The Affordable Care Act, One Year Later

By October 1 the exchanges of the Affordable Care Act (ACA) have been operating for a year, following their disastrous debut, which prompts an assessment how the furiously controversial health insurance program is doing. The reckoning? There's seismic rumbling subsurface, but what was once expected to be the biggest issue in the coming election is instead hardly mentioned. A recent Kaiser Family Foundation poll found that only 3% of Republicans and 2% of Democrats thought Obamacare was the biggest problem facing the nation. Immigration, the economy and now the "network of death", as President Obama calls it, have surged to the lead.

More than 8 million signed up during the enrollment period that ran to the end of March. The administration said in mid-September that 7.3 million had paid their premiums and were still enrolled. In July the Commonwealth Fund reported a drop of 9.5 million uninsureds; their figure includes those who registered for Medicaid.

It has been unclear how many already had insurance deemed inadequate and had to convert to plans meeting the ACA's minima, versus how many previously uninsured were brought into the fold for the first time, but in July the Kaiser Family Foundation reported that 57% of its enrollees had no previous insurance.

An estimated 13 million more will need to enroll in the coming period that runs from mid-November to mid-February 2015 if the administration is to meet its targets.

Considering that the foundational motive was to deal with the rising tide of 50 million Americans who had no coverage, there is a long way to go. The biggest setback was the Supreme Court's decision that the administration lacked the constitutional right to require the states to expand Medicaid. Even though the federal government will pick up the entire tab for the first two years and 90% of the cost thereafter, 23 states have not taken up the offer. Partly, they are worried about funding even that future 10%, but 20 of those states have Republican governors and their refusal is an ideological protest against Obamacare which harms an estimated five million of their citizens.

An Urban Institute survey found that the number of households without insurance has declined by 6.1% in states that agreed to Medicaid expansion versus only a 1.7% drop in states that turned it down.

Only now is it beginning to emerge by how much the cost of insurance will rise or fall in the coming enrollment period. Inevitably, those most ill and who were denied insurance before the Affordable Care Act were quick to take advantage of the law's prohibition against insurers turning them away owing to their pre-existing illness. Of enrollees who sought treatment in the first quarter of this year, 27% had serious health issues compared to 16% before Obamacare took effect. "It's even worse than what we thought", said the chief actuary for Blue Cross Blue Shield of North Carolina. The counterbalance of enough of the healthy young demographic signing up, with their premium payments effectively paying for the care of the older and sicker, has not matched hope.

What this will do to rates is too complicated to guess at from outside the field; this Bloomberg outline of what insurers must consider in setting prices makes that clear. So far, the heralds telling us of coming costs are largely partisan, with those on the left reporting instances of lower charges and those on the right saying "new premiums and deductibles are much higher", leaving us with not much to go on. These same right-left disparities are neatly matched in popularity samplings. Media on the left quoted that same Commonwealth Fund survey, saying that even 74% of Republicans are happy with their new coverage, whereas a June Fox News poll said 38% were "glad the healthcare law passed" against 55% who "wish it had never passed".

One of the worst defects of the ACA law is the rule that employers with 50 or more employees working more than 30 hours a week must offer to pay for their health insurance. Adding a 50th employee suddenly triggers the sizeable cost for all 49 preceding employees. If not fixed — and we have a Congress that would prefer to leave flaws in place to help bring down the healthcare law — the rigid barrier will cause employers to either avoid expansion or, more likely, reduce employee working hours to part-time jobs of less than 30 hours a week at tremendous damage to families' incomes in addition to introducing scheduling chaos into their lives.

The President unilaterally waived the rule that employers must offer insurance, first giving special exemptions to a host of large companies in response to their pleadings, and then postponing by two years the requirement altogether. Small businesses had said they weren't ready (four years since passage of the law in 2009 was not enough?).

The delay was welcomed by Republicans — the Party would like the employer mandate repealed altogether — but they then made this Obama manipulation (one of several) of a law passed by Congress the centerpiece of a suit against the President that Speaker John Boehner persuaded the House to approve.

Low-wage companies that offer coverage are finding that employees who have never availed themselves of the benefit are now signing up. Walmart's insurance cost have risen, for example, because employees who held off joining the company plan because of the $18 payroll deduction every two weeks, now realize they must have insurance under the new law.

