The Patient Protection and Affordable Care Act of 2010 (Pub. L. No. 111-148) (“ACA”), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. No. 111-151), initiated comprehensive reform of the U.S. health care sector.  In addition to coverage expansions, ACA contains provisions to control the cost and improve the quality and efficiency of health care.  The major reform in ACA targets the lack of access to health insurance.   In 2010, according to the U.S. Census Bureau, 16.3 percent of the U.S. population was uninsured. 

The U.S. Health Insurance Sector.  The U.S. health coverage insurance is a mix of private and public programs that fails to provide adequate and affordable coverage for all. 

Private Health Coverage.  Most people in the U.S. have private health insurance—either through an employer or commercial plan.  No federal or state law requires employers to provide health coverage to employees.  Employers are motivated to do so because of advantageous treatment of plans under federal tax law.  According to the U.S. Census Bureau, about 65 percent of the U.S. population had private health insurance coverage in 2010.  The majority, 55.3 percent, obtained coverage through employers and 9.8 percent purchased private commercial coverage.

Both the federal government and the states regulate private health insurance in the U.S.  The Employee Retirement Income Security Act of 1974 (Pub. L. No.  93-406) regulates employer-sponsored plans. States regulate commercial health insurance plans.  There are convoluted, historic reasons for this division of regulatory responsibility and ACA address many resulting problems.

                                                     Public Health Coverage. The primary public health insurance programs are Medicare, Medicaid, and the State Children’s Health Insurance Program (“SCHIP”).  The Center for Budget and Policy Priorities reports that Medicare and Medicaid comprised 21 percent of the federal budget 2011. 

The Medicare program provides basic coverage to the aged, severely disabled, and people with end stage renal disease.  Medicaid, jointly financed and administered by the federal government and states, provides health insurance for some disabled and aged poor, as well as poor pregnant mothers, infants, and children.  SCHIP covers poor children who are ineligible for Medicaid benefits.

The federal government also sponsors health care systems for the military and veterans as well as community health centers in rural and medically underserved areas.  In all, 31 percent of the U.S. population is covered through public programs.

Major Problems.  The major problems for the U.S. health care system are access, costs, inefficiency and also quality.   Regarding costs, the U.S. Department of Health and Human Services reports that the share of GDP attributable to health care was 17.3 percent in 2009 and is projected to reach 19.3 percent by 2019.  Regarding quality and efficiency, policy makers and health services researchers believe that the fragmented and inefficient organization of health care delivery is a major cause of high costs, inefficiency and substandard quality.  As noted above, the biggest problem is the uninsurance and also underinsurance.    The most recent U.S. Census data indicates that as of 2010, 49.9 million individuals were without health insurance coverage at any point in time.                                              

ACA Reforms regarding Coverage Expansions. The first two titles of ACA reform the private health insurance market and expand Medicaid.  To understand ACA, one must understand the characteristics of the uninsured. (See figure 1) The Medicaid expansion in Title II is intended to cover Group 1 and the poorer in Group 2.  The health insurance market reforms in Title I are intended to extend coverage for groups 2, 3 and 4.   Presumably persons in Groups 3 and 4 are younger and healthier people and their participation will bring down costs of coverage for all.

For those ineligible for Medicaid and unable to get employer-sponsored coverage, the uninsured must purchase health insurance through a state exchange or pay a small penalty.  If their income is below a certain level, federal subsidies to purchase coverage are available.  Subsidies and other incentives encourage employers to offer coverage.   The federal government operates an exchange for people in states that do not establish an exchange.

Finally, titles III through X of ACA contain provisions to control the cost and improve the quality and efficiency of health care.