There have been fewer laws more controversial – politically, legally and emotionally – than the Affordable Care Act, aka “Obamacare”). Controversy commenced when it was first proposed, and then intensified while it was being debated in Congress. Furthermore, it was a significant campaign issue in the 2012 presidential election. The vote in Congress was strictly along party lines – Dems for, GOP against. Subsequently, its constitutionality was challenged in the courts. Eventually, amid some controversy and surprise, the Supreme Court ratified it by a 5-4 vote with Chief Justice Roberts tendering the deciding vote.
Its rollout was delayed substantially due to computer problems. It remains an explosive topic to this day. Evaluation of its performance to date is mixed. Its supporters tout it as a landmark law that provides affordable, or, in some cases, free healthcare to everybody. Its detractors deride it as another wasteful, expensive and inefficient government program, or, even worse, as a surreptitious means for the federal government to control the country’s healthcare system. Undoubtedly, it will be a major issue in the 2016 presidential election. Many people want to repeal it, replace it, or modify it with some other health plan.
All that said, the purpose of this blog is not to debate the merits and demerits of the law. Been there; done that four years ago. My objective is to denote that substantial premium increases will be assessed commencing January 1, 2017 and analyze the reasons why. (Incidentally, note the timing, after the election.) Insurance carriers have already signaled their intent. My research indicates that preliminary requests for a rate increase will be posted on HealthCare.gov by the end of May, with final requests to be filed by the end of August. I have read about prices increases as high as 30%. Some of the largest increases will likely be assessed against consumers who are currently utilizing the “bronze” plans, who can least afford it.
Some of the reasons for the increase are as follows:
- Quite simply, health insurers are losing money, particularly on the exchanges. As we all know, insurance companies are not in business to lose money, so when they do, they file for and receive premium increases, or, in extreme cases, cease to write policies for the product.
- One of the insurers’ major complaints is rising drug costs. We can debate the whys and wherefores and who is to blame, but the fact is drug costs have been skyrocketing. Most of us have experienced this firsthand at the local pharmacy. In extreme cases, the excessive cost has forced people to forego needed prescription medicines entirely.
- Reinsurance will be expiring at the end of the year. Briefly, reinsurance is a pool of funds created to help insurers pay off claims in excess of premiums collected during ACA’s first few years. It is slated to expire at the end of 2016, because by then the exchanges were supposed to have been stabilized, i. e. they were supposed to have attracted enough healthy people to balance out the unhealthy ones. This is not the case.
- An unintended consequence of the law, which might have been foreseen if the bill had been vetted properly, is not enough healthy people have signed up with the exchanges, and many of those who did initially have determined it is more cost effective for them to quit. Apparently, some healthy people would rather pay the nominal annual fine for not being signed up than pay the premiums. They feel they can join an exchange when, as and if they ever need health services. This works for them because there is no longer a “pre-existing condition” restriction. The “bronze” plans have resulted in the largest losses since the low rates have tended to attract heavy-use patients who sign up when they need medical services then drop the coverage when they don’t. A rough parallel would be a person who foregoes homeowner’s insurance then signs up for it after a storm damages his house. According to Ana Gupte, a senior health-care services analyst and managing director at Leerink Partners, “had reinsurance phased out with a more balanced health-risk pool, it may not have been so problematic for the insurers.” Gupte also opines that enrollment in the exchanges has likely topped out, which is additional bad news. This, folks, is the free market in action.
- A few insurers, such as United Health and Humana have ceased doing business in some states. In addition, Blue Cross (Virginia) has announced its intention to cease writing “bronze” plan policies. As a result, it intends to “transition” its “bronze” customers to “silver,” which will result in a substantial premium increase (up to 70%) for those customers.
The price increases should not be a surprise to anyone who was paying attention when the bill was first being debated. It was obvious that someone would have to pay for the medical services proffered for free to others, and that “someone” would be the vast majority of us that already had adequate health coverage. Payment would be in the form of higher premiums, declining quality of coverage, and/or higher taxes. It is, after all, a zero sum game. No problem, if that was what the majority wanted, but full disclosure of that would have been nice.
According to a survey conducted by Bankrate.com nearly 50% of upper middle class persons are now paying more for insurance and being charged higher premiums and deductibles than before the advent of ACA. Furthermore, many of them have lost coverage for spouses and/or children. The same survey found that 48% of respondents wanted to repeal ACA, while 38% did not. The rate of dissatisfaction will likely increase after January 1 when consumers actually see the rate increases.
To me, the worst part of all this is not the impending price increase, itself, but the fact that many of ACA’s shortcomings were intentionally hidden from the American people in order to “sell” the bill. As usual, most Americans were not paying attention. Worse, virtually no congressman and few of their respective staffers even read the 1,100 page bill. Therefore, they failed in their duty to the American people who elected them. This gross negligence and incompetence is yet another example of why a substantial portion of Americans are dissatisfied with their government – all branches, both parties.
As I said, President Obama wanted the bill passed, and his minions pressured the Democratic congressmen, who folded like a cheap suit. Their negligence is astounding. Now, to quote Reverend Wright, “The chickens are coming home to roost.” What other surprises will percolate to the surface prospectively is anybody’s guess. In my opinion, for better or worse, the Dems “own” this law, and will have to defend it in the 2016 election campaign and beyond.