16 Sep 2022


The Impact of the ACA on Health Insurance Supply and Demand

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Academic level: College

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The Affordable Care Act is a federal statute that was signed into law by Former US President Barrack Obama to provide the American citizens with affordable medical insurance so as to ensure that low-income earners were able to access medical care. The health plan ensures that every citizen has health insurance coverage for either public or private hospitals to prevent them from being charged with a tax penalty. As a result, this law will increase the demand for health insurance among citizens since it is affordable and can allow every citizen to access coverage and care for themselves and their families. Since it has been passed as a law, most citizens will seek insurance covers to avoid getting tax penalties. It is estimated that around 30 million Americans will gain health insurance through the law and as a result, there will still be an increase in demand for provision of the health insurance cover (Anderson, 2014). This Act also provides subsidies to citizens who cannot afford this new coverage and thus, this will increase the demand for health insurance coverage. The Act also forbids insurance companies from increasing the premiums beyond the limit set by the government, and this is lower than the initial amount that most insurance companies charged for health insurance. With regards to the law of demand, a decrease in price results in an increase in demand. Hence there will be an increase in the demand for coverage. 

Seeing that the government has reduced premiums rates for health insurance so as to accommodate all citizens in the health coverage plan, average price of health insurance will significantly fall so as to allow many citizens to access health insurance. According to Loren Alder and Paul Ginsburg, analysis shows that these rates have dropped by between 10 and 21 per cent, an indication that the average price is also low (Mangan, 2016). There is no probability of health insurance process rising since the government has forbidden the increase of these prices to ensure that the current price cuts across every member of the population. Unlike the previous health care premiums where less-healthy people were charged higher premiums, the Affordable Care Act forbids the insurance companies from increasing premiums for special customers or denying them insurance coverage. The Act also aims at saving the money for the consumers and this simply means lowering the price at which health insurance coverage is given (Mangan, 2016). 

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With the law of affordable health care being made to cover every citizen, the supply for health insurance is expected to rise due to increase in demand. However, not many insurance companies are willing to provide health coverage to clients since not many benefits can be reaped from the Act. For this reason, there is low supply of health insurance. This is mainly due to the decrease in price of health insurance cover and the inclusion of subsidies by the government to cater for citizens who are not able to obtain medical cover. This further cuts down on any money that insurance money could have gained. The Act also prevents Insurance companies from maximizing their profits in situations such as previously ill people and old people who were charged higher premiums, with older people being charged up to 3 times more than that of old people. This is due to the standard rate provided by the Act, which discourages companies from supplying insurance cover to cater for the increased demand. 


Anderson, A. (2014, March).The Impact of the Affordable Care Act on the Health Care Workforce. The Heritage Foundation. Retrieved from http://www.heritage.org/health-care-reform/report/the-impact-the-affordable-care-act-the-health-care-workforce 

Mangan, D. (2016, July). Average Health Insurance Premiums Fell After Obamacare Took Effect, Study Says. CNBC. Retrieved from http://www.cnbc.com/2016/07/27/average-health-insurance-premiums-fell-after-obamacare-took-effect-study-says.html 

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