17.2 The Affordable Care Act: EHBs, Marketplaces, Subsidies, Mandates
Key Takeaways
- The ACA requires guaranteed issue, bans pre-existing-condition exclusions and lifetime/annual dollar limits, and extends dependent coverage to age 26.
- All individual and small-group plans must cover the ten categories of Essential Health Benefits, including maternity, mental health, and prescription drugs.
- Metal tiers reflect actuarial value: Bronze ~60%, Silver ~70%, Gold ~80%, Platinum ~90% paid by the plan on average.
- Premium Tax Credits lower premiums for ~100%-400% FPL; Cost-Sharing Reductions lower out-of-pocket costs only on Silver plans (~100%-250% FPL).
- The federal individual-mandate penalty is $0 since 2019, but the employer mandate still applies to Applicable Large Employers with 50+ FTE employees.
The Affordable Care Act (ACA)
The Affordable Care Act (ACA), also called the Patient Protection and Affordable Care Act (PPACA), reshaped the individual and small-group health markets. Producers must know its core consumer protections, the Essential Health Benefits (EHBs), how the Marketplace and metal tiers work, and how subsidies are calculated.
Key consumer protections the exam tests:
- Guaranteed issue: insurers cannot deny coverage for pre-existing conditions.
- No lifetime or annual dollar limits on EHBs.
- Dependent coverage to age 26 on a parent's plan.
- Adjusted community rating: premiums may vary only by age (max 3:1), tobacco use (max 1.5:1), geographic area, and family size — not by health status or gender.
- Preventive services (immunizations, many screenings) at no cost-sharing.
Essential Health Benefits (EHBs)
All individual and small-group plans must cover ten categories of Essential Health Benefits:
| # | Essential Health Benefit category |
|---|---|
| 1 | Ambulatory (outpatient) services |
| 2 | Emergency services |
| 3 | Hospitalization |
| 4 | Maternity & newborn care |
| 5 | Mental health & substance-use disorder services |
| 6 | Prescription drugs |
| 7 | Rehabilitative & habilitative services/devices |
| 8 | Laboratory services |
| 9 | Preventive/wellness & chronic-disease management |
| 10 | Pediatric services (incl. oral & vision) |
A plan that omits maternity coverage or excludes mental health is non-compliant. Note that the medical loss ratio (MLR) rule requires insurers to spend at least 80% of premium (individual/small group) or 85% (large group) on claims and quality, or rebate the difference.
Marketplaces and Metal Tiers
The Health Insurance Marketplace (Exchange) is where individuals shop for qualified health plans, often during open enrollment; a qualifying life event (marriage, birth, job loss, loss of other coverage) opens a special enrollment period.
Plans are sold in four metal tiers based on actuarial value (AV) — the share of total costs the plan pays on average:
| Metal tier | Actuarial value (plan pays) | Member shares |
|---|---|---|
| Bronze | ~60% | Highest cost-sharing |
| Silver | ~70% | Moderate |
| Gold | ~80% | Lower |
| Platinum | ~90% | Lowest cost-sharing |
Higher metal = higher premium but lower out-of-pocket when care is used. A catastrophic plan exists for those under 30 or with a hardship exemption. The exam trap: a higher AV does not mean the insurer pays 100% — Platinum still leaves ~10% to the member.
Subsidies: Premium Tax Credit and Cost-Sharing Reductions
Two subsidies lower cost for eligible Marketplace buyers:
- Premium Tax Credit (PTC / APTC): an income-based credit (historically for households 100%-400% of FPL) that reduces the monthly premium. It can be taken in advance and reconciled on the tax return.
- Cost-Sharing Reduction (CSR): lowers deductibles, copays, and coinsurance — but only if the buyer enrolls in a Silver plan and earns roughly 100%-250% of FPL.
Worked example: A household earning 200% of FPL picks a Silver plan. They may receive both an APTC (lower premium) and a CSR (lower deductibles/copays). If they chose Gold instead, they would keep the APTC but lose the CSR, because CSRs attach only to Silver plans. Pick the answer that ties CSRs to Silver.
A client earning 200% of the Federal Poverty Level wants the lowest possible deductibles and copays through a Marketplace cost-sharing reduction. Which metal tier must they choose?
Which of the following is NOT a permitted ACA premium rating factor in the individual market?
Mandates and Exemptions
The ACA originally imposed an individual mandate (a tax penalty for going uninsured). The federal penalty was reduced to $0 in 2019, though some states impose their own mandate. The employer mandate still applies: Applicable Large Employers (ALEs) with 50+ full-time-equivalent employees must offer affordable, minimum-value coverage or face a shared-responsibility payment. Affordable means the employee's share of self-only premium stays under an indexed percentage of household income; minimum value means the plan pays at least 60% of costs (Bronze-equivalent).
Worked Numeric: Actuarial Value and Cost Sharing
Metal tiers describe actuarial value (AV) - the average share of covered costs the plan pays, not what any one person pays.
Suppose a Silver plan (70% AV) member incurs $10,000 of covered claims for the year. On average the plan is designed to pay about $7,000 and the member about $3,000 through deductible, copays, and coinsurance. A Bronze plan (60% AV) would pay roughly $6,000 and leave $4,000 to the member; Platinum (90% AV) pays about $9,000, leaving $1,000.
Exam trap: AV is an actuarial average across a standard population, so an individual's real out-of-pocket can differ. And even Platinum does not pay 100% - there is still member cost-sharing up to the annual out-of-pocket maximum, after which the plan pays 100% of covered EHBs.
Worked Numeric: Out-of-Pocket Maximum and the 100% Payment Point
Every ACA-compliant plan caps the member's annual out-of-pocket (OOP) maximum for in-network essential health benefits; once reached, the plan pays 100% of further covered EHBs for the year. The OOP maximum includes the deductible, copays, and coinsurance but not premiums.
Worked example: a Silver plan has a $3,000 deductible, 30% coinsurance, and a $9,000 OOP maximum. A member incurs $60,000 of covered claims:
- Pays the $3,000 deductible, then 30% of the next claims until cost-sharing totals $9,000.
- Once the member's payments hit the $9,000 OOP cap, the plan pays the remaining ~$51,000 at 100%.
This cap is why a serious illness cannot bankrupt an ACA enrollee the way pre-ACA annual/lifetime limits could. Pair this with metal-tier actuarial value (Bronze ~60% up to Platinum ~90%) - higher tiers mean lower cost-sharing on the path to the OOP cap, but even Platinum charges something until the cap is met.