, based
in the United States been as contentious and polarizing as on reputable empirical studies.
the ongoing debate over the Patient Protection and Afford
able Care Act of 2010 (Affordable Care Act). Much of the SOURCES AND SELECTION CRITERIA
intense opposition to this law has been motivated by political The Affordable Care Act is too new to have been studied
partisanship or by a belief that Congress used inappropriate extensively through scientific research. We were therefore
thebmj.com unable to perform a formal scientific review. Instead, we
legislative procedures to enact the law.13 But much of the
reviewed the extensive public policy literature about the act
Use our online tool social and political debate focuses on health policy concerns. in peer reviewed publications and published reports from
to discover which US Will the act achieve its stated goals and avoid unintended government agencies and reputable (non-ideological) think
states have adopted consequences? Will it constitute a major intrusion into how tanks, such as RAND, McKinsey, and the Urban Institute.
Obamacare measures medicine is practiced and reimbursed? And, if so, will that be We consulted all such major sources of public policy
and how this relates to to the detriment or benefit of patients and physicians? literature about the act published since 2010, which we
Fierce and often emotional discussions of these ques identified through several search techniques. This included
their political affiliations. our own routine tracking of the literature and a snowball
See tions often obscure a basic understanding of how the act
technique in which citations in key sources and to key
http://www.bmj.com/ functions. Confusion is understandable considering the
sources are followed until saturation is reached, meaning
laws complexity, so it is important to separate the laws
content/349/bmj. that no substantially new information or perspectives
core essentials from its more peripheral features. Also, are encountered. Much of this public policy literature
g5376/infographic
many claims about the act are based on conjecture or is evidence based, in that it uses various techniques of
implausible assumptions. Many patients will look to their descriptive data analysis to document or project the acts
physicians for information and guidance. Accordingly, this impacts, but summarizing these sources involved an
review begins with a description of how the act came about element of subjectivity.

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US insurance coverage before People without public coverage or group insurance

the Affordable Care Act and at work have had difficulty obtaining individual insur
under the act. These are the ance, not only because of its expense, but also because
authors approximations. private insurers screened people for health status (a pro
They are based on census
cess called medical underwriting) and either declined to
data and Congressional
cover people with potentially costly medical conditions,
Budget Office projections,
and they assume that only or charged them substantially more, or excluded coverage
about half of US states for their existing conditions. This is why only about 6%
expand Medicaid of the US population had individual (non-group) cover
age. Before reform, insurance for small employers shared
characteristics with both large group and individual
insurance: small group insurance was more available and
offered better coverage than in the individual market, but
pre-existing conditions were excluded for one year, and
insurers varied their small group rates according to age
and other health risk factors.6

History of the Affordable Care Act

Republicans versus Democrats
A more socialized solution for healthcare reform favored
by some left wing Democrats in the US would be to
expand Medicare or create something like it that, along
with Medicaid, covered everyone in a single payer sys
tem, like that in Canada. Despite Medicares relative pop
ularity with US patients and its success with constraining
healthcare spending, staunch opposition to anything that
smacks of socialized insurance keeps Congress from even
considering Medicare for all.
Right wing (Republican) proponents would prefer a less
ambitious law that uses government subsidies mainly to
help only those people who are not insurable, leaving the
rest of the market to function as normal. This would also
allow insurers to continue medical underwriting practices
that screen people for health status and exclude pre-exist
Health insurance before the Affordable Care Act ing conditions. Moreover, because the 20% of people with
The healthcare system in the US struggles more than sys the most expensive medical needs account for about 80%
tems in other industrialized countries with two basic aspects of spending,7 uninsurable people are much more expen
of healthcare finance and delivery. It spends far more per sive than people realize and support for them is likely to
person on healthcare than any other country, yet it is the be chronically underfunded.8 Indeed, adequate funding
only country in the developed world that fails to provide of the top end of the medical expense distribution would
healthcare coverage for almost all of its residents. In 2010, end up socializing a major portion of medical spending.
50 million people (16% of the population) had no public
or private health insurance coverage, at the same time that Middle ground
the US spent close to $3tr (1.8tr; 2.3tr) a year on medical The act was designed to avoid these extremes of right and left
care.4 In proportion to its size, the US spends 50-100% more by aiming for a middle course that preserves a private insur
than peer nations, even though these other countries have ance market for most people, but reforms the market so that
healthcare coverage for almost all of their residents.5 it advances rather than undermines health policy goals.2 9
One reason that the US spends this much is that financ Essentially, the act attempts to make the defective individual
ing for healthcare is more fragmented and privatized than market (see Glossary) function much more like the successful
in other developed countries. More than half the popula large group market (see Glossary) for people above the pov
tion has private insurance, mainly sponsored by employ erty line. The act also expands Medicaid to cover everyone
ers for their workers and families (figure). Most private near or below the poverty line. This is the same pragmatic
insurers are managed care (see Glossary) companies that combination of approaches that conservative thought leaders
encourage or require people to use doctors or hospitals in (such as the Heritage Foundation) had previously advanced
contracted networks. Outside the workforce, the federal and that was successfully implemented in Massachusetts by
Medicare program covers people who are disabled or over its former governor Mitt Romney, a Republican.
65 years and retired. Medicaid, a joint state and federal
program, covers some people who are poor, but, in most How the act was passed
states, before the acts expansion, it covered only those By using private market approaches endorsed by con
who fitted into prescribed categories, such as single par servative thinkers to pursue liberal social goals, the
ents, children, and pregnant women. Democrats who crafted the act hoped that it would be

