How did the Affordable Care Act’s individual mandate and tax credits support insurance coverage for people with preexisting conditions?

The Patient Protection and Affordable Care Act (ACA) prohibited insurance companies from denying coverage to individuals with preexisting conditions or charging them higher premiums than healthier customers in the same age groups.1

To make this requirement sustainable, the law established a system of health-insurance financing based on three interconnected elements:1

• Individual Mandate: Most Americans were required to obtain health insurance or pay a tax penalty. This provision was designed to ensure that a large pool of relatively healthy people entered the insurance market.21
• Tax Credits: The federal government provided subsidies in the form of advanced tax credits to help low- and middle-income individuals afford insurance premiums.31
• Market Stability: By incentivizing healthy individuals to purchase coverage through the mandate and making that coverage affordable via tax credits, the ACA ensured the insurance pool remained large enough to compensate companies for the costs of covering people with preexisting conditions.1

Without this balance, the market risked a "death spiral," where rising premiums would cause healthy people to drop coverage, further increasing costs for those remaining in the pool.1