Congressional Republicans have long opposed the Patient Protection and Affordable Care Act (ACA), the landmark 2010 law that created Obamacare. With a majority in both houses of Congress, President Trump and Republicans have an unprecedented opportunity to reform the ACA. The thought of changing the poorly conceived health care law is a sacrilege to Democrats. Recently Scientific American and the Kaiser Family Foundation discussed how President Trump could weaken the Affordable Care Act, saying:
The governing trifecta sets the stage for potentially seismic changes that could curtail the law’s Medicaid expansion, raise the uninsured rate, weaken patient protections, and increase premium costs for millions of people.“The Republican plans — they don’t say they are going to repeal the ACA, but their collection of policies could amount to the same thing or worse,” said Sarah Lueck, vice president for health policy at the Center on Budget and Policy Priorities, a research and policy institute. “It could happen through legislation and regulation. We’re on alert for anything and everything. It could take many forms.”
ACA plans are very expensive for subpar coverage. The only reason people enroll in ACA plans is due to the generous subsidies paid for by taxpayers. Before the expansion of middle-class subsidies under the Biden Administration, the only people who enrolled in Obamacare were low-income people who qualified for subsidies. The average premium without a subsidy is $517. The average premium subsidy is $393 a month, or nearly $5,000 a year. It is difficult to argue that Obamacare plans are affordable when 76% of the premiums must be paid for by the government to entice people to enroll in a Silver Plan with a deductible of around $5,000. Obamacare is a poor value for all but the sickest individuals and those receiving generous subsidies.
Proponents of the Affordable Care Act argue the ACA’s patient protections are popular. Support for this assertion (see above link) is that nearly two-thirds of adults polled have a favorable view of the 2010 health care law. It is not clear whether those same adults would have a favorable view of Obamacare if they: 1) are actually enrolled in ACA plans; 2) had to pay the entire premium themselves; 3) received no cost-sharing subsidies. I suspect their views would turn unfavorable. Polls that rely on stated opinions are notoriously unreliable. That’s why economists prefer to study revealed preferences. For example, ACA enrollment has always been heavily concentrated among people receiving a subsidy, not those who have to pay the full price. Thus, consumers’ revealed preferences are that ACA plans are a poor value.
Among the so-called consumer protections are regulations known as guaranteed issue and community rating. This is what allows individuals to wait until they are sick to enroll, at premiums that cannot be adjusted for their health risk. That these protections enjoy broad support is undoubtedly true. However, that does not mean that should not be repealed. No health insurance marketplace can survive such gaming of the system.
Let’s discuss auto insurance for a minute. An equally popular protection would be to require auto insurance companies to cover damaged cars, whose owners waited to buy coverage until such time their cars need autobody repair. Community rating would mean the owners of damaged cars needing repairs would only pay premiums equal to what other car owners pay, whose cars are not damaged and who continuously maintained car insurance. If the ACA’s guaranteed issue/community rating regulations are imposed on the auto insurance industry the results would be the same as Obamacare plans. Deductibles would rise, premiums would skyrocket and the government would have to step and subsidize car insurance to make it affordable.
One problem with Trump and the Republicans trying to reform the Affordable Care Act is that it is difficult to unwind such a troubled program. If Congress repeals the ACA tomorrow many Americans would be uninsurable. They would have to be given credit for continuous coverage, which they may not have. The monumental problem faced by Republicans is that it’s relatively easy to destroy a functioning insurance market. It’s much harder to rebuild a dysfunctional insurance market into a functioning one.
Interesting article. I recently helped a son of mine research ACA policies. He does not get a subsidy and the policies were all junk. If he had a $10,000 claim, he would have to pay the first $7.000 himself. A classic example of what happens after guaranteed issue.
Your account of the ACA’s history is accurate, but I wonder if there is one dimension missing here, namely learning from foreign experience. Virtually all other industrial nations have guaranteed issue, have had it for years, and they have their own problems but they seem pretty stable.
Medicare in the USA has guaranteed issue at age 65, and it too is very stable.
How do they do it? Probably requires a willingness to raise taxes as needed.
“Probably?” I should say so.
I wonder if separating Medicare into two component programs– one purely welfare, and the other purely subscriber-financed insurance– would help to rationalize the system. I’ve been thinking the same regarding Social Security.
As for ACA specifically, I’ve long been in favor of a fixed-dollar or fixed-percentage premium tax credit, non-means-tested, that would be applied to only ACA-compliant premiums. It would have to be applied before any means-tested subsidies were calculated, so that the latter could be reduced, partially offsetting the net cost. Such a flat subsidy would be analogous (but not identical) to the favorable tax treatment of employer-sponsored health insurance, and it would help bridge the gap between the two. This obviously helps middle-class ACA subscribers, but perhaps more importantly it allows both community-rated and individually rated forms of insurance to coexist (the latter without public subsidy).
Aside from allowing a more diverse marketplace to exist, this arrangement would more closely assign public expense to the public (i.e. the general fund), instead of financing welfare programs via hidden taxes with no way of accounting for who pays and who benefits.