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sured. (About a quarter of the remaining uninsured will

Box 1|Key features of the Affordable Care Act
be eligible for Medicaid but not yet enrolled, another
The act has been buffeted by ideological debate, and this has clouded the view of its merits, quarter will decline to purchase affordable private insur
limitations, goals, and performance. Physicians need a clearer view so that they can help
ance, another quarter will still face unaffordable premi
their patients have a better understanding of what the law means for them
ums, and the remaining quarter will not be US citizens or
The act does not socialize medical care or payment. Instead, it charts a middle course
between more socialist and conservative alternativesone that expands on existing US long term legal residents.)
structures and preserves a central place for the private market If the act does not control costs or provide univer
The act will not change the nature and type of insurance that most people have. Its main sal coverage, what does it do? The acts core and most
effects will be on people who previously were uninsured or who purchased individual important achievement is universal insurability. From 1
insurance. Most of them are now eligible for Medicaid (in states that choose to expand) or for January 2014 insurers can no longer turn anyone away
subsidized private insurance through the new state or federal exchanges or refuse to cover pre-existing conditions (which is called
The new insurance exchanges are highly competitive. Most offer a good range of options for guaranteed issue). In addition, insurers have to charge
individuals at prices that, even without subsidies, are similar to or lower than those for group individuals and small groups rates that are based on
coverage population averages (which is called community rating)
The act does not directly affect how private insurers pay physicians or hospitals. Its payment rather than basing rates on individual characteristics.
innovations are focused only on Medicare (see box 2).
Guaranteed issue with community rating is an obvious
The act does not authorize private insurers or government agencies to intrude in medical
boon for people who previously could not qualify, but
decision making any more than they already do. Instead, it forbids the federal government
from rationing care or limiting effective services purely on the basis of costs universal insurability also benefits people who previously
Private insurers are forming narrower provider networks for the individual insurance they sell had good coverage. The knowledge that coverage will be
through the subsidized exchanges. Patients may be worried or confused about whether their available regardless of what happens enables people to
clinicians are included in these new networks change jobs, start new businesses, leave unhappy rela
Insurers are experimenting with different combinations of deductibles and copayments. This tionships, and make other major life choices that previ
may increase patients concern or confusion about how much particular courses of treatment ously dependedat least to some extenton whether
will cost them insurability might be threatened in the process.10
As a continuation of previous trends, the act encourages, but does not require, greater Accomplishing the core goal of universal insurability
clinical and financial integration among physicians and hospitals requires more than simply regulating insurers. For this
to work, people need subsidies so that they can afford
acceptable to a broad swathe of the political and policy insurance. And, to prevent people from simply waiting
spectrum. Despite this reasonable expectation, Repub until they are sick to enroll, which would drive up insur
licans uniformly opposed it, and the political conse ance premiums even more, the act imposes an individual
quences of this response are stark. Massachusetts mandate (see Glossary) in the form of a tax penalty (rang
surprising election of a Republican to fill the seat vacated ing from 1% of taxable income in 2014 to 2.5% in 2016)
by Senator Kennedys death in 2009 left Democrats one if people fail to enroll in insurance that is affordable.
vote short of the supermajority needed to avoid block (Affordable is defined for this purpose as single coverage
ing techniques by the opposition. Although the Senate costing 8% of household income). The act also requires
previously had adopted a version of the Affordable Care larger employers (those with more than 50 full time
Act, it differed from the House version. There was now equivalent workers) to pay a tax if they decline to offer
no opportunity for a reconciliation process or careful minimum essential benefits (see Glossary). Administra
proofreading. Instead, using legislative rules that allow tive complications delayed this employer mandate (as it
purely budgetary and tax measures to advance with sim is known) for a year, until 2015.
ple majority support, the Senate adopted a patchwork of
amendments that made the Affordable Care Act accept Core insurance provisions
able to the House, and President Obama signed the law Most of the acts core insurance provisions flow from
into effect in 2010. these few fundamentalsguaranteed issue, subsidies,
and individual and employer mandates. Because insur
The acts main features (box 1) ance is expensive, sliding scale premium tax subsidies
The act does much more than reform individual insur (see Glossary) are needed all the way up to four times
ance and expand Medicaid, but most of these add-ons the poverty level, which is almost $100000 for a fam
are peripheral to the laws main aim of insurance reform, ily of foursubstantially more than the median house
so will not be considered here. Even limited to its core, hold income. For people who cannot afford to contribute
however, the act is complex, but simpler solutions were substantially to their cost of care, states can now expand
not politically feasible or would not have achieved the Medicaid to cover everyone at or below 133% of poverty,
core goals. rather than the uneven patchwork of Medicaid eligibility
criteria that existed between various states.
Universal insurability To determine eligibility for subsidies and to facilitate
Before discussing what the act covers it is helpful to clar choice among qualified plans, states are invited to cre
ify what it does not cover. It is not about regulating how ate insurance exchanges, but if they do not, the federal
private insurers pay providers. Also it does not achieve government will operate one for them. Exchanges are web
truly universal coverage, because it cuts the number of portals where people can shop among qualified insurers
uninsured by only about a half (figure). Even after full and determine their eligibility for subsidies. To qualify,
implementation, 30 million people will still be unin insurers have to satisfy numerous criteria, to ensure

