By now, just about everyone knows two things about the Affordable Care Act: The website that is supposed to sign people up isn’t working, and President Obama broke his promise that people could keep their existing health insurance if they wanted to. So far in the rollout of the new law, the program seems to be failing, both in political support and in actual success in getting people insured.
Medical metaphors seem irresistible. Obamacare is badly wounded, in critical condition, on life support–take your choice. Some commentators are talking as if it were already dead. Of course, many on the right already pronounced it a failure before the health exchanges even opened. Now they are joined by mainstream media who may not be rooting so hard for it to fail, but do tend to overreact to the latest events and miss the bigger picture.
My contrarian prediction is that the Affordable Care Act will turn out to be very hard to kill. The federal website will keep getting better, although that will take longer than the remainder of this month. More importantly, the benefits of the new law will become increasingly apparent in the states that are fully implementing it by setting up their own exchanges and expanding Medicaid. The success of the Massachusetts experiment, which was based on the same (conservative) principles as the ACA, is likely to be emulated in other states, and that will make it very hard to roll back the entire program.
Consider the basic logic of the ACA. The goal is to increase health insurance coverage both qualitatively and quantitatively–better coverage for more people–while keeping coverage affordable. Private insurers have to improve coverage by accepting people with preexisting conditions at no extra charge, observing federal caps on out-of-pocket costs, and providing a standard range of benefits. The mandates requiring individuals to carry insurance and large employers to offer it are supposed to generate enough premium payments from healthy people to cover improved benefits for the sick without raising premiums too high. The government helps by expanding Medicaid coverage to those with incomes between 100% and 133% of the poverty level, and by providing subsidies for those with incomes up to 400% of the poverty level.
Any assessment of the law must consider how it affects three groups of people:
- the adequately insured, who already had good coverage through Medicare, Medicaid, employer group plans or relatively expensive individual plans
- the minimally insured, who could only afford to buy plans with very few benefits
- the uninsured, who lacked insurance either because they couldn’t afford it or believed they didn’t need it
The law was meant to have little impact on the adequately insured and the greatest effect on the uninsured. President Obama was probably thinking primarily of the first group when he said that people who liked their plan could keep it. That statement turned out to be more misleading and controversial for the second group, the minimally insured. They could be affected in various ways by the new higher standards of coverage:
- A grandfather clause allowed holders of substandard policies to keep them, but only if they were issued before 2010 when the law was passed
- People could drop substandard policies and shop for better policies in the exchanges, taking advantage of any federal subsidy that applied
- People could receive a cancellation notice, often with an option for an upgraded policy at a higher rate
It was the very last group for which the President’s promise didn’t hold. Some people liked their minimal plans because they were cheap, and they didn’t mind or didn’t realize their limitations. They thought they could keep them and were upset when they received letters saying they couldn’t. The insurance companies helped mislead their customers by issuing new policies after 2010 without telling them that the policies wouldn’t qualify for grandfathering. Nor did they explain in the cancellation letters the possibilities for greater choices, better prices or subsidies in the exchanges.
As Jonathan Cohn has pointed out, the debate over keeping existing coverage is primarily a battle for the right to keep the least popular form of insurance, and the one that has been associated with the worst company abuses, such as finding excuses to cancel policies if people actually get sick.
To sum up, lots of people losing coverage are losing policies they never liked much, that they would have dropped soon anyway, and that would have left them facing potential financial ruin if they got sick. Even those with truly good policies had no guarantees that in one year, let alone two or three, they’d still be able to pay for them.
President Obama has announced a temporary extension allowing insurers to continue substandard policies for one more year, but that may be hard for insurance companies and state insurance commissioners to implement on such short notice. Eight states have already announced that they will not allow it.
One other aspect of this debate deserves special mention. Many people are upset that they might have to pay higher premiums for coverage they don’t need, such as maternity benefits in policies purchased by men. This gets to the heart of what you think insurance is about. Is it like a retail store where you buy only what benefits you personally? Or is it a social system for making casualties more affordable by spreading the risks and costs among the many? Some of the same people who don’t want to pay for public goods through government want to extend their libertarian philosophy even further and avoid insuring people whose medical needs are different from theirs. True, men don’t get pregnant, but they do the impregnating and share the benefits of family life, not to mention the general social benefits of raising the next generation. What a hypocritical society we are if we celebrate motherhood while refusing the share the costs of maternal care!
Of the three groups–adequately insured, minimally insured, uninsured–the minimally insured are the smallest, consisting of no more than 5% of the population. Of those, the ones who are truly better off keeping their existing policies than shopping in the exchanges are a minority of a minority. Yet they have received far more media attention than the 50 million uninsured who stand to gain from Obamacare. The refusal of the Republican-run states to extend Medicaid hurts far more people, but it doesn’t provide the “gotcha” feature of catching the President in a lie.
The recent debates over the website and the President’s promise by no means seal the fate of the Affordable Care Act, although they do raise some red flags. The success of the program depends on getting a lot of the uninsured and the minimally insured to sign up, especially those healthy and wealthy enough to pay at least as much in premiums as they take out in benefits. The program could fail if too many of them fail to enroll because the website is dysfunctional, or because they are permitted to keep a cut-rate policy that doesn’t meet the new standards. Even if they cannot repeal the legislation, the opponents of the bill can help it fail by fighting for the “right” to be uninsured or minimally insured, strange as that may seem to true health insurance reformers. Some groups are running ads trying to persuade the uninsured not to sign up, although the law is primarily for their benefit.
However, the opponents are going to have a hard time getting the ACA to fail in all of the states. About half the states are participating in the Medicaid expansion, and fourteen states have set up their own insurance exchanges and websites, the best of which are in New York, California, Connecticut and Kentucky. The states that are rejecting Obama’s proposal to allow insurers to extend substandard policies for another year are not primarily Republican states, but Democratic states that are trying very hard to implement the new law in its totality.
What I expect to happen is that resistance to the law continues in Congress and in many of the states while implementation proceeds in others. That could be a good thing, because it will give the country a chance to conduct an experiment and compare the outcomes. The large number of people who get adequate and affordable insurance for the first time should outweigh the number who had to give up a cheap policy they liked. Even if the opponents were to repeal the federal law, more states would probably proceed with their own reform, as Massachusetts already did. The idea of improving coverage through a combination of government incentives and private insurance will probably be with us for some time. No alternative is in sight, besides going back to the national scandal of massive coverage gaps or forward to a more radical “Medicaid for all” approach.