Mired by Cost, Obamacare Fails to Deliver

Mired by Cost, Obamacare Fails to Deliver

The Affordable Care Act (ACA) enrollee counts have plateaued at about 11 million. While the Congressional Budget Office (CBO) foresaw this, non-payment swings are proving more severe than expected. The result? The ACA is unable to deliver on its promise of full coverage at affordable prices.

ACA enrollment fluctuates by almost 20 percent during the year. Every year, the process is the same. Early in the year, a lot of people sign up or enroll (12.7 million in 2016), but many of them don’t pay the first premium. (1.6 million failed to pay in 2016). Those who don’t pay are then removed from enrollment. Later in the year, enrollees gradually drop out. (Another 1.1 million are expected to drop out in 2016).

In 2014, the CBO estimated that in 2016 subsidized enrollment would plateau at 19 million persons and unsubsidized enrollees would plateau at 6 million in 2017. As for this year’s enrollment: “Only about 40 percent of the eligible have so far signed up and the take-up rate is far worse the higher the incomes are.” 

Enrollment fell short of expectations for several reasons, chief of which is the cost. The young and healthy often judge the cost to be higher than the benefit. That leaves the risk pool sicker and older than insurers need to lower the premiums. For everyone else, facing the premium and out-of-pocket costs without subsidy deters enrollment, especially for those whose income exceeds four times the poverty level (i.e., those who make $80,000 a year or more). For people with lower incomes, subsidies make health coverage somewhat more affordable.

The subsidies are intended to leave families paying no more than a “cap” percentage of income for premium and out-of-pocket costs. For the lowest income tier, the cap is 2 percent of income; for the highest subsidy tier, the cap is 9.5 percent. As a result, the subsidies can be large: “CBO and JCT [Joint Committee on Taxation] project that the average subsidy will be $4,410 in 2014, that it will decline to $4,250 in 2015, and that it will then rise each year to reach $7,170 in 2024.” Assuming linear growth, that means the average subsidy will be $4,900 per enrollee in 2017.

Many insurers have been leaving the ACA marketplace due to intolerable financial performance. In 2015, many insurers lost as much as 11 percent of revenues. United Health, Pemera, Aetna, Humana, and 13 co-ops have all withdrawn from at least some of the state markets.

Other insurers are suing the federal government to make good on its promise of so-called risk corridor payments, which were intended to offset higher-than-anticipated losses. The federal government refuses to make the payments because it has not collected a matching amount of excess profit — the only source for risk corridor payments. As that stalemate persists, more insurers will drop out of marketplaces, leaving fewer choices and higher prices for consumers.

Next year’s anticipated premium increases will be as much as 26 percent, bearing heavily on all people, but especially those who don’t qualify for subsidies. And, as it stands, 32 million people still lack health insurance.

The situation is clear: ACA is stuck on a plateau of enrollment due to cost. What’s not clear is what can be done about it. The cost of health care is a critical problem that, ironically enough, the Affordable Care Act is ill-equipped to address. As a result, the impetus behind the law — full health-care coverage — is not something that it can achieve any time soon. 

Alan Daley writes for The American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.theamericanconsumer.org.

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