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that people (and the government) receive decent value those that serve a higher than average share of the unin
for their money and that insurers compete on fair terms. sured will continue to do so, but the act cuts federal
Requirements include offering a standard set of essen funds to support this uncompensated care across the
tial health benefits that cover a comprehensive range board, having anticipated that all states would expand.
of services. It is not surprising, therefore, that several major medi
The act also requires insurers to package their patient cal centers across the country that have announced that
cost sharing mechanisms (such as deductibles (see Glos they are cutting jobs are in states that have not expanded
sary) and copayments (see Glossary)) in standard ways Medicaid.18
labeled bronze, silver, gold, and platinumaccording to
whether insurance, on average, pays for 60%, 70%, 80%, Misconceptions about the act
or 90% of the required covered benefits. Socialized insurance
The acts most vociferous opponents say that it social
The constitution and Medicaid izes medicine, meaning that the government has taken
Immediately after the act became law, lawsuits that over the delivery of care. However, that is a misuse of
challenged its constitutionality were filed. Clearly, the the nomenclature. The distinction between socialized
federal government has constitutional authority to medicine and socialized insurance is that, with socialized
require Medicare for all,11 but doing something short of insurance, the government pays for rather than delivers
thatexpanding Medicaid and requiring people to buy care. Considering the insurance element, congressional
private coveragewas attacked as exceeding congres leaders originally proposed selling government insurance
sional powers. In what is undoubtedly the health law on the new exchanges and allowing older people to buy
case of the century, the Supreme Court ruled partially in into Medicare before age 65 years, but both of these pub
both sides favor.12 It held that the Medicaid expansion lic option ideas were stripped from the law before it was
is permissible but only if states can opt out of the expan passed to garner enough votes in the Senate.2 Essentially
sion and still keep their current Medicaid funding. And, what is left is a system for subsidizing and regulating the
it ruled that the individual mandate is valid, but only purchase of the same kind of private insurance that was
if it is construed simply as a tax on a personal choice to already being sold in the market.
decline coverage rather than as a penalty for violating a This subsidy and regulation scheme has many social
regulatory law that prohibits being uninsured. elements, such as modified community rating, but they
This ruling allowed the act to survive, just barely (by are not greatly more socialized than certain elements
a vote of 5-4 on the individual mandate), but in a weak that prevailed in the market before the Affordable Care
ened form. In particular, about half of US states so far Act. The act allows individual and small group insurers
have declined to expand Medicaid. In those states the to charge the oldest adults only three times more than
subsidized exchanges can reach down to the poverty the youngest adults. Threefold variation is less than the
level but not below. This means that a high proportion fivefold one that insurance actuaries would like, but a
of uninsured people on a low income in these states threefold variation is much more flexible than the mar
have no new options, even though people earning just a ket based form of community rating seen within large
few dollars more qualify for free private coverage on the employer groups, where every worker in a group is
exchanges. Many states chose this upside down effect charged exactly the same rate regardless of age.
because they say they cannot afford their very small Although the act mandates coverage of at least 60% of
portion of the Medicaid expansion costs. Skeptics claim the actuarial value of a package of essential health bene
that politics, not state finances, are the main driver of fits, the 60% level is much lower than what insurance typ
states decisions to refuse Medicaid expansion. They note ically covers in employer groups, and it is similar to what
that all of the states that refused are led by Republicans, previously prevailed in the individual market. Similarly,
and that they all also refused to establish insurance the essential health benefits package is based mainly on
exchanges.1 13 what was the most popular insurance plan recently sold
Although states struggle to balance their budgets, state in each states small group market.19 Some other impor
finances are not a compelling reason to refuse Medicaid tant aspects of the act push the private market towards
expansion. The federal government will pay the full costs more coverage and cross subsidization than occurs in the
of expansion for the first two years and 90% of the costs unregulated market, but overall the act mirrors rather
by 2020. This would reduce states existing financial than displaces many aspects of existing insurance mar
burden of caring for the uninsured and would pay for ket conditions. It is always possible that Congress might
additional care that saves citizens lives and relieves suf adopt further reforms that are more socialized than the
fering.14 15 Moreover, Medicaid expansion would create Affordable Care Act, but nothing in the acts structure
jobs that generate more state and local tax revenue, suf makes this likely.
ficient to offset most or all of the states small fraction of
Medicaid costs.16 17 Socialized medicine
These refusals come at a high cost for states and their It is also not accurate to say that the act socializes medi
citizens. Opting out of Medicaid expansion does not cal practice or payment. It does nothing that directly
relieve state citizens from paying the federal taxes that alters the fundamentals of how private insurance pays
fund the act in other states. Not expanding puts many healthcare providers. One reason that the act was ulti
US hospitals in a particularly difficult position because mately endorsed by the American Medical Association,

