Who Does The Affordable Care Act Actually Help?

How the Affordable Care Act Survived, How It’s Funded, and Why It Still Feels Like a Tax

By DFW Social & Analysis Studies | November 7, 2025

“Wasn’t Obamacare ruled unconstitutional because it forced people to buy insurance? How is it still working — and how can the government say it saves taxpayers money when people are paying more out of pocket?”

That question hits at the very center of what the Supreme Court debated in NFIB v. Sebelius (2012). The Affordable Care Act (ACA) was designed to expand coverage and lower national healthcare costs, but the way it’s funded — and justified — makes it feel more like a tax system than an insurance program. Here’s how it all fits together.

1. The Mandate That Became a Tax

When the ACA passed in 2010, it required most Americans to have health insurance or pay a penalty. The penalty was either:

• 2.5% of household income above the filing threshold, or
• $695 per adult ($347.50 per child), capped at $2,085 per family.

In 2012, the Supreme Court said Congress couldn’t force people to buy insurance under the Commerce Clause — but could impose a tax on those who didn’t. That distinction saved the law. Chief Justice John Roberts concluded the penalty was effectively a tax, making the ACA constitutional under Congress’s taxing power.

Then Congress Zeroed Out the Penalty

The 2017 Tax Cuts and Jobs Act didn’t repeal the ACA, but it set the penalty at $0 beginning in 2019. So, while the “individual mandate” technically still exists, there’s no longer any enforcement or collection — the law remains on the books but without a bite.

2. How the ACA Is Funded Without the Mandate

Even though the individual penalty now raises no money, the ACA continues to operate through a web of taxes, fees, and cost adjustments — mostly targeting high-income earners and healthcare industries. According to the Congressional Budget Office (CBO, 2024):

Revenue Source	Estimated Amount (2010–2033)
3.8% Net Investment Income Tax (for incomes over $200k single / $250k joint)	≈ $350 billion
0.9% Medicare Payroll Tax on high earners	≈ $290 billion
Annual fees on health insurers	≈ $150 billion
Annual fees on brand-name drug manufacturers	≈ $50 billion
Medicare payment cuts to hospitals & Advantage plans	≈ $800 billion in savings
Total new taxes and cuts	≈ $2 trillion

The ACA exchanges are supported by premiums from enrollees (around 80% of whom receive subsidies) and cost-sharing reduction payments, which were halted during the Trump administration but restored under President Biden.

3. Why Officials Claim It “Saves Taxpayers Money”

Here’s the logic behind that claim, using 2024 CBO and CMS data:

• Total cost of ACA subsidies + Medicaid expansion: $260 billion
• Offsetting taxes and Medicare savings: $180 billion
• Net cost to the federal budget: About $80 billion per year

The argument is that by expanding insurance coverage and reducing unpaid emergency care, total national healthcare costs grow more slowly. Uninsured rates dropped from 16% in 2010 to 7.7% in 2024, meaning fewer unpaid hospital bills get shifted onto taxpayers and Medicare.

Critics, however, note that those savings are projections — not hard numbers — and depend heavily on long-term spending models that have missed the mark before.

4. Why Many Still See It as a Hidden Tax

For many middle-income Americans, the ACA behaves like a tax even if the penalty is gone. Consider a 30-year-old earning $50,000. Their Silver Plan might cost $450/month ($5,400/year). With subsidies, they could pay around $150/month out of pocket — roughly $1,800/year — with no tax deduction for premiums. If their income dropped slightly, they’d qualify for a much larger subsidy.

That “benefit cliff” effectively penalizes being young, healthy, and middle-income. Meanwhile, high earners permanently pay the 0.9% and 3.8% Medicare surtaxes, even though many ACA subsidies were supposed to be temporary. It’s no wonder it feels like an ongoing tax.

5. Who Benefits and Who Pays More

Winners:

• Lower-income individuals and families (under 400% of the federal poverty level)
• Older adults aged 55–64
• People with preexisting or chronic health conditions
• Hospitals, which now receive payment for previously uncompensated care

Losers:

• Healthy 25–45-year-olds making $50k–$120k without employer coverage
• High earners paying permanent ACA-related Medicare taxes

According to the Kaiser Family Foundation (2024), the average unsubsidized marketplace enrollee pays about 55% more than before the ACA, often for narrower networks. Much of that increase comes from industry fees and Medicare payment cuts that ripple back into private insurance prices.

6. The Real Bottom Line

Legally, the Affordable Care Act remains intact because the Supreme Court recognized the individual mandate as a tax — and Congress has the power to tax. Financially, it’s sustained by a mix of high-earner taxes, healthcare industry fees, and Medicare spending reductions.

In practice, though, the ACA redistributes healthcare costs much like a tax system does: shifting burdens from lower-income and older Americans to middle-income and high-earning taxpayers. Whether that’s fair or sustainable remains a political question more than a legal one.

In summary: The ACA is constitutional, funded, and here to stay — but for many working Americans, it still feels like paying a tax dressed up as insurance.

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Tags: Affordable Care Act, Obamacare, healthcare reform, NFIB v Sebelius, ACA funding, Medicare taxes, insurance policy, U.S. healthcare, economic policy