When the Affordable Care Act was debated in Congress, and even earlier as progressives geared up for the fight, public health advocates often repeated the phrase, “health coverage will not be affordable until everyone has coverage.” The idea was that forcing everyone to have similar coverage, while charging similar rates, would somehow make coverage affordable. Or at least it would make coverage affordable for those with pre-existing conditions, if not for those who were healthier. I recently ran across someone who is blaming the high cost of Obamacare on the repeal of the individual mandate. Absent was any discussion about poorly crafted plan design, a multiplicity of mandated benefits and costly regulations.
Prior to enhanced subsidies (and prior to repealing the mandate) Obamacare premiums were still high. Doubling enrollment in 2022 with enhanced subsidies (with mostly healthy people) did little to mitigate the cost. Most of the people who enrolled in ACA plans were those getting huge subsidies. After subsidies were expanded to the middle class, most of the newly enrolled were also getting huge subsidies.
Even with generous subsidies Obamacare is still a bad deal. Indeed, only about 10% of plan members surpass their health plan deductible. Obamacare is a good deal only for the members who are: 1) healthy, requiring no care during the year who: 2) receive generous subsidies, making it cost almost nothing. The program is a failure by almost any measure when you consider nobody is willing to enroll unless the cost is nearly free.
What is the purpose of health insurance? The answer to that question determines how health coverage is designed. A standard answer is to avoid the monetary loss of an unexpected illness and associated medical care. Economist John Nyman argues that consumers buy health insurance to secure additional income in the event they become ill. I even heard a benefits broker say that consumers want health insurance partly for access to the negotiated discounts only available to those with health coverage. These reasons are not mutually exclusive.
How should health coverage be designed? Obamacare was originally premised on a 3-legged stool. Any one leg breaks off and the whole thing supposedly would come crashing down. Leg 1 was an individual mandate forcing everyone to have coverage. Leg 2 was generous subsidies for those unable to afford coverage. Leg 3 was nobody could be turned away for pre-existing conditions. However, there were other regulations that strained the legs unnecessarily. There was no requirement for continuation coverage other than a fine based on income. Paying the fine was often cheaper than paying premiums. People could jump on and back off during the year. There were no limits on annual or lifetime benefits. Premiums could not vary with health status and were divided into three age bands. Insurers enjoying a favorable selection of enrollees were penalized, while those suffering an unfavorable selection were subsidized. All these regulations had the effect of making Affordable Care Act plans anything but affordable.
Unable to price premiums based on risk, health insurers did the only thing they could under the circumstances: they began to raise deductibles and carve out narrow (almost nonexistent) networks. As a result, 56% of enrollees choose Silver plans with an average deductible of $5,000. An additional 30% choose Bronze plans, with an average deductible of about $7,000. That means nearly 90% of enrollees are paying their entire medical bills out of pocket. No wonder they are not too keen on paying thousands of dollars in premiums too.
Conservatives are fond of explaining that health coverage is not the same as health care. That is certainly true with Obamacare. A desirable reform would be to repeal most ACA insurance regulations and allow insurers to affordable health plans with more limited benefit plans with lower deductibles. Congress should require continuation coverage before plans are guaranteed issue (called guaranteed renewability). Insurers should also be allowed to offer discounts in return for healthy behaviors or better health status. Congress could even use the estimated $350 billion cost of enhanced subsidies to instead shore up a high-risk pool.
Conclusion. Obamacare was purposely designed to accomplish an impossible task. In the process it was rendered unsuitable for most people. What most people want is the ability to see a doctor when they are sick, not the assurance they can access a $1 million drug in the unlikely event they need one. Health coverage should be suitable for the majority of enrollees, not a miniscule subset.
Read more at: The ACA’s missing mandate: Why costs keep rising