Is Time Running Out for Obamacare?

The Affordable Care Act — ACA for short — is an intricate watchwork of mutually dependent parts, but a key part has proved to be in short supply. For the
mechanism to work, 35% of participants must come from the 18- to 34-year-old demographic. Currently, only 28% have signed on.

The absence of that group, profitable for insurers for its lack of health problems, has skewed policy buyers toward the older, who tend to have more costly ailments. Covering their care is what is forcing insurers to raise premium prices significantly in 2017. That could force out the healthier, who decide to chance it, leading insurers to boost their pricing further to cover the sick who remain. The cycle then repeats.

This is the "death spiral" that conservatives predicted and now gleefully believe is sending Obamacare crashing to earth, a scenario that we said was happening eight months ago in "Obamacare Is Heading for Collapse".

Insurers in 41 states reported losses as one after another major company dropped out. Across 2014 and 2015, Blue Cross Blue Shield of North Carolina lost $400 million and United Healthcare nearly $1 billion. Many states are down to a single provider, ending any hope of competitive pricing for 19% of all healthcare customers. When its rate hike was turned down by the state, Alaska's sole provider threatened to quit, forcing a $55 million bailout from the state taxpayers. The only providers reporting profits are those that offer bare-bones coverage, which bring deductibles of $5,000 or more and narrow lists of doctors and hospitals that patients must use.

Another intricate mechanism of the ACA — it expires after 2017 once insurers no longer need training wheels — calls for profitable companies to share with insurers posting losses. But it has proved useless, given that none have made anywhere near enough profit to counter the huge losses of others.

From the outset, the Obama administration took steps that would undercut the success of its own plan by paying little heed to essential funding needs. Companies with over 50 employees were required under the Act to pay for insurance for their full-time workers or pay fines, but right off, the White House issued waivers to several hundred companies, seemingly any who asked, cutting off revenue needed by insurers to pay for the sick who rushed to buy insurance previously denied them. This mandate was then postponed a year, then another year for companies with 50 to 100 employees, then made applicable only to companies with over 100. And a tax that insurance companies were to pay for the added business Obamacare delivered was delayed.

But by far the most damaging have been the "special enrollment" periods the administration created to inflate the insured count. People suddenly finding themselves ill could sign up outside the November-January window, receive treatment, then stop paying their premiums — cheating that made for outsized losses for insurers. Blue Cross Blue Shield says “individuals enrolled through special enrollment periods are utilizing up to 55 percent more services than their open enrollment counterparts.”

The Obama administration forecast that 20 million would sign up this year. About 12.7 million did, and dropouts will probably reduce that to 10 million still paying by year end. Despite the diminished ranks of insurers and soaring premiums — which officials just acknowledged would rise 22% to 25% for midlevel benchmark plans in 2017 — the Health and Human Services Department puts on a brave face and projects a 9% enrollment increase for 2017. They say that 72% will still be able to find a plan for $75 a month after subsidies at HealthCare.gov.

The averages cited mask huge increases in certain states: 32.5% in Pennsylvania, 51% for Blue Cross Blue Shield in Arizona, 50% to 67% in Minnesota to stave off collapse of its exchange, and in Tennessee 62% for BlueCross BlueShield, 46% for Cigna and 44% for Humana.

For a 21 year old, the average cost in 2016 was supposedly $200 a month, or $2,400 a year (says this source), rising to $244 at age 35 — over $2,900. Failure to sign up means at tax time a minimum penalty of $695 — or 2.5% of adjusted gross income beyond $27,800. The high deductibles for the minimal plans tell them that they'll get nothing for their money. So they "do the math" and opt out. Some have attitude, judging from a millennial given Wall Street Journal op-ed space to complain about the IRS using "confidential taxpayer information" to send him a heads-up. He wants an explanation "how this doesn’t cross an ethical line" when the IRS uses data he has supplied to warn him of penalties should he not opt in for insurance. Others don't get the point. A 27-year-old free lance worker from Brooklyn interviewed on the PBS NewsHour said, "The chances of me really taking advantage of the plan are very low, I think. I don't have any chronic health issues". The older can be no wiser. A 45-year-old engineer from Sulphur Springs, Texas, who faced a penalty of $1,800 owing to his income, passed up a year of insurance that would have cost just $1,100 more than the penalty. All he has to do is stay healthy, he said to The New York Times. Their outlook was a bit like saying, "Why do I need life insurance? I didn't die this year".

