
On July 14, 2009, House Democratic leaders introduced a 1,017-page bill containing a plan for overhauling the U.S. health care system. President Obama wanted Congress to approve the bill by the end of 2009. After a lot of public debate during the Congressional summer recess of 2009, Obama delivered a speech to a joint session of Congress on September 9 addressing the concerns raised over the proposal.
On November 7, 2009, a health care bill featuring the public option was passed in the House. Then on December 24, 2009, the Senate passed its own bill, one that did not contain a public option. The senate bill passed on a party-line vote of 60–39. On March 21, 2010, the Patient Protection and Affordable Care Act passed by the Senate in December was passed in the House by a vote of 219 to 212. President Obama signed the bill into law on March 23, 2010.
The Patient Protection and Affordable Care Act included provisions designed to take effect over four years. These included the expansion of Medicaid eligibility for people making up to 133% of the federal poverty level starting in 2014, subsidization of insurance premiums for people making up to 400% of the federal poverty level, incentives for businesses to provide health care benefits, prohibition of the denial of coverage and denial of claims based on pre-existing conditions, creation of health insurance exchanges, prohibition of annual coverage caps, and support for medical research.
Obama intended that the costs of these provisions would be offset by taxes, fees, and cost-saving measures, such as new Medicare taxes for those in high-income brackets, taxes on indoor tanning, cuts to the Medicare Advantage program. The plan also included a tax penalty for those who do not obtain health insurance, unless they are exempt due to low income or other reasons. In March 2010, the Congressional Budget Office estimated that the net effect of both laws will be a reduction in the federal deficit by $143 billion over the first decade.

The law became known as "Obamacare." It has faced several legal challenges, with the major argument against the bill being the contention that an individual mandate requiring Americans to buy health insurance is unconstitutional. But on June 28, 2012, the Supreme Court ruled by a 5–4 vote in National Federation of Independent Business v. Sebelius that although the Commerce Clause does not allow the government to require people to buy health insurance, the mandate was constitutional under the US Congress's taxing authority. In King v. Burwell, the Supreme Court, by a 6-3 majority, allowed the use of tax credits in state-operated exchanges. The October 2013 launch of HealthCare.gov, a health insurance exchange website created under the provisions of the ACA, was widely criticized, and faced many technical glitches, even though many of the problems were fixed by the end of the year. The number of uninsured Americans dropped from 20.2% of the population in 2010 to 13.3% of the population in 2015. Republicans continued to oppose Obamacare as an unwelcome expansion of government, while liberals continued to push for a single-payer healthcare system or a public option. Obama endorsed the latter proposal, as well as an expansion of health insurance tax credits, in 2016.