Dismantling Obamacare: A Self Inflicted Wound

With Republicans winning control of the White House, the House of Representatives and the Senate you can nearly hear chomping at the bit to dismantle the Affordable Care Act, a.k.a. Obamacare. Objections to the law have been loud and unending since it was passed in 2009. Congress has voted to repeal the law in its entirety six times and voted to defund or delay parts of the law 54 times since then. Only 40 percent of Americans approve of the law and about 50 percent disapprove. Yet anecdotally speaking, few people I have spoken to understand how it works, and too many blame it for problems it did not cause. Before there is too much enthusiasm for repealing or mortally dismembering the law it is worthwhile to consider what we would be giving up.

The ACA has allowed 20 million people to get health insurance coverage according to the Department of Health and Human Services. This includes people who previously could not get coverage due to preexisting conditions and young people who can now be covered under their parent’s work related group healthcare plans. It requires that all healthcare plans, including work related plans, cover wellness exams fully among other minimum coverage requirements. The law also mandates maximum out of pocket costs and eliminates coverage limits.

This last piece of the ACA is likely the source of dissatisfaction among those covered by an individual policy purchased through the healthcare exchanges who are not happy with the law (less than a quarter of those buying insurance through the exchanges). In 2014, minimum coverage requirements went into affect causing insurance companies to drop some policies. These were generally cheap policies with coverage limits that could leave the insured holding the bag on costs related to serious illnesses like cancer. Those who owned these policies had to select a new plan, and their premiums increased substantially.

What is misunderstood about this feature is the benefits the coverage requirements provide. Individuals purchasing insurance can count on a reasonable level of coverage regardless of the plan that they buy. The ACA compliant plans have maximum out of pocket expenses that, while high ($7,150 for individuals and $14,300 for families), make sure that people with serious conditions have a limit to what they will have to pay. People can focus on premiums, deductibles and whether their doctor is in the coverage network when buying healthcare insurance. For plans with coverage above the bottom tier, doctors visits and prescriptions are mostly covered within the deductible. Three quarters or more of those buying individual healthcare coverage through the exchanges rate their coverage as excellent or good.

Another complaint about the law is that it is driving up healthcare costs as well as insurance deductibles even in work related group insurance plans. Insurance premiums have a long history of rising every year. Since the ACA was enacted, increases in insurance premiums have actually slowed on average. That is not to say the healthcare law is responsible for lower premium inflation, but it is certainly not responsible for higher premiums. Rising deductibles in work related plans are corporate reactions to rising premiums. Companies can buy high deductible plans more cheaply than the traditional plans, so they are narrowing their offerings to these lower cost options.

The ACA requires that everyone have health insurance either through work, through a state sponsored healthcare program, such as Medicaid, privately or through the healthcare exchanges. Those who don’t get health insurance are charged a fine. Critics consider this feature of the law to be unconstitutional. In their view, no one should be required to buy something they don’t want.

There are two purposes behind this requirement, though only one of them is widely discussed. The requirement allows insurance companies to have a better mix of risks. Those who are healthy and use their insurance less help subsidize the costs of providing coverage to those who are not healthy and use their insurance more. When said this way, it is easy to understand why the healthy would not appreciate their role in the system.

The second, less talked about reason is if you don’t have coverage and need health care, someone else has to pick up the bill. The cost of uncompensated care for uninsured individuals in 2013 was over $84 billion, or on average $900 per person. Many states require motorcycle riders to wear a helmet. The reason behind this is the high cost of caring for those with injuries that could be prevented by a helmet. It would seem reasonable to require those who are subject to injuries and serious illnesses, i.e., all of us, to have a minimal level of health insurance so healthcare providers don’t have to pay for our misfortune.

Still, even though the healthcare law requires you to have insurance many choose to pay the fine instead. For those who don’t qualify for tax credits because their income is too high, the fine is cheaper than most healthcare plans. These people are putting their financial security on the line. They face serious financial hardship if they are involved in a car accident or are diagnosed with a serious illness.

The number of people who buy healthcare insurance through the exchanges without help from the government is a minority. About 85 percent do receive some level of subsidy in the form of tax credits and reduced out of pocket costs. The average subsidy is $291 per month which is a sizeable portion of the average monthly premium per person of $386 in 2016. Without the subsidies, many more would not be able to afford coverage.

If you think health insurance is expensive now, wait until you see what some of the proposed changes in the healthcare law do to premiums. The most often cited proposals include eliminating the individual mandate, the requirement that everyone buy health insurance, and reducing the subsidies available currently on the healthcare exchanges. The first proposal would increase insurance company risks as more of those who are healthy drop out of the marketplace. That will drive insurers to either raise premiums or leave the market altogether. Reduced subsidies means that fewer people will be eligible for tax credits raising their cost of insurance.

No good can come of dismantling the healthcare law. Yes, there are some things that would make it better, but the currently proposed changes would make it worse. A better use of time and energy would be to focus on reducing the cost of healthcare. Americans pay more than twice as much as other developed countries with worse outcomes. The ACA has helped millions of Americans get access to healthcare and, for most, at affordable prices. Undoing the law amounts to cutting off our noses to spite our face, with no health insurance to cover the cost of treating this self inflicted wound.

Image courtesy of zirconicusso at FreeDigitalPhotos.net

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