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the American Hospital Association, and other major Government mandated insurance
industry and trade groups is that it did not implement Finally, there is merit to both sides of the debate about
comprehensive payment reform or regulation for pro whether the act forces people to give up their previous
viders.2 20 The act contains several innovations in pay insurance. The act will have little or no effect on most
ment methods, described below, but most of these are people who are already insured (figure). Eligibility for
demonstration or pilot projects under Medicare, which Medicare remains the same and expands for Medicaid.
already regulates payment rates, and these innovations Large employers are not expected to, and so far are not
build on ones that were already under way before the planning to, drop coverage (although this remains spec
act came into law. ulative because of a two year reprieve for the employer
Similarly, despite concern that the government would mandate).2628 However, because small employers are
control and ration care, the act does little to directly alter not subject to an employer mandate, a fair number of
prevailing standards of practice or clinical autonomy. It them (but fewer than half) are expected to drop cover
creates new institutions that aim to improve quality and age, especially if many of their employees are eligible for
value (administered by the Patient Centered Outcomes substantial subsidies on the exchange.28 29
Research Institute and the Center for Medicare and Med The act mandates that insurance sold to individuals
icaid Innovation), but they mostly just fund research or and small groups (initially, groups of fewer than 50, but
make proposals. Some potentially influential initiatives increasing to 100 in 2017) cover a comprehensive set of
have not even been implemented, either because of a lack essential health benefits. Also, it caps out of pocket pay
of funding (National Health Care Workforce Commission) ments at $6350 for individuals and $12700 for families.
or continued political and policy opposition (Independ For those who want to avoid these mandates and keep
ent Payment Advisory Board). Even if established, most the coverage they have, the law clearly permits continued
of these study commissions and advisory boards differ renewal of plans that existed at the time of enactment,
little in their fundamentals from those that have been for as long as the insurer and the policyholder both wish
in place for decades, such as the Agency for Healthcare to maintain coverage. This explicit statutory protection
Research and Quality and the Medicare Payment Advisory is the basis for President Obamas controversial pledge
Commission. that, if you like your insurance plan, you can keep it.
Naturally, the story is more complex than this, but This was true when the law first passed, but to remain
despite a sometimes alarming plethora of new organiza true people had to have the same coverage that they had
tions and acronyms, there is no new government author in 2010 and insurers had to avoid making any substan
ity that requires physicians to change how they practice tial changes to their plans. People and insurers change
or tells private insurers how to pay for care. Just the oppo coverage frequently. Therefore, by the time the laws
site, to assure that the acts initiatives do not compromise main provisions took effect in 2014, millions of people
patient care or interfere with clinical judgment, the law were no longer eligible to keep their coverage.30 Moreo
contains a series of restrictive provisos that preclude ver, many insurers decided to cancel their existing plans
any recommendation to ration health care (Independ because it did not make business sense to keep plans that
ent Payment Advisory Board), any use of dollars per could not be sold to new subscribers. In addition, some
quality adjusted life year (Patient Centered Outcomes states decided to require these cancellations. The ensuing
Research Institute), or any denial of benefits based on uproar led the Obama administration to allow insurers to
age, disability, or expected length of life (essential keep in place coverage that they had planned or begun
health benefits).21 to cancel. However, for many insurers this continuation
was not feasible or was not allowed by state regulators.
Budget buster Even for cancellation deadlines that were extended,
Another misconception is that the act puts the federal sooner or later people will have to conform to the acts
government deeper into debt. Certainly, the act is not benefit minimums for individuals and small groups.
inexpensive; it is expected to cost about $1tr of federal Whether or not these minimum benefits are good policy
spending over the first decade, even though it was not is, of course, subject to debate. For instance, should cov
fully in effect for several of those years. Nevertheless, the erage for maternity care be required even if many poli
law is designed to cover the federal governments costs cyholders simply cannot have children? And, should
through various tax increases and spending cuts (mainly insurance cover habilitative services that go beyond
to Medicare), so it is not expected to increase federal debt merely rehabilitating patients, to include various thera
for the foreseeable future according to the Congressional pies that help people cope with chronic disabilities?
Budget Office (CBO),22 23 whose expertise and neutrality Although coverage of these services is more comprehen
is not seriously questioned. Naturally, such projections sive than what prevailed previously in the individual mar
often prove to be inaccurate and other government pro ket, this coverage is similar to the most popular plans that
grams such as Medicare have ended up costing much had been for sale in the small group market and a bit less
more than initially forecast. However, this is not the generous than what prevails for large employer groups.19
experience so far. Because initial insurance rates were
lower than expected, and about half the states have not Impact on patients and consumers
expanded Medicaid, the CBO now projects that costs to For reasons just explained, the Affordable Care Act has
the federal government will be about $30bn less per year little effect on the insurance coverage of roughly three
than originally forecast.24 25 quarters of the population (figure). The laws main effect

