Editor’s Note: This is the first of a two-part series on the state of U.S. healthcare and its future.
The election of President Donald Trump has ramifications across every policy field, but it may have the largest impact on healthcare. Election night immediately called into question the future of the Affordable Care Act (ACA). With the nomination of Rep. Tom Price (R-GA) as Secretary of Health and Human Services – the branch of government that oversees the ACA exchanges, Medicaid and Medicare – Trump demonstrated that he is serious about repealing Obamacare. What the Republicans will replace it with is more murky.
To evaluate any Republican alternative to the ACA, we first have to analyze its flaws and whether those flaws can be amended. Republicans have argued that the ACA has been collapsing under its own weight since its passage in 2010. These platitudes hold more weight now, with costs of premiums growing exponentially and competition weakening as insurers drop out of the marketplaces.
The structural flaws in the ACA stem from its enrollment numbers. Where the Congressional Budget Office (CBO) had projected enrollment at 22 million by the end of 2016, actual enrollment is about 10.6 million. Let’s be clear: this is a lot of people. The uninsured rate fell to 8.6 percent, its lowest point ever, in September. The bigger problem is the makeup of the new enrollees. Due to stipulations in the ACA that prevent insurers from discriminating against customers with pre-existing conditions and mandate a robust set of essential benefits, the ACA exchanges have been dominated by new enrollees that look a lot like the Medicaid population. Obamacare is allowing these people – millions who were prohibited from health insurance due to cost or discrimination based on preexisting conditions – to get access to healthcare for the first time.
Proponents and architects of the ACA anticipated an increase in sickly or poor enrollees, but their projections were off. The average income of Americans who purchased coverage through the ACA exchanges is 165 percent of the poverty line, which equates to under $20,000 for an individual and $40,000 for a family of four. Because of their income level, enrollees are receiving generous subsidies. The CBO projected that 43 percent of enrollees would purchase insurance without a subsidy, but currently just 17 percent of enrollees fit that description.
More problematically, the enrollment figures for young, healthy people have been significantly lower than the White House anticipated. The Obama administration projected that young adults would constitute 38 percent of the marketplace population, but they currently make up just 28 percent of the exchange participants. This composition means that there aren’t enough healthy people to offset the costs of insuring the sick. Citing these concerns, UnitedHealth and Aetna have drastically reduced their participation in the exchanges, which had reduced competition and coverage in many rural areas. Five states – Alaska, Alabama, South Carolina, Oklahoma and Wyoming – currently have just one insurance plan available in 2017.
Meanwhile, for those on the exchanges, premiums are rising drastically. Nationally, premiums are expected to increase 22 percent in the coming year. According to The Brookings Institute, premiums nationally are actually lower than expected. But in the states that have little competition, the increases are more severe. Premiums in Alabama are set to rise 58 percent in 2017, while in Oklahoma, they will increase 69 percent. As mentioned, most exchange enrollees receive significant subsidies, so they are largely protected from the hike in premiums. But for wealthier enrollees, the prices may be too high to justify staying on the exchanges. Insurance companies are already making the same decision as their profits decline.
Ultimately, Obamacare’s flaws can be easily addressed. Plenty of European countries, including Switzerland and Germany, have achieved universal coverage while utilizing private insurers. Where the ACA has failed to follow their example is in its penalization for those who don’t receive health insurance. In Switzerland, newly arrived residents must purchase insurance within three months of arrival, while in the United States, enrollees are free to opt in or out of plans on a yearly basis. In Switzerland, those who fail to purchase coverage face harsh fines or even jail time. In the United States, the fine this year will be $695, far lower than the cost of insurance for many healthy people. Increasing the mandates and penalties will force healthier individuals onto the ACA exchanges, balancing out the population and increasing profits for the insurance companies.
But Republicans won’t make these changes. For years, the GOP has called for repeal of Obamacare, with the GOP-controlled House famously (or infamously) passing more than 60 repeal bills. It cannot go back on this promise now. But on a more ideological level, Republicans will repeal the ACA because they have a fundamentally different view of insurance. Where Democrats see health insurance as a safety net for the poorest and sickest – and an incentivization method to make the population healthier – Republicans see it as security against disaster, a personal coverage based on your risk of illness. I will explore these ideological differences further next week when I look at Republican plans to replace the ACA, specifically proposals from Price.