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Obamacare troubles give Republicans political advantage, even if Clinton wins

Premiums for individual health insurance plans purchased on Obamacare exchanges will go up an average of 25 percent in 2017. (Healthcare.gov)

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Reports of massive increases in premiums for some consumers purchasing health insurance on Affordable Care Act (ACA) marketplaces for 2017 have energized critics of President Obama’s signature reform initiative with less than two weeks until the election that could decide whether the law survives.

Republican presidential nominee hammered the so-called Obamacare system in a speech in Ohio Thursday.

“Obamacare is a catastrophe for Ohio workers, and is making it impossible for many parents to pay their bills, support their families, or get quality medical care for their children,” Trump claimed. “Repealing Obamacare is one of the single most important reasons we must win on November 8th.”

Although the rise in premiums set off sensationalistic headlines this week, the factors that precipitated it have been at work for a while and analysts did foresee them.

“A lot of people, including myself and others, have written about the problems that were likely to take place in the exchanges,” said Robert Moffit, senior fellow at the Heritage Foundation and co-author of “Why Obamacare Is Wrong for America.”

Enrollment on the exchanges has been slow, and those signing up have been more expensive to insure than companies planned. The result is a rapid surge in premium costs to compensate for significant losses companies have reported for their marketplace business so far.

Fewer healthy people have signed up through the exchanges than ACA supporters predicted, but Moffit said some of its critics’ projections that would have upped enrollment did not materialize either. Analysts had expected more employers to drop their employees’ coverage and send them to the exchanges, but they have not done so, in part because they not like the system.

The Heritage Foundation expected premiums to go up by an average of at least 22 percent nationwide for 2017. The Obama administration announced this week that it would be 25 percent.

Sandy Ahn, an associate research professor at the Center on Health Insurance Reforms at Georgetown University, said the issues that led to the increases have been developing for years, starting with insurers underestimating the cost of insuring the patients on the exchanges in 2014.

“Programs that were aimed to stabilize the market - reinsurance, risk corridor, and risk adjustment - failed to do so for both political reasons and operational difficulty,” she said.

The increases for 2017 vary widely, with Arizona’s average benchmark rates more than doubling and a few states even seeing their premiums drop. Moffit said there is good reason for the discrepancy.

“The insurance markets have always differed radically from state to state,” he said. Premiums in each state depend on factors like medical practice costs, demographics, and the relative health of the state’s population. Utah, where many people do not smoke or drink for religious reasons, has some of the lowest premiums in the country.

One of Moffit’s many complaints about the Obamacare system is that it fails to account for this and “straightjackets” states into the same standards and regulations.

In an online briefing Wednesday, experts at the Kaiser Family Foundation laid out the impact of premium hikes.

“This open enrollment period could be pivotal for the future of the marketplaces,” said Larry Levitt, a senior vice president at Kaiser.

If enrollment grows, many of the current concerns will fade away. If more healthy people drop coverage due to high premiums, fewer insurers will be willing to offer plans on the exchanges in the future.

One area where the ACA has indisputably succeeded is reducing the number of uninsured Americans. Senior researcher Rachel Garfield said the uninsured rate is at a historic low of 10 percent.

There are several reasons why about 27 million Americans remain uninsured, although most of them boil down to cost or the perception of cost. Some people earn too much to qualify for subsidies, some already have an offer of insurance from their employer, some are ineligible because of their immigration status, and the rest live in states where they would be eligible for Medicaid if their governments had accepted the ACA’s expansion of benefits.

Associate director Cynthia Cox said many consumers are confused about who is impacted by the double digit premium increases. Those who purchase insurance on the exchanges and receive federal subsidies will see little to no increase in most states, and any premium hikes experienced by the vast majority of people who get their insurance through their employers are unrelated to the ACA.

“Generally speaking, what happens in these markets does not affect most Americans,” Cox said.

There are two groups of consumers who will actually pay these higher premiums, according to Ahn.

“People that will be hardest hit are those making too much to receive financial assistance--about 15% of marketplace consumers--or people buying coverage off the marketplace since you can only receive financial assistance with a marketplace plan,” she said.

Those who are affected have no other options if they want to comply with the mandate to have insurance, and there are millions of them. Younger and healthier consumers who do not need expensive care may choose to pay the tax penalty rather than cover skyrocketing premiums out-of-pocket.

“Young people look at the cost of the premiums and deductibles and say it’s simply not worth it,” Moffit said.

The result is that the exchanges are turning into very high risk pools for poor and sick consumers.

“What you have here is a congressionally-designed health system. They tried to calibrate things to make it all come out right and what happened is they turned the wrong dials,” he said, comparing it to “a Rube Goldberg scheme.”

He pointed to the non-profit co-ops that have already failed in most states where they were set up as an example of Congress’ miscalculations.

The next two to four years will be critical to determining whether the Obamacare system will survive in its current form. Much of that will depend on who succeeds President Obama in the Oval Office.

If Republican Donald Trump wins the presidential election, he has promised to repeal the ACA and replace it with a number of free market proposals that would not cover nearly as many people but might bring lower costs for those who can afford it.

However, if Clinton wins, the future is much harder to predict. While chances are currently good that she would enter the White House with a Democratic majority in the Senate, Republicans will likely retain control of the House of Representatives.

There are policy options that could reduce costs, according to Ahn, and Clinton has considered some of them. These include introducing a public option that would provide competition for private insurers, expanding Medicaid to all states, and taking on the rising costs of prescription drugs.

Other ideas Ahn mentioned were lowering the age of Medicare eligibility and getting more young and healthy people into the markets to strengthen the risk pool.

Any of those measures would need to get through a Republican House, and Moffit doubts that will happen.

“None of the current debate about the law goes away,” he said. “The problem for Mrs. Clinton is not what goes on in Congress. It’s what goes on outside of the walls of Congress.”

He sees public opinion against the law hardening, with no evidence that people will come to like it anytime soon. A September Gallup poll found 51 percent of Americans disapprove of the ACA and 29 percent believe it has harmed them. Only 18 percent say the law has benefited their families.

Moffit said Clinton’s proposals would be “fabulously expensive” and would essentially create a price control system that leads insurers to cut payments to providers and further narrow their networks.

If Clinton wins the presidency and Paul Ryan remains Speaker of the House with his allies in relevant chairmanships, Moffit expects very little reform to occur.

Republicans have no incentive or responsibility to help fix a law that they maintain is a fundamentally bad idea that prioritizes expanding coverage over controlling costs. The ACA also provides them with a political advantage as long as the public remains dissatisfied with it, according to Moffit.

“The Republicans will see the law as bad public policy… In this particular case, it is a wholly owned subsidiary of the Democratic minority in Congress,” he said.

Polarization will grow deeper, but there are small steps that Moffit said both sides probably could agree on. Clinton and Trump have both spoken of repealing the Cadillac tax on high value plans and requiring price transparency from providers, for example.

Republicans may put forth alternatives to address specific problems that arise from the ACA, but Clinton would likely veto them. Republican voters would not want to see their representatives collaborate with a Clinton White House to salvage Obamacare, so many would be satisfied with allowing the current status quo to continue.

“As long as health care is an issue for Republicans, they win elections,” Moffit said.

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