Health-care reform law: How Supreme Court ruling affects families

(Updated at 1:10 p.m. Thursday)

When it issued a 5-to-4 ruling upholding President Obama's health-care reforms, the US Supreme Court rendered judgment on an issue that carries a direct impact for millions of American families.

The reform law, known as the Affordable Care Act (ACA), seeks to expand health insurance coverage by requiring individuals to purchase it and requiring insurers to offer coverage to all comers.

The Supreme Court rejected arguments that such a mandate on individuals is unconstitutional, ruling that the mandate is acceptable under Congress's power to levy taxes. (Many people who fail to buy insurance would owe a fine – in effect a tax.)

The court also declined to strike down a portion of the law that would extend Medicaid to more low-income families, up to 1.33 times the current poverty level.

The mammoth law contains many interconnected provisions, so the impact of the court's ruling will vary greatly by family circumstance.

For the roughly 50 million uninsured Americans, the court's ruling has the biggest implications. For the majority of citizens who currently have insurance, the ruling could mean some important changes as well, such as to their health plans or their personal tax rates.

Many less affluent Americans who do not qualify for Medicaid may now gain health coverage as the program is expanded.

But the court gave a mixed decision on the law's Medicaid provision, saying states cannot be coerced into participating in an expansion of the program, which is run by the states with federal support. So, depending on state-level choices, the Medicaid expansion may reach many fewer than the roughly 17 million people envisioned by the law's backers. [Editor's note: The original version of this story failed to note the mixed nature of the court's Medicaid decision.]

For others among the ranks of some 50 million uninsured Americans, the law creates a system of tax subsidies – designed to help more Americans afford health coverage – plus the mandate to buy insurance or pay a fine.

Consider a working-age family of four, with an income of $60,000 and no earner covered by an employer-based health plan. According to a "health reform subsidy calculator" created by the Kaiser Family Foundation, which tracks US health-care policies, this family would reap a tax subsidy of $9,308 if they buy insurance in 2014. That would cover most of a total premium cost of $14,245, perhaps putting health insurance within the family's financial reach.

Without the "stick" of an individual mandate, this "carrot" might not prompt as many households to fully insure themselves. To take the family in the example just given, they would still face a sizable premium (nearly $5,000), plus the prospect of additional out-of-pocket expenses, capped for this family at $6,250.

For comparison, the typical US household in 2010 had total spending of $48,109, with $3,157 of that for health care, according to a survey by the US Labor Department.

The law provides for people who don't have an employer-based plan to shop for insurance on "exchanges" set up at the state level, with coverage plans ranging from "bronze" to "platinum." The Kaiser Family Foundation's calculator focuses on the cost of a "silver" plan, and the example given above assumes the household is headed by a 45-year-old.

Note this: The subsidies are designed to phase out as household income rises, so the family of four would see the cost of health-insurance jump once their income exceeds about $93,700 – making them ineligible for federal subsidies.

Some will remain uninsured

Even with the Supreme Court's ruling to uphold the law, many Americans are likely to remain uninsured.

As the Kaiser Family Foundation explains, some citizens would be exempt from the mandate (such as for religious reasons, being in prison, being an undocumented immigrant, or not being able to afford insurance). The law deems insurance to be unaffordable for people when insurance premiums after subsidies and employer contributions exceed 8 percent of family income.

For whom would insurance be "unaffordable"? While low-income families would be eligible for Medicaid, and families in the next rung up the ladder would get generous subsidies, the phaseout of tax credits would put insurance in the zone above that 8-percent-of-income threshold for many families with middle to high incomes. At the top of the income scale, such as a four-person family earning above $180,000, insurance becomes "affordable" again.
 
Of course, even with subsides that make insurance technically "affordable," spending 7 percent of income on health premiums won't necessarily feel easy for working-class families. 
 
In upholding the whole law, the court preserved a range of other ACA provisions that affect families, including a guarantee that insurers will provide coverage to people with preexisting conditions. 

This "guaranteed issue" provision matters to many Americans, even if they now have insurance. For example, that provision eases the worry that if you lose your jobs, you might not be able to get insurance on your own.

Similarly, the ACA includes some "community rating" provisions designed to limit variation in the cost of insurance. Firms can't charge an older purchaser more than three times what they charge a young person. They can't charge a tobacco user more than 1.5 times what a nonuser would pay.

Overall, ranks of insured to increase

In all, millions more Americans are expected to have insurance as key ACA provisions take effect in 2014.

The Congressional Budget Office estimates that some 20 million people would gain coverage by buying their own insurance through exchanges.

Beyond that, the law also has tax implications for many families. The biggest are for high-income individuals who will face a Medicare-tax increase and a 3.8 percent tax on investment income, designed to help pay for the ACA's costs.

Opinion polls have found that a majority of US adults like many provisions in the ACA. The federal subsidies, "guaranteed issue," and the Medicaid expansion all were supported by more than two-thirds of Americans in an early 2012 Kaiser-sponsored poll.

At the same time, many Americans don't like the individual mandate (and the related threat of fines), view the law as an instance of government overreach, or worry that the law won't control health-care costs. Those factors go a long way toward explaining why the law overall hasn't garnered majority support.