Of the 7.3 million still in the program some 85% receive some level of subsidy. That such a high percentage is eligible makes it apparent that affordability is what had caused people to run the risk of having no insurance, not just inattention or avoidance of an unwelcome expense. The subsidy declines as income increases but it is substantial enough for the "vast majority" to pay $100 or less a month and 46% to pay less than $50 a month. That leads conservatives to despair that "Obamacare turns out to be just another subsidy program", as columnist Holman Jenkins at The Wall Street Journal says. He writes:

In economics, you can't subsidize everybody but we're trying: 50 million Americans get help from Medicare, 65 million from Medicaid, nine million from the Department of Veterans Affairs, seven million (and counting) from ObamaCare, and a whopping 149 million from the giant tax handout for employer-provided health insurance.

That last point refers to what equates to tax free income that employees get when companies pay for their health insurance. It has become a whopping big number; the average annual premium for a family plan is now $16,834 a year.

Some of Jenkins' anger is misdirected. What makes health insurance so unaffordable, what makes subsidies unavoidable, is the staggering cost of healthcare, which would be a better target at which to direct anger. Yet no action is taken against the astonishing fraud of hospital charges and the stratospheric prices of drugs that pharmaceutical companies charge to Americans so as to charge far less in other countries.

To spur people to buy insurance, but also to partly cover some of the cost of the subsidies, those who fail to buy into the program are to be fined. Roughly $100 billion over the next decade was to come from those penalties and from employers who fail to offer insurance. Yet nearly 90% of the of the nation’s 30 million uninsured won’t pay a penalty says a Wall Street Journal report. They will qualify for one of 14 exemptions that excuse those who say they suffered from domestic violence, are members of a Native American tribe, or of certain religious sects, have incurred property damage from fire or flood, received an electricity shutoff notice, faced eviction, experienced a death in the family or even the mystifying "experienced another hardship obtaining health insurance". There's lots of room for cheating here. The exemptions leave only 4 million who are expected to be fined.

Where imposed, the penalties phase in at too low a level to make buying insurance the better monetary option. At the threshold above which a person or family is not eligible for Medicaid and must buy insurance, what the Supreme Court has called a "tax" is only $95, or 1% of household income, whichever is greater. It rises to $695 per adult or 2.5% of family income by 2016, with a cap of $2,085 per family. Originally, the fines were to have been as high as $3,800 a year, but former Sen. Max Baucus (D-Mt), who chaired the Senate finance committee “whittled” them down in the hopes of gaining Republican votes, but not a single Republican voted for the ACA.

Another outflow of federal funds will be payments to insurers via what is referred to as the "risk corridor". Until it sunsets in 2017, insurers are guaranteed by the government against loss arising from, say, having to accept a disproportionate number of sick people onto their roles or setting premium prices too low to cover their cost. The administration had declared that this would be "revenue neutral", that it would not cost extra taxpayer dollars, although we are left wondering where the money will come from. And what will prevent insurers from slashing rates to gain market share, secure in the knowledge that their losses will be eradicated by the federal government, which is to say, a taxpayer-funded bailout?

Another looming threat is a shortage of doctors, especially primary care physicians. Editorialists on the right have repeatedly warned us of long waits for appointments that we can expect by pointing to countries that have single payer systems, which is where they believe Obamacare is headed. Their foreboding reeks of self-interest, however. What they complain about is that, thanks to the Affordable Care Act, a huge underclass will finally have access to medical help that they could never afford. The opinionators are upset at having to have to share their doctors.

A favorite Republican meme even shared by Democrats is that "ObamaCare top to bottom was poor judgment", as expressed recently by Peggy Noonan, former Reagan speechwrite and columnist at the Journal. "It shouldn't have been the central domestic effort of his presidency, that should have been the economy and jobs". Setting aside Obama's $858 billion stimulus to resurrect the economy, had he focused on and somehow improved the economy, we would still have the broken U.S. healthcare system that left 50 million and counting with no protection from the uinsurmountable costs of healthcare in this country. It's a little like the aphorism "give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime". Good economies come and go irrespective of who is president, whereas Obama chose to put in place something that will last (if allowed to).

But if Republicans gain control of the Senate, won't they move forward on those 50-or-so House votes to repeal the Affordable Care Act? The author of a lengthy article in the New York Times Magazine over the summer about the reform movement in the Republican Party pointed out, as have others, that Obama's plan, which expands healthcare coverage through the marketplace of private insurers, was "hatched from a conservative policy suggestion that originated in 1989 from the Heritage Foundation", a well to the right think tank, and writes that "Every reformer I talked to acknowledged that the principle of universal coverage is here to stay".