A Look Back at the Affordable Care Act

In March 2010, the Affordable Care Act (ACA) was signed into law. Its aims included expanding and revamping Medicaid and Medicare; offering affordable health insurance for all population groups; introducing regulated health insurance exchange markets to ensure competitive pricing for insurance; and supporting innovative medical care delivery methods to lower health care costs.¹

For older Americans, the ACA represented an important financial benefit. “The ACA gradually closed Medicare Part D’s doughnut hole [the gap in coverage] between 2010 and 2020, which enabled millions of [older Americans] in that program to more easily afford their prescriptions,” noted the authors of a 2020 study published in Health Affairs.² Young adults also benefited because their parents’ health insurance could cover them through December 31 of the year they reached 26 years of age.³ Americans living at or slightly above the poverty level also received financial relief—and, to a certain extent, the middle class (more on that later).

Overall, the law was vast, complex, and driven by genuine need. According to KFF, a nonprofit organization devoted to policy research and polling on national health issues, “In the years leading up to the passage of the ACA, about 14% to 16% of people in the United States were uninsured [across all ages]. By 2023, the uninsured rate had fallen to a record low of 7.7%. Most of the gains in insurance coverage have come from the ACA’s expansion of Medicaid, followed by the creation of the exchange markets.”³

The Affordable Care Act was signed into law in March of 2010. | image credit: Svetlana / stock.adobe.com

Challenges to the ACA

The law, however, was not without controversy. Almost as soon as it was passed, states began to sue the federal government, arguing they could not mandate expansion of Medicaid programs and questioning the constitutionality of such a mandate.⁴ In 2011, the US Supreme Court overturned this section of the ACA, making the expansion of Medicaid optional.⁴

Additionally, the ACA required Americans who did not have health insurance to pay a penalty (known as an individual mandate). This mandate was highly polarizing, with several legal challenges heard in court. Some argued it was government overreach; others stated penalizing Americans who could not afford health insurance or did not want it was unfair. The individual mandate was eliminated in 2019 through the Tax Cuts and Jobs Act of 2017.^4,5 The ACA also imposed new costs, such as penalties for employers with at least 50 employees who did not offer adequate coverage and regulations on insurers to prevent discrimination against patients with preexisting conditions.⁴

Another controversial section of the ACA was the “subsidy cliff,” increasing health insurance costs for those whose income was 400% over the federal poverty level. This clause essentially levied hundreds to thousands of dollars on the middle class, resulting in them having to pay full price for their insurance. The American Rescue Plan Act of 2021, part of the COVID-19 relief legislation, suspended this “cliff” by expanding subsidy eligibility, with the Inflation Reduction Act of 2022 extending the subsidies until the end of 2025.³

Despite the arguments, proponents believe that overall, the ACA produced widespread benefits and succeeded in many of its goals. According to another article published in Health Affairs, “Collectively, the ACA’s coverage expansions and market reforms generated substantial and widespread improvements in reducing financial barriers to coverage, improving access to health care, and lowering the financial risks of illness. The coverage expansions reduced uninsurance rates, especially relative to earlier forecasts; improved access to health care; and led to measurable gains in the financial well-being of poor Americans.”⁶

Benjamin Jolley, PharmD, a pharmacist at Jolley’s Compounding Pharmacy in Salt Lake City, Utah, and senior fellow for health care at the American Economic Liberties Project, agrees that the ACA has been a boon for many Americans. “Dramatically more people are insured today than before,” Jolley said in an interview with Drug Topics. “When the ACA was passed, there were basically 2 camps in Washington, DC: One wanted to get more people on insurance, and the other wanted to make everything less expensive. The camp focused on increasing insurance won. We see that today—the number of prescriptions that people pay [for] out of pocket vs those billed to a pharmacy benefit manager is dramatically lower. This is due to the existence of the exchanges, the expansion of Medicaid, and employers offering more coverage. The number of people I see in my practice who don’t have insurance and pay out of pocket, instead of through a PBM, is significantly lower than a decade ago.”

READ MORE: Health Care Affordability in the Election Spotlight

The ACA, Pharmacists, and PBMs

There is, however, a caveat to how things shook out. “As a pharmacy operator, our relationship with PBMs has become much more important because almost everyone has insurance now, and most expect their prescriptions to be billed to insurance,” Jolley said. In other words, as health care coverage has expanded, so has the influence of PBMs in managing prescription cost benefits, often negotiating lower reimbursement rates for pharmacies. “My societal duty is to ensure people get the medicines they need and avoid harm. But much of my day is spent ensuring we don’t lose money, which is not what I went to school for,” Jolley added. “As a pharmacist, I sometimes feel like a commodities trader. Instead of just focusing on health, I’m constantly trying to find weak points in PBM pricing, which isn’t the purpose of my profession. It’s become necessary for a pharmacy to stay in business, though, which is frustrating.”

Additionally, although the ACA increased drug pricing transparency for Medicare, it allowed PBMs to charge pharmacies higher direct and indirect remuneration fees. “I’ve compared this problem to a slot machine,” Jolley explained. “The more business we have where we don’t control the price, the more we see slot-machine behavior—losing money frequently, making a little occasionally, and hitting the jackpot every now and then to fund the staff for a day,” which, he admits, is not the greatest incentive system.