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is that the number of people who are uninsured will be Effect on community and average rates
roughly halved by moving them to Medicaid (those below Similarly overstated are charges that the act has caused
the poverty line) or subsidized private insurance sold massive rate shock. It is true that community rating
through the new government exchange. Everyone with will increase rates for younger people by 30-40%, but it
Medicare, and most people with Medicaid or employment will also significantly lower rates for older people.50 Early
based insurance, will continue to receive the same kind indicators of the market-wide effect on insurance rates
of coverage, from the same source, at price increases that are encouraging. Average rates for 2014 in the individual
are in line with medical cost inflation. Medicare recipi market (which includes the new exchanges) are almost
ents will be covered for more preventive care and will 20% lower than the CBO initially projected, and in line
see coverage for prescription drugs expand. People with with, or lower than, prevailing rates for group insur
large group insurance (including self funded insurers) ance.24 44 51 52
will also have better coverage for preventive services and It is true that these rates exceed what many people
will no longer be subject to lifetime or annual limits on previously paid in the individual market. But insurance
total claims. These and other requirements undoubtedly under the act has better coverage (sometimes better
add to the cost of insurance, but many of them have only than people want).53 Also, insurance now covers all pre-
a minor or negligible impact, in part because most pri existing conditions and allows people to undergo periods
vate insurance already complied with the bulk of the acts of non-coverage without worrying about their ability to
requirements. requalify for coverage. Moreover, this insurance can
The acts primary impact is on the 18% of people who not be cancelled or rescinded and its premiums do not
are uninsured, the 6% who have individual coverage, and increase as steeply with age, or at all when people get sick
the small proportion (so far) of people whose employers or injured. These benefits come at a cost, which insurers
are dropping group coverage. These roughly 80 million require people to pay, but which the act subsidizes for
people will need to decide between the following options: most people.
Remain as they are and pay a tax penalty (1% of
income in 2014, increasing to 2.5% in 2016), unless Premium subsidies
they qualify for an exemption The acts premium subsidies vary substantially accord
Enroll in Medicaid or with an employer plan, if eligible ing to income and family composition. It is therefore
Purchase subsidized private insurance on the not easy to summarise the impact of these subsidies.
exchange (if their income is between 133% and However, because subsidies are available to people who
400% of the poverty line) earn up to four times the poverty level, most people who
Purchase full price insurance on their own. purchase individual insurance will be eligible for some
Undocumented immigrants are not eligible for Med subsidy.30 50 54 55 Among those who qualify, the subsidy
icaid or the exchanges.31 32 Also, in states that do not averages about $5000 per family.23 The full net impact of
expand Medicaid, people below the poverty level have these various components of insurance pricing (average
no new options because exchange subsidies are available rate, age rating, exchange subsidies) is not yet known but
only above the poverty line.14 there will be more winners than losers.30 54 Still, if only
During the first open enrollment period (which ended a small minority of existing policyholders face increases
in March 2014), about eight million people purchased substantially more than general medical cost trends, this
individual insurance through the state and federal will amount to a few million people who will be worse off
exchanges, exceeding expectations despite severe soft than before.
ware problems.25 3335 About a quarter of these enrollees
were previously uninsured.33 34 36 37 Another six million Medical loss ratio
uninsured people enrolled with Medicaid.33 34 38 39 This Another of the acts benefits for consumers is its regula
enrollment surge could cause patients in some parts of tion of insurers medical loss ratio, which is the propor
the country to face a shortage of available physicians, tion of the premium spent on medical claims and quality
especially primary care physicians,40 but this has not yet improvement as opposed to overheads such as sales
happened,41 42 and efforts (described below) are being costs, administration, and profits. Requiring insurers to
made to increase primary care capacity. rebate overheads that exceed 20% in the individual and
small group markets, or 15% in the large group market,
Effect on insurance exchanges has resulted so far in almost $2bn of consumer rebates.56
Most of the insurance exchanges offer a good range of In addition, insurers reduced their overhead expenses by
choice at prevailing prices.4347 Fears that the new law a similar amount after enactment of the law, and appar
would drive insurers from the market in droves have not ently in response to it.48
materialized. To the contrary, in each market segment
(individual, small group, and large group), roughly 500 Summary of the acts impact on patients and consumers
insurers throughout the country had at least 1000 mem The act seems to have had no unwanted consequences for
bers in 2012.48 Moreover, insurers stock prices have risen most patients and consumers. However, the act has had a
substantially more than the rest of the stock market,49 negative effect on less than 5% of peoplethose who are
and new insurers are entering the individual market in younger, healthier, and wealthier and so had lower rates
many states, in response to the opportunity for increased and are not eligible for substantial financial assistance.
enrollment through the exchanges.46 There is also legitimate concern that the initial favorable

