This Wednesday, March 23, Obamacare turns all of six years old.
The administration is using the occasion to celebrate. At a speech in Milwaukee earlier this month, the president claimed that 20 million people have gained health insurance because of the law.
The truth is far more complicated. Enrollment in Obamacare has fallen well short of the administration’s own expectations. And some insurers are considering leaving the exchanges after losing millions. That’s hardly cause for a sixth-birthday celebration.
This year’s exchange enrollment figures were far below expected totals. In March 2015, the Congressional Budget Office predicted that 21 million people would enroll in the exchanges in 2016. Then, this past January, it cut that projection to 13 million. But only 12.7 million have actually signed up.
That number will likely be even smaller by the end of 2016. Last year, the administration boasted that 11.7 million people had signed up during open enrollment. But by year’s end, only 8.8 million had an active policy. Some of those who vanished from the exchange pool failed to pay their premiums. Others couldn’t verify their citizenship and thus their eligibility for exchange coverage.
It remains to be seen whether history repeats itself this year.
The big reason for lagging exchange enrollment is that young patients aren’t signing up. During the latest enrollment period, only about one-quarter of exchange enrollees were between the ages of 18 and 35. That’s well below the 40% benchmark the administration set for this age group.
The exchanges need premiums from relatively healthy twenty- and thirty-somethings to help cover the costs of care for older, sicker enrollees.
Despite the president’s boast that exchange plans offer great coverage, enrollees are facing sky-high premiums and deductibles as well as smaller networks of doctors and hospitals. Indeed, one report found that premiums for exchange plans in 49 states increased by an average of 15% this year. Deductibles for exchange policies nationwide have surged by 8.4% over the last year. Forty percent of plans on federal and state exchanges cover less than one-quarter of local doctors.
Many patients are also gaming the system. The law mandates that insurers offer plans to all applicants regardless of health status. So thousands have waited until they got sick to snag a plan through a “special-enrollment” period supposedly reserved for people facing hardships. After their insurers have paid their bills, they’ve cancelled their plans.
Polls continue to show that more Americans disapprove of the law than support it. A new one from NPR found that 25% believe the law has harmed them, while only 15% believe it has helped.
Insurers are faring no better than consumers. UnitedHealth lost $720 million on the exchanges last year after enrolling 500,000 people. It predicts it will lose another half-billion in 2016 selling plans in 34 states and is considering exiting the exchanges in 2017.
Fitch Ratings found that nearly half of Blue Cross Blue Shield plans for sale through the exchanges lost money last year.
And that’s to say nothing of Obamacare’s 23 failing non-profit CO-OP insurance plans set up using more than $2.4 billion in taxpayer-backed loans. More than half have closed, losing $1.2 billion that will likely never be repaid. Eight of the 11 remaining CO-OPs are on shaky ground — they’re being closely monitored by the Centers for Medicare and Medicaid Services.
Things are only going to get worse. This summer, insurers will start proposing rate hikes for 2017 — just months before this fall’s election.
Critics of the law should seize the opportunity to articulate a replacement plan for Obamacare — one that will actually provide affordable, accessible, quality care for all.
Any true reform effort has to start by repealing Obamacare in its entirety.
Then, it should provide a simple, age-based refundable tax credit to anyone buying insurance on the individual market. It should also cap the dollar value in health benefits that employers can provide to their employees tax-free. These two changes are vital to removing the tax distortions that favor employer-provided insurance. And they’d stoke real competition in the insurance market.
An alternative to Obamacare should also expand Health Savings Accounts, which allow consumers to stow away untaxed dollars for medical expenses. Right now, HSA-holders can contribute no more than $3,350 per year to their accounts. That limit should rise to $5,500 — and $6,500 for individuals over the age of 50 — to match those in force for IRAs.
Obamacare’s replacement must also effectively protect people with pre-existing conditions. It can do so by requiring insurers to offer a reasonably priced policy to anyone who has held continuous health coverage for a full year. Such a reform will encourage people to get and keep coverage — rather than jumping in and out of the insurance pool, as Obamacare incentivizes them to do.
While the president gears up to celebrate the sixth birthday of his signature legislative achievement, Americans should make a birthday wish of their own — to replace Obamacare with a plan that empowers doctors and patients, not the federal government.