A Calamity Ahead: the Future of the ACA

The Affordable Care Act—popularly known as Obamacare—is undeniably the most important and controversial piece of President Obama’s legacy. Over 21 million Americans have received healthcare coverage under the law, and the number of Americans who are uninsured has been almost cut in half.[1] However, the law has also increased healthcare premiums in many parts of the country and become one of the most divisive domestic issues in American politics.

Republicans have been fighting the ACA since it was first introduced. The bill passed in 2010 without a single Republican vote, and House Republicans have voted to repeal all or part of the law over 60 times since gaining control of the chamber in 2011.

President-elect Donald Trump succeeded in making the ACA a lightning rod of his 2016 campaign: the “disaster” of Obamacare was a routine part of his stump speech, and he repeatedly vowed to “Repeal it, replace it, [and] get something great!”[2] Trump’s case against the law was strengthened by news from the Department of Health and Human Services (HHS) in the weeks leading up to the election that premiums on the healthcare exchanges set up under the ACA were expected to increase by an average of 25% across the country. The anticipated rate hikes are even higher in certain states like Arizona (where premiums are projected to rise by over 110%) and in Pennsylvania, which will see a 53% price increase.[3] These numbers certainly contributed to the wave of support that Republicans shored up in the weeks leading up to November 8th.

Now that Republicans have control of the White House and Congress, they finally have their opportunity to repeal and replace Obamacare. The ACA, however, is far from dead. There are several realities facing Republicans that make dismantling Obamacare easier said than done.

First, 44% of new enrollees were already eligible for Medicaid even before Obamacare expanded the program—they just came out of the woodwork during open-enrollment campaigns.[4] Their coverage would not be affected even if the law were to be repealed. Another 2.3 million previously uninsured 19 to 25 year olds gained coverage after the provision allowing young adults to stay on their parent’s plan until age 26 went into effect, and virtually every Republican alternative to the ACA has kept this provision because of its high popularity and relatively low cost. This means that over half of Americans who gained coverage under Obamacare will get to keep it—even if the law is repealed. However, this still leaves about ten million Americans who gained coverage under the Medicaid expansion and on the healthcare exchanges set up under the ACA. They are the ones most at risk of losing coverage.

Secondly, a successful fight for repeal this spring is actually a dangerous scenario for Republicans. If the law is repealed before they are ready with a comprehensive replacement bill, it puts Republicans at risk of failing to develop a replacement plan that will garner enough support to pass before the end of the legislative session. Republicans know that this scenario would be an unmitigated political disaster: an estimated 24 million Americans would lose out on coverage that Obamacare would have provided by 2021[5] and insurance companies would again have the power to deny coverage to people with pre-existing conditions. Evidence also suggests that premiums would increase even more than they would have under Obamacare[6]. This would infuriate millions of Americans and could even embolden Democrats to reenact the law if they won control of Congress or the White House in 2020.

Unfortunately, this is more likely than one might think. Six years after the 900-page ACA was introduced, Republicans are still struggling to rally around a viable replacement package. House Speaker Paul Ryan released a Republican healthcare plan this past June. This plan has not yet been written into a bill, and according to a report by the Center for Health and the Economy– a research group which attempted an analysis of the proposal — “The Plan does not include comprehensive details on all the provisions included.” Donald Trump also released his own healthcare proposal during the campaign, and several other prominent Republicans have plans of their own.

From what we do know, the basic framework of most Republican plans is to scrap the key components of Obamacare: the individual mandate, Medicaid expansion, and insurance subsidies for those who cannot afford it. Republicans also want to keep two popular provisions of the ACA, the section allowing children to stay on their parent’s healthcare plan until age 26 and prohibition of denying coverage based on pre-existing conditions.

In place of Medicaid expansion, some Republicans have proposed a block-grant program that would give states a fixed sum of money to finance their Medicaid programs. Most alternatives to the exchanges involve a system of tax credits or non-taxable health savings accounts to buy insurance. While these proposals may certainly give people more choices than the federal exchanges currently provide, high-risk individuals that have low income, but do not qualify for Medicaid will still struggle to find affordable insurance. The only direct solution for these people in the plan proposed by Speaker Ryan is $25 billion allocated to subsidize high-risk insurance pools, but this is an unsustainably modest solution for the millions of Americans who would need this coverage. Ultimately, the Center for Health and the Economy estimates that the Ryan Plan will result in an increase of four million in the number of uninsured Americans by 2026.[7]

The problem is that keeping only the popular parts of the law while scrapping the unpopular parts – especially the individual mandate – will likely not work, because the law is premised on offsetting higher healthcare costs with premiums from healthy people who require less healthcare. Before the ACA, several states tried adopting a system in which insurers could not deny coverage for pre-existing conditions without an individual mandate. Invariably, young, healthy people did not sign up, so prices skyrocketed and insurance companies left the market. Take the case of New York: insurance prices more than doubled between 2005 and 2014 when New York adopted such a law, but after 2014, when the ACA took effect, prices dropped below 2005 levels. [8]

Obamacare is not perfect, and Republicans are right that fresh ideas could improve some of the challenges associated with the law. Republicans have a lot to lose by blindly pushing forward with a repeal that will raise costs and leave millions of Americans out of healthcare. If anything, Congress may need to prop up the ACA’s fragile exchanges in the short term until they rally around a viable replacement package with bipartisan support. This may be a tough pill for Republicans to swallow, but it is the only way their quest to reform the ACA has any chance of success.

Works Cited:

[1] Cohen, Robin, et al., “Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January–March 2016,” National Center for Health Statistics, September 2016, https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201609.pdf.

[2] Paul, Jeff, “Trump: America ‘A Dumping Ground For The Rest Of The World,’” CBS Dallas-Fort Worth, September 14, 2015, http://dfw.cbslocal.com/2015/09/14/trump-america-a-dumping-ground-for-the-rest-of-the-world/.

[3] “Health Plan Choice and Premiums in the 2017 Health Insurance Marketplace,” US Department of Health and Human Services, October 24, 2016, https://aspe.hhs.gov/sites/default/files/pdf/212721/2017MarketplaceLandscapeBrief.pdf.

[4] Zinberg, Joel, “Repeal and Revise,” American Enterprise Institute, November 22, 2016, https://www.aei.org/publication/repeal-and-revise/.

[5] Buettgens, M, et al., “The Cost of ACA Repeal.” Robert Wood Johnson Foundation, June 2016, http://www.cnbc.com/2016/06/13/obamacare-repeal-would-lead-to-24-million-more-people-without-health-insurance.html.

[6] Tuttle, Brad, “Here’s What’s Happened to Health Care Costs in America in the Obama Years,” Time Magazine, October 4, 2016, http://time.com/money/4503325/obama-health-care-costs-obamacare/.

[7] “A Better Way to Fix Health Care,” Center for Health and Economy, August 23, 2016, http://healthandeconomy.org/a-better-way-to-fix-health-care/.

[8] Sanger-Katz, Margot, “Why Keeping Only the Popular Parts of Obamacare Won’t Work,” The New York Times, November 15, 2016, http://www.nytimes.com/2016/11/15/upshot/why-keeping-only-the-popular-parts-of-obamacare-wont-work.html.