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rather than volume. In particular, Medicare is expected to

Box 2|Medicare payment innovations in the Affordable
make greater use of bundled payments (see Glossary) for
Care Act
episodes of illness, which hold hospitals and physicians
Community Care Transitions Program jointly responsible for cost and quality for an episode of
Tests models to decrease readmission after Medicare
care.63
funded hospital admission by improving communication
between hospitals and primary care physicians. Models Pilots completed to date have had variable success
being tested include specialized clinics, enhanced home and the optimal arrangements have not been clearly
care services, partnerships between hospitals and nursing defined.64 65 The open structure of accountable care
homes, and a return to home visits by doctors organizations, for example, makes it more difficult for
Value Based Purchasing Program them to coordinate and manage care.66 Accordingly,
A pilot program that shifts financial risk from Medicare to the these organizations have not yet shown substantial
physicians and hospitals that provide care. Current pilots savings.60 67
include bundling hospital and physician reimbursement The prospect of marked change in Medicare payments
into a single payment for an episode of care might make the relationship between hospitals and phy
Shared Savings Program sicians more collaborative or contentious. Initially, at
Retains current payment structure but rewards groups of least, providers are becoming more closely aligned. Many
providers, referred to as accountable care organizations
physician groups are being bought by hospitals, convert
(ACOs), that can deliver quality care at lower cost. ACO
structures are invisible to patients. Patients are attributed to ing physicians from small business owners to employ
an ACO on the basis of their voluntary provider relationships, ees.68 It is too early to know whether these payment and
which leaves them free to see non-ACO providers. In 2014, organizational changes will enhance or erode the patient-
200 ACO pilots were ongoing in the US, and their optimal physician interaction. Physicians may be rewarded for
size and organization is still under study. spending more time with patients rather than simply
ordering more tests. But there is also the potential that
market performance may not persist. Insurers initial cost or institutional constraints will make patients more
pricing was based on actuarial assumptions about the wary of physicians motivations.
unknown age and health status mix of enrollees under
the new market rules. If the actual experience is substan The act continues existing trajectories
tially worse, rates for individual coverage could rise con Medicine has been beset for decades with changes like
siderably, or participating insurers could decline. these. Considering the Affordable Care Acts size, impor
tance, and complexity, the tendency is to attribute almost
Impact on physicians and hospitals everything that happens in healthcare delivery, especially
Provider capacity and patient access unwelcome changes, to the act.69 But much of the current
The surge in enrollment is expected to place a strain change was under way before the act and clearly would
on provider capacity, especially for primary care physi have continued anyway.70 Adoption of electronic medical
cians.40 The full extent of this has not yet been seen,42 records, for example, received a major bolus of funding
but various measures are under way to increase primary from the bipartisan American Recovery and Reinvestment
care capacity.57 58 The act increases funding for commu Act of 2009, and most delivery system changes directly
nity health centers, and it increases payment rates under fostered by the Affordable Care Act are focused on Medi
Medicare and Medicaid for primary care physicians and care and not on private insurance.61 71 For private insur
for team based patient centered medical homes (see Glos ance, the act continues to leave payment of healthcare
sary).59 The act also focuses on making more use of physi providers to unregulated market forces. Its most overt cost
cian extenders (see Glossary), such as nurse practitioners control measure is to tax employers, starting in 2018, that
and telemedicine. More time and research are needed to offer especially generous health insurance. The act has,
know whether these measures will suffice and how best to however, put into motion market forces that are bringing
organize and fund primary care. Without these improve about further change in the private sector, in the form
ments, the acts increased coverage may not achieve its of narrower networks (see below) and increased patient
full potential to increase access to care and produce a cost sharing.
measurable improvement in population health.
Narrower networks
Cost control To offer the most competitively priced product on the
The Affordable Care Act, despite its name, is much more new exchanges, many insurers have asked providers to
about the cost of insurance than the cost of healthcare. charge substantially less than they usually charge com
Nevertheless, key provisions of the act are designed to mercial insurers by accepting reimbursement closer to
