It’s come to be known as Obamacare. Sometimes it seems more like O-drama-care.
Nearly a decade has passed since Democrats first began promoting the initiative that eventually became the Affordable Care Act. And at no point has their effort to reform America’s dysfunctional health care system gone easily. Passing the law was a struggle, and then implementing it was, too.
Now there are new problems. Many of the nation’s largest insurers say they are losing big money on the policies they sell through the program’s exchanges. Some of these companies have responded by jacking up rates. Others are dropping out of the markets altogether. Consumers who relied on these plans may have to pay more or switch plans next year, and they may not have many alternatives.
But the focus on what’s going wrong with Obamacare makes it easy to lose sight of what’s going right. The law has ended the insurance industry’s most pernicious practices, fostered improvements in the way doctors and hospitals deliver care and brought the number of Americans without coverage to a historic low. Some state markets appear to be working just fine, and at least a few insurers are making money.
The law’s achievements don’t make the problems any less real. But they do put those problems into perspective ― and suggest that fixing them is worthwhile.
Obamacare’s Mounting Problems
One way to make sense of the latest news is to think about two recent reports ― one that spotlights the bad news and one that highlights the good. The first, which the Henry J. Kaiser Family Foundation conducted in conjunction with the Wall Street Journal, examines the exchanges and how many insurers have committed to offering plans through them. The exchanges are where people without access to employer coverage or public programs like Medicare can buy insurance, taking advantage of generous tax subsidies that vary based on income.
According to the Kaiser report, about 19 percent of people buying coverage through exchanges next year will have just one choice of insurer. (The figure could change but is unlikely to do so dramatically.) This is a dramatic increase from last year, when just 2 percent of people buying coverage through the exchanges had could only pick one insurer. The number of people who can choose from only two carriers, rather than more, is also likely to rise next year.
The big national insurers say they are losing money on Obamacare because the premiums they are collecting aren’t sufficient to cover the medical bills of the people they are enrolling. A big reason for this is that, so far, people in relatively good health ― the ones whose premiums pay for the bills of the sick ― haven’t signed up in the numbers that these carriers expected. Insurers won’t sustain such losses indefinitely, which is one reason why insurers like Aetna are leaving some markets altogether and others are raising premiums, sometimes dramatically.
What’s Going Right?
But in states like California, the markets appear to be functioning well. And although companies like Aetna are taking losses on their Obamacare plans, companies like Florida Blue and Centene are doing well with theirs ― a sign, perhaps, that in some states the insurer shake-out is simply by-product of the leanest competitors prevailing.
Meanwhile, the law has already transformed millions of lives for the better. This is the story of that second report, which Gallup published this past week. It shows that the proportion of Americans without health insurance is down to 10.8 percent of adults, the lowest since Gallup’s tracking began in 2008, when the figure was 14.8 percent. And the proportion of adults who had trouble paying for health care or medicine in the last 12 months has also declined to the lowest figure that Gallup has recorded: 15.5 percent. In 2008, it was 19.7 percent.
Other studies have come to the same conclusion as Gallup. They are a reminder that, while Obamacare consumers in some parts of the country will have fewer choices next year, few choices is still better than no choices ― and that’s what millions of people with pre-existing conditions or low incomes had before the health care law came along.
Meanwhile, predictions that Obamacare would wreck the economy or cause the budget deficit to explode have proven spectacularly wrong. Perhaps the most surprising development is that, nationwide, health care spending is rising at a historically low rate. The health care law may or may not have played a role in this slowdown. But before passage, skeptics of President Barack Obama’s health reform agenda were sure it would have the opposite effect ― and that clearly has not happened.
It’s easy to get carried away with the law’s successes, just as it’s easy to make too much of its failures. Tens of millions still have no insurance and even some of those with coverage still struggle with medical bills. Insurers had to raise premiums once they could no longer deny coverage to people with pre-existing medication conditions, which is why millions of relatively healthy people who don’t benefit from the law’s tax credits are paying more for coverage than they would have otherwise.
What Happens Next?
Exactly how the law will evolve over the next few years is impossible to say right now. The best-case scenario is that enrollment will continue to grow, with healthy people signing up in relatively greater numbers, so that the marketplaces become more attractive to insurers. Premiums could settle, maybe as soon as next year, if this year’s increases represent the equivalent of a market correction ― basically, insurers making up for some early underpricing and setting premiums where they should have been all along.
The worst-case scenario is that insurers continue to flee and premiums continue to rise. The law’s subsidies would probably prevent a true insurance “death spiral,” since they guarantee that lower-income people will continue to find coverage attractive, but it’s easy to imagine a scenario where significant swaths of the country have just one insurance option, with premiums so high that most people ineligible for financial assistance decide it’s not worth the money.
Anything between those extremes is possible, and across the country the story is likely to play out in very different ways. For all discussion of Obamacare as a single program, it actually created 51 different insurance markets, one for each state plus the District of Columbia. The market is also developing in some unpredictable ways, as the most successful plans are increasingly the ones with “narrow networks” of doctors and hospitals. The plans are popular because they are cheap, which is what most people want.
Narrow networks can be a sign of efficiency, because they can mean insurers are coordinating care among small groups of providers (the way plans like Kaiser Permanente do) or demanding steep discounts from doctors and hospitals. But narrow networks can also cause hardship if insurers design them in ways that deny the chronically ill access to speciality care they need ― or lead to high, unexpected charges for seeking care outside networks.
Going forward, politicians face a pretty simple choice. One possibility is to work on improving the system, on the theory that reorganizing health insurance markets was bound to be an ongoing, difficult process. Just this week, the Obama administration proposed changes to the formula for Obamacare’s “risk adjustment” system, in which the plans that attract unusually healthy enrollees subsidize the ones that attract unusually unhealthy ones. It’s the latest in a series of proposals to shore up the markets.
Other fixes, such as boosting financial assistance to make plans more attractive, would require passing new legislation ― something the federal government has done before, with programs like Medicare Advantage, when they ran into trouble. And in a traditional political environment, Democrats and Republicans could easily find a compromise, with reforms that each side favors ― and maybe a little extra money, since the program as a whole has come in well under budget. Next year’s agenda already includes health care legislation, including reauthorization of the Children’s Health Insurance Program and the scheduled restart of a medical device tax, onto which Congress could graft some changes. (Hillary Clinton has already put forth a few ideas, in case she becomes president.)
But a bipartisan deal to shore up the health care law can’t happen when one party, the Republicans, remains committed to repeal altogether. It’s always hard to know what this would mean precisely, since vows to repeal Obamacare usually come with promises to replace it, and Republican leaders can never explain, with any specificity, what that replacement would entail. But the likely result would be lower taxes and less regulation; cheaper insurance options for people in good health ― along with more difficult access for people at risk of getting sick; a proliferation of the junk plans that Obamacare is phasing out of existence and dramatically higher numbers of people struggling with medical bills because they have no coverage at all.
Health care would end up looking a lot like it did before Obamacare came along, undoing the law’s achievements rather than trying to build on them.