President Obama says he’s “feeling pretty good” about the Affordable Care Act in the wake of King v. Burwell, the June 25 U.S. Supreme Court ruling that upheld the flow of means-tested subsidies through the federally operated health insurance exchange, HealthCare.gov.
Without those subsidies, HealthCare.gov, which serves consumers in the 34 states that did not build their own exchanges, would’ve collapsed. Many shoppers would have been unable to afford the pricey plans on offer without a change to the law.
But anyone who thinks that the high court’s decision has saved Obamacare is delusional. Premiums are continuing to skyrocket. Annual double-digit rate hikes are becoming Obamacare’s new normal. That will send the taxpayers’ tab for subsidies ever-higher — and cause unsubsidized consumers to consider going without coverage altogether.
Obamacare’s foes should capitalize on the law’s ongoing unraveling by coalescing around a replacement plan to put in place the day the president leaves office in 2017. Rep. Tom Price’s (R-Ga.) Empowering Patients First Act represents a good start.
Even with SCOTUS-blessed subsidies, Obamacare is unaffordable.
Days after King, regulators in Oregon approved huge premium increases for plans sold on the state’s exchange. The biggest participating insurer — Moda Health Plan — is going to hike premiums by over 25 percent. Four other insurers will bump their premiums an average of 30 percent.
Such rate increases are occurring across the country. Blue Cross Blue Shield is requesting an average rate increase of 25 percent in North Carolina, 31 percent in Oklahoma, and 36 percent in Tennessee. In Minnesota, the insurer is asking for a 54 percent spike.
Nationwide, premiums could jump an average of 14 percent, according to the online insurance marketplace HealthPocket.
This situation will only worsen in the coming years. As premiums spiral upwards, the young and healthy will increasingly decide that insurance isn’t worth the cost. Many will opt out of the market altogether.
That will leave insurance risk pools to be comprised primarily of older, sicker patients. To cover the costs of insuring this population, insurers will have to increase rates even higher. More people will find these new premiums unaffordable — and they, too, will drop their coverage.
As this process repeats, the insurance market will descend into chaos — what industry experts call a “death spiral.”
President Obama and other Democrats are already trying to blame insurers for these hikes — and are calling for even more intrusive regulation.
At an event in Tennessee, the president responded to a question about double-digit premiums increases by saying that it’s up to consumers to “make sure that the insurance commissioner does their job in not just passively reviewing the rates.”
But insurance commissioners aren’t the problem. In fact, some are directing insurers to raise their rates further to ensure that they remain solvent as costs rise. Oregon Insurance Commissioner Laura Cali, for example, required state plans that didn’t want to hike rates to do so by an average of 8.3 percent.
“Inadequate rates could also result in companies going out of business in the middle of the plan year, or being unable to pay claims,” she explained.
Insurers are already worried about going out of business, as seen by the recent slew of mergers across the country. Companies claim that such consolidation will help them cut costs. In truth, though, it threatens to push premiums up even further and reduce consumer choice.
Given this environment, it’s no wonder Americans are fed up with Obamacare. Days before the Supreme Court upheld Obamacare’s federal exchange subsidies, a Washington Post/ABC News poll found that just 39 percent of Americans approved of the law. That’s tied for the lowest approval rating since the poll began keeping track.
Obamacare’s opponents can capitalize on this public unrest by offering a clear and viable alternative to the faltering status quo. They should use Rep. Tom Price’s plan as a model.
First, Price’s plan would fully repeal Obamacare. It rightly asserts that the law cannot be fixed.
Second, the plan would offer incentives — not mandates — to encourage people to purchase health coverage.
Price’s bill would do away with Obamacare’s complicated subsidy scheme, which requires an army of IRS officials to enforce. Instead, it would offer refundable tax credits based on age to help people buy insurance on the individual market.
Those between the ages of 18 and 35 would receive a tax credit of $1,200. People 35 to 50 years old would receive $2,100, and those over the age of 50 would receive $3,000. Parents would receive $900 per child up until age 18.
Individuals could also choose to opt out of coverage available through their employers — and instead claim the tax credits to purchase insurance of their choice.
Third, the Price plan would roll back Obamacare’s ruinous guaranteed-issue and community- rating regulations — which have steadily pushed up insurance prices for everyone. That would allow for a functional insurance market for those without pre-existing conditions to emerge.
To help provide affordable coverage to those with pre-existing conditions, Price’s plan would seed state-run high-risk pools $1 billion each year. These grants would empower states to choose how best to use the money. The feds would also offer bonus grants for low premiums as an incentive to keep insurance in the pools affordable.
Eligibility would be decided by these premiums. If an individual received a quote for a premium in the regular market that was higher than in the pool, he or she would be eligible to join.
Price’s plan does have several flaws. For instance, its refundable tax credits go to insurers rather than consumers. If individuals received the credits themselves, they could opt to put any money they didn’t spend into a tax-advantaged Health Savings Account for routine out-of-pocket expenses.
Obamacare may have survived another Supreme Court challenge. But its future is by no means certain. A majority of the country opposes the law — and its namesake will be out of office in short order. Obamacare’s foes should capitalize by campaigning to replace it in 2017 with reform that empowers patients, not government.