help bend the cost curve in ways that could change how Medicare levels. Providers that are unwilling are often
physicians work together across specialties and with hos dropped from the networks that insurers offer on the
pitals. Almost all of these cost control initiatives focus exchanges. Thus, many insurers have much narrower
on Medicare (box 2).6062 They include the Community networks for their products sold through the exchanges
Care Transitions Program, the Value Based Purchasing than those that they sell simultaneously to groups outside
Program, and the Shared Savings Program. The major the exchanges.43 72 73
goal of these Medicare provisions is to move toward Narrow networks will provide a market test of the
healthcare services being paid for on the basis of value economic theory that individuals are more willing than

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GLOSSARY accountable care organizations and other arrangements

Bundled payment: Combining hospital and physician that use alternative payment methods, such as capitation
reimbursement into a single payment for an episode of and bundled payment for episodes of care. Again, outside
care of Medicare, these are not required by the act, but they
Copayment: The portion of a medical bill paid by the could develop in response to the market structures and
patient rather than by the insurer forces that the act engenders.
Deductible: The amount of covered medical expenses that
an insured patient must pay entirely out of pocket in a year Increased patient cost sharing
before insurance begins to pay anything Another important trend affecting physicians is an
Employer mandate: Taxing larger employers that do not increase in patient cost sharing (see Glossary). All insur
offer group health insurance to full time workers ance sold to individuals and small groups must cover
Essential health benefits: The standard set of benefits the same comprehensive set of essential health benefits
that individual and small-group insurance must cover.
that are commonly covered in the large group market.
It is generally set to the level of benefits that previously
prevailed in each states small group market However, insurers can attach markedly different levels
Individual insurance: Insurance that is not group of patient cost sharing to these comprehensive benefits,
coveragefor example, insurance purchased outside the through various combinations of deductibles and copay
workplace ments (see Glossary).76
Individual mandate: The requirement that people pay a Patient cost sharing has increased substantially in
tax if they do not sign up for insurance coverage that is recent years as employers seek to keep premiums in
affordable, as defined by law check.77 The exchanges present individuals with the
Insurance exchange: A virtual or electronic marketplace in same trade-off between premiums and cost sharing. In
which people can shop for insurance among companies response, most consumers prefer the intermediate level
whose products have been vetted of cost sharing offered by the silver plan, which requires
Large group insurance: Insurance purchased by larger patients on average to pay for 30% of their treatment
employersthose with more than 50 or 100 workers
costs. This is similar to what prevailed recently among
(depending on the particular definition that applies)
small groups but is more cost burden than is common
Managed care: A type of insurance that sets constraints
on which doctors or hospitals are covered in full, that
among large groups. Next most popular are bronze plans,
negotiates price discounts with medical providers, and which average 40% patient cost sharing, similar to the
that reviews the medical necessity of covered treatments cost sharing level that had been most common in the
Minimum essential benefits: The ill defined level of individual market.
insurance coverage that must be purchased to satisfy the Insurers are also experimenting with which combina
individual mandate tion of the cost sharing elements is most appealing for
Patient centered: A care delivery structure that assigns consumersfor example, whether patients prefer lower
responsibility to a medical homes primary care provider deductibles that apply to all sources of treatment or
to track and coordinate a patients care received from higher deductibles that do not apply to primary care.
multiple sources
As patients sort through these options, they will
Patient cost sharing: The portion of treatment costs paid by
increasingly turn to their physicians for better informa
patients, through deductibles and copayments
tion about the actual costs of care and the availability
Physician extenders: Healthcare providers that are
of less costly options. Physicians are not accustomed to
licensed to provide some of the services also provided
by physiciansfor example, nurse practitioners and discussing treatment costs with patients, except perhaps
physicians assistants to pick between generic and branded drugs.78 79 We may
Premium tax subsidies: Financial support provided be at the beginning of a shift in the doctor-patient rela
to people above the poverty line to purchase private tionship that requires a much more cost conscious style
insurance of patient communication and medical decision making.