Another problem for Obamacare has been the surprise that few businesses have ended coverage for their employees. The plan expected that employers would gladly shed the cost and responsibility now that there are exchanges for individuals to buy insurance. That this didn't happen made for another sizable body of missing customers that insurers were counting on to offset the sicker applicants the law forbids them from turning away.

And a major blow, of course, was the Supreme Court ruling that the federal government cannot force the states to accept Obamacare's Medicaid mandate. That opened the door for 19 states with Republican governors to refuse the deal the government offered. Washington stands ready to pay 100% for coverage of Medicaid enrollees in Obamacare for three years, and 90% of the cost thereafter. The governors say they are uncertain how they'll be able to pay that 10% when that day comes. So they turn down a bargain of 90% off. Exercising their ideological purity harms some 5 million citizens of their own states and has meant another huge block not showing up to fortify insurance company coffers to pay for the onslaught of the most ill.

A Hillary Clinton victory would have to be accompanied by Democratic takeovers in the House and a filibuster proof margin in the Senate for her to have the legislative power to fix the ACA. Without that more than unlikely scenario, she will be hamstrung. Republicans have since its inception wanted to destroy Obamacare. They have refused to administer any remedies, intent on watching Obama's "signature achievement" wither and die from its congenital defects.

Conservatives see a conspiracy afoot, with Obama again calling for the fix of a "public option" whereby the government enters the exchanges so that a state at least has that alternative if insurers defect. "It’s like a trojan horse for a single payer system that has windows so you can actually see the troops inside", says Seth Chandler, a law professor at the University of Houston, quoted in Forbes.

Donald Trump could fare better if control of both houses of Congress is retained by Republicans. The Affordable Care Act was passed in a process called reconciliation, reserved only for financial bills and not subject to filibuster. A repeal bill could be sent to President Trump's desk under that same reconciliation rule, requiring only simple majority votes in both houses.

But how would that be greeted? The majority of Americans have always been against the healthcare act. It makes them buy something they can ill afford or think they can do without. The free-riders whose insurance is largely or entirely paid by employers don't like the subsidies to others that they think are paid from their tax dollars. But now, some 14 million people in Obamacare’s expanded Medicaid coverage and 10 million people through the ACA exchanges have health insurance they may have never had before. There is bound to be backlash if a Trump government yanks that away. Republicans will need to tread more carefully than they now think.

Trump has adopted the Republican mantra of "repeal and replace", to which he'd probably never given a thought before deciding to run for the highest office, witness his plan to replace spelled out only as "something wonderful".

In the six and a half years since the ACA was signed, Republicans have fulfilled half of their "repeal and replace" mantra with 60-or-so pointless repeal votes (only one of which was sent to Obama for veto last January) but have developed close to nothing to fulfill the "replace" half. A sketchy outline by House Speaker Paul Ryan put forth in June comes closest. It would end the mandate requiring people to buy insurance, substituting it with a tax credit, an inducement that people can ignore at no cost compared to the current penalties, so it is unclear how that would be effective. The credit would replace the subsidies. The ban on insurers discriminating against people with preexisting conditions would continue — but only for those who maintain continuous coverage. Beyond that, the GOP proposal is fuzzy: expanded Medicaid is not mentioned. There are no financial projections, perhaps out of awareness that the cost outcome would be far worse than Obamacare.

Because something must be done, and rapidly, doesn't mean that anything will be done. As time passes Herb Stein's maxim — he was chairman of the Council of Economic Advisers under Nixon and Ford — comes to mind: "If something cannot go on forever, it will stop."