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01/23/2015

ACA Report Card: One Year of Obamacare and the Individual Insurance Mandate

by Craig M. Klugman

The United States has passed a milestone, the first year of the Affordable Care Act’s insurance mandate. This is the requirement that all U.S. residents have health insurance whether through an employer, an organization, or via the insurance marketplaces. Opponents of the ACA (also known as “Obamacare”) feared that this act would destroy the country by decimating the economy, creating a federal government takeover of healthcare, forcing employers to drop coverage, workers quitting who no longer need their employer-based health insurance, and companies cutting workers to stay below minimum thresholds.

The results of the first year are positive. There are increases in people with insurance coverage, increases in access to medical services, and increase filling of prescriptions. There was also a decrease in consumer stress about being able to pay for medical care.

One year in and the sky has not fallen. A report by the Commonwealth Fund has found a 5% decrease in uninsured adults (ages 19-64). In young adults (ages 19-34), the uninsured rate is now 18% compared to 28 percent a year before. And among Latinos, the uninsured rate is 23%, down from 36%. In regards to individuals under 138 percent of the poverty line, the uninsured rate dropped to 24 percent from 35 percent. And of people who visit the insurance marketplaces, a full 51% enroll in a plan.

Of those who bought insurance through the marketplaces, 60% found it easy to pay their premium, 60% used their new plan to visit a doctor or hospital, or to fill a prescription. A full 64% of people said that without their insurance, they could not have afforded the care they received.

According to the Kaiser Family Foundation, premiums for 2015 have not skyrocketed as ACA opponents predicted. On average, silver level plan premiums have decreased 0.8% and bronze plans increased by an average of 3.3%. These are low increases for modern history. In fact, health care spending as a proportion of the U.S. economy grew at its lowest rate in 53 years.

Does this mean that the ACA was successful? It appears to have been so, at least for 2014. However, pundits are already saying that despite their wrong predictions of huge increases in 2015, those increases are really going to hit in 2016. Obviously, it’s difficult to trust soothsayers who have been wrong so far.

But there are some real concerns about the ACA’s future. The new House of Representatives passed a bill that raises the definition of “full time” employee from the ACA’s definition of 30 hours, to 40 hours. That means someone who works 39 hours, or even a standard 37.5 hours, no longer would have to receive employer health insurance. Other bills are surely to come from this Congress as separate pieces of legislation or as riders to essential bills. President Obama has stated that he will veto any attempt to override or weaken the ACA during his last two years in office.

In 2014, the House Republicans filed a lawsuit against the Obama Administration purporting that (1) the delay on the employer mandate was illegal and (2) that the wording of the ACA only allows federal subsidies for people who buy insurance on state-run exchanges. Fourteen states run their own exchanges, but 36 states elected for the federal government to run their exchanges. Thus, people with subsidies in 36 states could lose that benefit if the suit is successful. Arguments will be heard on March 4.

A third challenge to the ACA, surprisingly, comes from large business and many of the people who have supported the law. In 2018, the ACA provides for so-called “Cadillac plans” to be taxed. These are insurance plans that cost more than $10,200 for an individual per year (or $27,500 for a family) in health benefits (premiums, flexible spending and health savings accounts exclusive of vision and dental). The new excise tax would be 40% on the cost exceeding these values. Its goal is to subsidize the exchanges, reduce health care costs, and to reduce an inequality in employer-sponsored plans (which are paid for with before tax dollars) versus exchange and personal plans (after tax dollars). In response, most employers with these plans have been eliminating their highest benefit programs, increasing premiums, deductibles and co-payments.

The “Cadillac” change was most widely discussed recently by the faculty of Harvard University who complained about higher premiums, copays, and deductibles. With no change in the current law, other employers with generous allowance for a very modest increase in inflation. This means over time, more and more plans will fall under this excise tax.

A fourth threat is the subscriber mix. Only once 2014 tax returns are filed will we know what percent of people opted to pay the penalty rather than take out insurance. The young and healthy are needed to pay premiums into the pool to help subsidize those who require care. If the pool has too many people who are sick and not enough who are well, then it can financially unsustainable.

In 2015, the Affordable Care Act will see increasing federal matches for CHIP programs. Employers with more than 100 employees must cover insurance for their workers starting this year. The fee for not having coverage increases by nearly double (for families with income under $48,700). These changes are small compared to 2014, but are key components of keeping the program viable.

Whether one supports Obamacare, opposes it, or prefers another system such as single payer or an open market, the fact that more people have insurance and more people are receiving needed care is a boon. This is just the beginning in an enormous experiment and whether it succeeds will only be known in the decades ahead.

This entry was posted in Featured Posts, Health Policy & Insurance, Health Regulation & Law. Posted by Craig Klugman. Bookmark the permalink.

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