employers to sacrifice breadth of choice among providers Future prospects

for lower premiums. Employers are less willing to do this The acts major provisions took effect only on 1 January
when they choose a plan that covers a large number of 2014. Therefore, it is far too early to judge whether it is
workers, many of whom might find that their preferred a shining success or utter failure. Most likely, it will be
physicians or hospitals are not in a narrow network. Indi something in between, but it remains to be seen whether
viduals however may be willing to shop among different its advantages exceed its shortfalls and which aspects
plans on the basis of which one has their preferred pro perform better or worse. Naturally, views will differ on
viders or they might be more willing to change physicians how its performance should be measured. However, on
to save their own money. the basis of the acts content and structure, it should
If narrow networks persist, they might also expand not be expected to solve the major faults of US health
beyond the government exchanges to offer lower cost care. Instead, it can be claimed to be successful if it
options for employer groups, possibly through private substantially reduces the number of people who lack
exchanges.74 75 If so, providers may face increasingly insurance without accelerating the increase in medical
tough choices about how great a discount they are will costs. The ultimate goals of universal coverage, effective
ing to confer. More than just price discounting, narrow cost containment, and optimal quality will have to await
networks form the scaffolding to construct private sector additional reforms.

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1 Oberlander J, Perreira K. Implementing Obamacare in a red state

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issue_briefs/2013/rwjf406367
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The act does not directly change how private insurers information. N Engl J Med 2010;363:1495-7.
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coverage-and-costs-under-the-affordable-care-act/.
cal practice. In response, many hospitals and physicians 23 Congressional Budget Office. CBOs May 2013 estimate of the effects of the
are forming closer and larger affiliations. Further time Affordable Care Act on health insurance coverage. CBO, 2013. www.cbo.
and study are needed to learn whether these evolutionary gov/sites/default/files/cbofiles/attachments/43900-2013-05-ACA.pdf.
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We are grateful to colleagues Curt Furberg and Greg Burke (Wake Forest 25 Congress of the United States Congressional Budget Office. Updated
University) for encouraging us to write this article and for insightful estimates of the effects of the insurance coverage provisions of the
comments on an earlier draft. They do not necessarily share all of the views Affordable Care Act, April 2014. 2014. www.cbo.gov/publication/45231.
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2013;32:1522-30.
and design of the work and the analysis and interpretation of data, and
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He is accountable for all aspects of the work in ensuring that questions 2012;49:116-26.
related to the accuracy or integrity of any part of the work are appropriately 28 Eibner C, Hussey PS, Girosi F. The effects of the Affordable Care Act on
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portion of the article that deals with impacts on physicians. For this portion, 29 Gabel JR, Whitmore H, Pickreign J, Satorius JL, Stromberg S. Small
he contributed to the conception and design of the work, the analysis and employer perspectives on the Affordable Care Acts premiums, SHOP
interpretation of data, and the drafting and revising of the article. exchanges, and self-insurance. Health Aff (Millwood) 2013;32:2032-9.
30 Families USA. How does the Affordable Care Act affect people who buy
Competing interests: We have read and understood BMJ policy on
health insurance in the individual market? 2013. http://familiesusa.org/
declaration of interests and declare the following interests: none. product/how-does-affordable-care-act-affect-people-who-buy-health-
Provenance and peer review: Commissioned; externally peer reviewed. insurance-individual-market.

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