Drug Pricing and the ACA

There is also the inevitable question of the increase in drug pricing. “The ACA did make important strides in expanding health care access; however, it did not address systemic issues around drug pricing,” said Danielle M. Alm, PharmD, BCPS, BCPPS, an associate professor of clinical pharmacy at the Philadelphia College of Pharmacy at Saint Joseph’s University in Pennsylvania. “Even though patients gained more access to medications through insurance reforms, the underlying cost of drugs has continued to rise.”

“In terms of the pharmaceutical industry, we understand that significant regulatory intervention in pricing could potentially reduce incentives for these companies to invest in research and development,” Alm continued. “New drug approvals have accelerated, especially in areas like oncology, rare diseases, and biologics. Many of these new therapies have brought substantial therapeutic advancements, which have, in turn, benefited patients. We still need to think about accessibility as these high drug prices can lead to financial stress: certain insurance plans may have high deductibles, making these therapies financially out of reach. Therefore, a gap still exists regarding making changes to how drugs are priced and to institute mechanisms such as direct price controls or government negotiations on drug prices.” Indeed, the ACA did not directly address the issue of drug pricing, which, in a free market economy, can be wildly wide ranging.

Although Jolley also acknowledges that certain medications, particularly specialty medicines, can be exorbitantly priced, the increase in generic drugs has somewhat leveled the pricing field for more common indications. “Around the time the ACA was passed, Congress also passed the Generic Drug User Fee Act, which allowed drug manufacturers to pay the FDA to expedite the approval process for generics. This cleared a backlog of generic applications, and we’ve seen the prices of generics drop steadily since. A common blood pressure drug like amlodipine costs a pharmacy half a penny per tablet now, compared to Lipitor [atorvastatin calcium], which used to cost $300 and now costs around 8 cents.”

The ACA Today: What Would It Look Like?

What would the ideal ACA look like today? Among several modifications that Jolley would make, “I’d love to see what I call a ‘Glass-Steagall for health care,’ where financial services entities like insurers and PBMs are separate from health care providers like pharmacies and doctors,” he said. The Glass-Steagall Act of 1933, which also created the Federal Deposit Insurance Corporation, separated commercial banks from investment banking. It states: “Commercial banks, which took in deposits and made loans, were no longer allowed to underwrite or deal in securities, while investment banks, which underwrote and dealt in securities, were no longer allowed to have close connections to commercial banks, such as overlapping directorships or common ownership.”⁷

“Basically, this would mean that insurers and PBMs would be separate from health care providers like pharmacies and doctors,” Jolley explained.

Another item on his wish list for a revamped ACA is regulating the entities in charge of paying pharmacies. “I’d like to see something like HR 9096, the Pharmacists Fight Back Act,” Jolley said. “This act would require federal programs like Medicare and Medicaid to pay pharmacies fairly, covering the national average drug acquisition cost plus a small markup and a professional dispensing fee. This would break the slot-machine pricing model, ensuring a more consistent income for pharmacies.”

As for Alm, her wish list includes addressing the rising cost of prescription drugs, as well as “allow[ing] these new, innovative medications to be accessible to all patients who need these medications [as well as] potentially create a cap on out-of-pocket drug costs that would help families with chronic conditions to better afford expensive medications, especially biological agents and specialty drugs.”

To read these stories and more, download the PDF of the Drug Topics November/December issue here.

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References

1. Assistant Secretary for Public Affairs. About the affordable care act. US Department of Health and Human Services. March 17, 2022. Accessed September 26, 2024. https://www.hhs.gov/healthcare/about-the-aca/index.html

2. Conti R, Dusetzina SB, Sachs R. How the ACA reframed the prescription drug market and set the stage for current reform efforts. Health Aff (Millwood). 2020;39(3):445-452. doi:10.1377/hlthaff.2019.01432

3. Ortaliza J, Cox C. The Affordable Care Act 101. KFF. Published May 28, 2024. Updated July 29, 2024. Accessed October 4, 2024. https://www.kff.org/health-policy-101-the-affordable-care-act/?entry=table-of-contents-what-is-the-affordable-care-act 

4. LaFontaine PR, Vogenberg FR, Pizzi LT. From then until now: A top-down view of the Affordable Care Act. Pharmacy & Therapeutics. 2019;44(8):467-470, 493.

5. Fiedler, M. The ACA’s individual mandate in retrospect: What did it do, and where do we go from here? Health Affairs (Millwood). 2020;39(3):429-435. doi:10.1377/hlthaff.2019.01433

6. Glied SA, Collins SR, Lin S. Did the ACA lower Americans’ financial barriers to health care? Health Affairs. 2020;39(3):379-386. doi:10.1377/hlthaff.2019.01448

7. Maues J. Banking Act of 1933 (Glass-Steagall). Federal Reserve History. Federalreservehistory.org. November 22, 2013. Accessed October 4, 2024. https://www.federalreservehistory.org/essays/glass-steagall-act