On March 23, 2010, President Barack Obama signed the Affordable Care Act into law. Two years later the law was upheld by the Supreme Court. Five years later, and we are in the middle of a Congressional healthcare ‘war’ where health care reform is taking a completely different turn. In the meantime, the health care coverage of millions of Americans is being threatened.
The question on many minds is, why has health care reform failed? With countless health care carriers pulling out local exchange markets, hundreds of thousands now find themselves without coverage. Features of health care that the ACA deliberately set out to transform are now seemingly going back to pre-ACA days. But how did all this happen? What has caused the ACA to fail, and if it hasn’t failed what might total implosion look like?
Healthcare Reform: The Origins
According to ObamacareFacts.com, the ACA was designed to “give more Americans access to affordable, quality health insurance and to reduce the growth of U.S. health care spending.” The purpose is also to increase these same features under private and public health insurance via exchanges, subsidies, taxes, and regulations.
Ultimately, those who previously couldn’t afford health insurance were promised low-cost, high coverage options that would benefit their families. Claims from the Obama administration that some 47.5 million Americans couldn’t afford insurance before the ACA are largely inaccurate. A more accurate snapshot of the uninsured pre-ACA is closer to 8 million to 18 million—those were the ones that actually could not afford insurance.
Another factor was to mandate the coverage of pre-existing conditions. The 10 minimum essential benefits included maternity and newborn care, hospitalization, prescription drugs, preventative and wellness services and devices among a few others such as ambulatory services. This list of benefits directly increases costs for insurers, who gradually increased their premiums to keep up with costs.
A healthier healthcare market was another goal of the ACA. Ideally, insurers would develop countless plans around the minimum essential benefits to provide options for every age group. Younger people would have plans that fit their needs while older individuals could still rely on Medicare to balance their health insurance costs.
Healthcare reform has not worked that way, however. It is far from affordable and plans are greatly limited by the exchange. But what caused it all to go south?
Why Healthcare is Not Affordable under Obamacare
Dissecting the unaffordability of Obamacare is a complex undertaking. Countless factors contributed to the downfall of healthcare reform. Today we are seeing major carriers pull out of the exchanges. Additionally, these major carriers are also now offering level funded products that require medical underwriting. Medical underwriting is what insurance companies use to determine the health status of the insured to decide if the individual should be offered coverage, what price it should be set at, and what limits or exclusions should be included. It is also a practice that Obamacare was attempting to eliminate from the market. Prior to 2014, insurers regularly used medical underwriting to manage costs. Major carriers have gotten around this requirement rather easily. Instead of outright declining coverage to individuals, as is prohibited by the ACA, carriers are increasing rates to such high levels that no one can afford them.
Level-Funding Plans
Interestingly, level-funded plans give individuals far more flexibility in affordability and coverage. Despite underwriting being one of the key debates during the ACA enactment, it is still effectively legal, as long as coverage is not declined. Healthy people are turning towards these plans more frequently, as are small businesses who wish to pay less for employer coverage.
Level-funded plans enable employers to set aside a set amount to cover claims for their employees. If at the end of the year their employee’s claims are less than the amount they budgeted they can receive a refund of up to 42 percent of the total. This benefits both employers and employees, as it offers the same coverage as a full insurance plan would.
Another piece of the puzzle is the mandate. Healthy young people are critical for the robustness of the health care pool. If they opt out, all that is left is the sick. This increases premiums and health insurers lose money.
The maximum amount an individual can be charged under the mandate is $2,085, however, single adults can be charged only up to $695. Compared to the cost of the average health insurance plan, that’s serious cost savings. So, we see the ‘invincible’ (those aged 18-29) dropping out of the health insurance market altogether and opting to pay the penalty instead. The obvious conclusion is the mandate doesn’t work.
Has Healthcare Reform Failed?
In Houston, Texas, the average cost of health insurance per month on the individual market is $218.41. Coupled with the type of coverage provided many are choosing not to be part of the market. Employers are especially hard-hit by healthcare reform, as their costs continue to skyrocket.
If higher premiums, fewer individuals insured, and lower incentive to sign up for health care are not a sign of health care reform failure than what would be? The entire bill was built on affordability and greater rates of coverage, but the opposite has largely been what we’re left with.
Major carriers are not blind to the failures of Obamacare, which is why they continue to drop out of the exchanges. Aetna, BlueCross and BlueShield, and Humana are just a few of the major carriers to remove themselves from the exchange citing losses.
The primary reason the ACA was signed into law was to allow people with pre-existing conditions to still get a cost-efficient health care plan. Now, these carriers are offering their own alternative to the ACA. Underwriting gives them more plan options to offer while finding balance in their pricing.
All of this has left the largest portion of Americans without health care coverage. The burden has also largely fallen on the middle class, another thing that Obamacare was said to help ease. The poorest individuals benefit from the ACA’s basic coverage, but the middle class has to foot the bill. As mentioned above, those individuals are choosing to pay the penalty instead of play a part in the market. The ones who suffer the most aren’t just the carriers, but those who make up the greatest portion of the healthcare market—the middle class.
Where We Stand
Despite Republicans efforts to repeal and replace Obamacare, they have largely failed to change the tides. It isn’t likely we will see a full replacement of the law anytime soon, which leaves many Americans turning to alternative options like underwritten plans. Employers too will be turning to alternative plan options. Healthcare reform is anything but a success, but there is time for real reform to take place.
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