More than a full year into the implementation of the Affordable Care Act’s most disruptive element — the individual insurance exchanges — and it remains too soon to draw a completely accurate conclusion about the health of the reform.
For one, the upcoming Supreme Court ruling on the constitutionality of subsidies on the federally-facilitated (as opposed to state-run) exchanges could dismantle the five-year-old health care reform law. The text of the 2010 law states that the Internal Revenue Service can authorize subsidies — which are awarded to Obamacare enrollees with annual incomes of up to 400 percent of the federal poverty level in the form of tax credits — to qualifying insurance consumers who purchase policies through an “exchange established by the state.” Seemingly, especially to Obamacare critics, those four words in the many hundreds of pages of regulations excludes the 36 states in which the federal government, rather than the state, operates the online insurance marketplaces from providing subsidies. However, it should be noted, in 2012 the Internal Revenue Service did adopt a regulation that allowed individuals who qualify for the subsidies but live in states that defaulted to the federally-facilitated exchanges to receive the tax credit, “regardless of whether the exchanges is established and operated by the state.”
The Urban Institute calculated that 9.3 million people will lose their tax credits if the Supreme Court decides subsidies distributed by the federally-facilitated exchanges are invalid. Losing the subsidy would make insurance coverage too expensive for many exchange enrollees, forcing an estimated 8.2 million to forgo insurance in 2016. The ramifications of such a decision extends far beyond the millions who would lose coverage. Pushing so many customers out would erode the entire system by making health insurance coverage more expensive for all Americans. “It’s what we call the ‘death spiral,’” Peter Cunningham, a health care policy expert at Virginia Commonwealth University, told Bankrate. If the Supreme Court limits subsidies, “it would, basically, destabilize the insurance markets and the exchanges in those states,” he added. “And that’s likely going to raise prices for everybody else.”
Obamacare, encompasses a number of health care reforms ranging from how hospitals are reimbursed for care to the regulation that chain restaurants post calorie counts on their menus to requirements that large employers provide workers with affordable insurance coverage. But the most essential, and most controversial, provision is the one that changed U.S. tax code to create subsidies (in the form of tax credits) that enable millions of uninsured Americans to purchase coverage. The goal of the Affordable Care Act was to make health care in the United States more accessible and more streamlined, and without the insurance subsidies that mission is unreachable
Politics and judicial questions may cast a shadow across the future of the Affordable Care Act, and it may be too early to completely evaluate the reform, but taking stock of how well it has performed to this point is necessary. According to an analysis conducted by consumer financial services company Bankrate, Obamacare is largely “delivering on its promises” because more insurance carriers are entering the marketplace and premiums are not “spiraling out of control.”
In order to fully analyze the successes of the Affordable Care Act, it is important to specify what exactly the reform was intended to accomplish. “The ACA starts from a place of wanting to make sure that all individuals can obtain affordable insurance, even if they have a prior medical condition,” explained Aaron Carroll MD, MS, — director of Indiana University’s Center for Health Policy and Professionalism Research — in a 2012 blog post. “But if you guarantee access to insurance to everyone and mandate that people with preexisting conditions can’t be charged higher rates than their healthier peers, you need to prevent adverse selection (having relatively sicker individuals more likely to buy insurance coverage rather than relatively healthy people) and people gaming the insurance market (forgoing coverage and enrolling only when they become ill) — thus, the mandate that everyone must purchase insurance or pay a penalty. And if you demand that people buy insurance, then you have to make sure they can afford it. That’s why you have subsidies,” he argued. “The plus is that many more people get access. The negative is that it costs people and the government money. That’s the trade-off.”
More than 16 million Americans have gained coverage as a result of the provisions of the Affordable Care Act, an expansion that has lowered the uninsured rate by approximately one third to the lowest level ever recorded. That the exchanges have produced strong enrollment numbers has proven the viability of the reform to insurers, and as a result more insurance carriers are entering the marketplace, according to Bankrate’s analysis of Department of Health and Human Services data from 40 states and Washington D.C. “This is certainly a good thing,” David Becker, a public health expert at the University of Alabama at Birmingham, told the firm. “The health insurance industry is becoming more like how other markets work.”
On average, each state’s insurance exchange added one new insurance carrier in 2015. New Hampshire experienced the greatest improvement, with the the number of participating insurers rising from one to five. In Georgia and Indiana, the number of carriers offering plans on the state exchanges at least doubled. By comparison, California, Oregon, and Oklahoma lost carriers. New carriers mean increased customer choice, leaving 2015 with an average nine plan options per county in the 35 states examined.
An even more basic concern than intra-exchange competition is whether the prices for plans offered through those marketplaces are affordable. If the main objective of the the health care reform was to health insurance accessible for nearly every single American, the premiums for insurance plans must be manageable. Whether premiums are growing more burdensome or more fair is hotly debated because of the complexity and politicization of the Affordable Care Act. Premiums did rise from 2014 to 2015, according to Bankrate’s analysis, but the increase was far more mild than those experienced before Obamacare was implemented. For the insurance plans in the second lowest-cost or “silver” bracket, which is the benchmark level, unsubsidized premiums for 40-year-olds increased by an average of 5%. Before the implementation of the Affordable Care Act’s insurance marketplaces, premiums rose an average of 11% a year between 2008 and 2010, according to data from the health research organization, the Commonwealth Fund. “There were a lot of concerns about premiums rising for the second year,” says Peter Cunningham, a health care policy expert at Virginia Commonwealth University. “That didn’t really turn out to be the case.” Likely a contributing factor to the more moderate increase in premium prices has been the increased competition on the exchanges. The evidence? Washington D.C’s insurance commissioner Philip Barlow told Bankrate that companies operating within the city’s marketplace have lowered prices in each of the past two years after noticing what other insurers were offering.
Still, Congressional Republicans want to dismantle the reform.
Click here for a more in-depth examination of how the Affordable Care Act has impacted employment, premiums, competition in the insurance market, the U.S. budget deficit, and the insured rate has been mythologized.
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