Earlier this week, the news broke that premiums for Obamacare mid-level plans are projected to see a 25% increase next year. Similarly, premiums for the benchmark silver plans are projected to increase by 22%. Reading these headlines leads to the conclusion that Obamacare as a whole is seeing rapid, unsustainable increases in prices and that it is falling apart.Yet, after zooming out at the entire picture, it becomes clear that this news is more like a big scratch on the surface of an otherwise sturdy table.
Most of the reporting either ignores or buries the two most important parts of this story. First, the increases do not impact the vast majority of consumers. This is true both for the public as a whole (only 6% of the country uses the Obamacare exchanges) and for people who buy their insurance through the exchanges. Approximately, 85% of people who buy their insurance on the Obamacare exchanges receive subsidies from the government which protect them from the impact of the premium increases. More than 70 percent of people buying insurance on the exchanges will be able to get a health plan for less than $75 a month in 2017.
Second, the premium increases are actually right in line with where the Congressional Budget Office projected them to be when it made its projections in 2009. Some experts believe that the initial premiums were too low and market is simply experiencing a correction . While the premium increases are a big jump, they are not out of line with original expectations.
All of this is small comfort to the people who buy their insurance on the exchanges and do not qualify for subsidies. Naturally, policymakers should provide help to these people to make the law function well (more on that below). However, their plight hardly signifies the collapse of the law, particularly when it is thriving by most other measures.
What Obamacare Is
To gauge the success of Obamacare, it is important to step back and understand what Obamacare is and what it is not.Obamacare does not provide for coverage of most Americans. The majority of Americans get their insurance through Medicare, Medicaid, or through employer provided insurance.
Prior to the passage of Obamacare, there were a significant number of Americans who did not have health insurance through Medicare, Medicaid, or their employers. The relatively narrow purpose of healthcare reform was to provide coverage for these Americans who were ineligible for Medicare or Medicaid but unable to get coverage through their employers. The debate over how to accomplish this goal ranged from doing nothing to scrapping the entire healthcare system and going to a single payer system. It is hard for many to accept this in today’s political climate but,from a policy perspective, Obamacare is a fairly conservative approach to the problem. It works within the private sector system, policymakers designed the law to be revenue neutral and included reforms to help curb the rise of healthcare costs.
The law extended coverage in two ways: through an expansion of Medicaid to give the poorest of the uninsured coverage and by providing insurance through the exchanges to the remaining individuals. While people in the exchanges have to buy coverage, many of the plans are subsidized.
So, how is Obamacare doing on these goals?
Pretty well. The main goal of Obamacare was to reduce the rate of uninsured people in this country. On this point, the law is a success. The uninsured rate has fallen to 8.6% of Americans, the lowest rate in history. Approximately, 20 million more people now have health insurance. The law achieved this increase in coverage while keeping healthcare cost inflation down. The country is spending trillions less than projected in overall healthcare costs. Along similar lines, the law is helping slow the growth of the national debt. According to the CBO, Medicare costs – a huge driver of concern over the national debt – are projected to be much lower than expected thanks, in part, to Obamacare. Conversely, the CBO has determined repealing the law would add hundreds of billions to the deficit.
To recap, the law gave health insurance coverage to millions of Americans and protects individuals with preexisting conditions all while helping curb the rise of healthcare costs and, as a result, easing the national debt. For a complicated domestic program on this scale, Obamacare is a triumph. To quote Joe Biden, this is a big fucking deal.
Where Obamacare Has Not Succeeded
While the law has been a success in general, it has not been a success for everyone. And that brings us back to where we started, with the average premiums going up. Experts point to several likely causes for these issues. The most generally-accepted cause is that there are more sick people who signed up for insurance than expected. Additionally, despite the individual mandate, some healthy individuals have still not signed up for coverage. In health insurance plans, the healthy essentially pay for the coverage of the sick. When there are more sick people than expected or less healthy people than expected, insurance becomes less profitable and companies either get out of the market or raise their rates.
This problem has been exacerbated by the refusal of many Republican governors to accept the Medicaid expansion which would provide coverage to many more of their states’ poorest individuals. Studies have shown that the expansion lowers the costs of premiums for consumers who purchase insurance through the exchanges. Basically, by refusing to take federal money to provide access to some of their most vulnerable citizens, these states have needlessly increased the strain on their exchanges.
Regardless of the cause, these issues are serious for people experiencing them. Statistics about decline of healthcare inflation and other successes of the law in general are cold comfort to people who are seeing their premiums go up on an insurance policy they are now required by law to purchase. The good news is these problems are solvable and it may even be an easy fix.
The leading proposed solutions involve strengthening the individual mandate, making changes to the insurance exchange markets to improve transparency and efficiency, restoring the risk corridor and reinsurance provisions, and, more dramatically, creating a public option. Paul Waldman of the Washington Post has a helpful rundown of the options. As Waldman points out, these are relatively minor changes designed to expand the risk pool. These proposals would not change current taxes and they would not impact the delivery of healthcare for most Americans. Despite the fear the stories of rising premiums produce, the problem remains fixable and it is dwarfed by the successes of the law.
Most of these fixes could be implemented immediately with congressional action and an eager signature from the President. However, the Republicans who control both houses of Congress refuse to do anything that will improve the law. Congressional Republicans believe either as a matter of policy or, more likely, as a matter of politics that it is better to see the law implode than improve.
Due to this hard-line position taken by Republicans, Obamacare has to be examined from the big picture. It holds up quite well under that lens. There are problems that need to be fixed. However, the question is whether it is a better choice to tweak the law to provide more affordable care to the small group of people who purchase unsubsidized plans on the exchanges or scrap the law and leave 20 million people without coverage. The choice is clearly delineated for voters this year: there is one party that is interested in improving the law and another that is interested only scrapping it with no credible plan for a replacement.
Photo Credit: Pete Souza