Although President Obama claims that the debate over the Affordable Care Act (ACA or "ObamaCare"), I believe that discussion will intensify as this election year progresses. Why?
First, looking at yesterday's primary defeat of Eric Cantor in Virginia, one can easily attribute disaffection of voters in part to the House leadership's (Cantor is House Majority Leader) waffling on putting "repeal and replace" legislation on the table.
Second, health insurance companies will be producing their rate estimates for next year's plans, and sticker shock will again occur.
Stephen T. Parente, Associate Dean of the Carlson School of Management and Director of the Medical Industry Leadership Institute at the University of Minnesota points out in his opinion piece in the 6/11/2014 issue of the Wall Street Journal that "premium growth has averaged at least 5% over the last five years", and it is unlikely that ACA's federal subsidies will increase enough to offset out-of-pocket costs.
Mr. Parente and his colleague at the Medical Industry Leadership Institute, Michael Ramlet, published a paper that projects the average premium increases by 2019 will be $1,375 for individuals and $4,198 for families, outpacing the increases from the previous five years.
The basic premise here is that these large premium increases will price consumers out of the market and force them to look for cheaper options, such as high-deductible plans or those with very limited provider networks. As more people leave the more comprehensive benefit plans, insurers will need to increase premiums, which spur more departures, and so on.
This cost/coverage cycle will only be exacerbated by the increasing number of businesses that are likely to cancel their group plans in favor of letting their employees find coverage on the health insurance exchanges, or "Marketplaces". Mr. Parente estimates that "over five million people will lose their employer-based insurance by the end of the decade". The CBO actually estimates that the ACA will lead to seven million people losing their employer-based insurance by 2020.
The primary causes of these future increases and the resulting cost crisis for consumers are threefold:
1) Beginning 1/1/2017 all health insurance plans must include all of the ACA-mandated benefits, the "essential benefits" in the law. This will eliminate large numbers of plans from the marketplace, up to 60% of the plans sold in 2013 in some states!
2) and 3) The ACA reinsurance provision, where the Federal government picks up the tab for plans' medical costs over a certain threshold and the "risk corridors", which provide assistance to health insurers when their ACA-compliant plans lose money, both expire in 2017.
If this scenario plays out, the result will be one of two options:
1) More people qualify for and enroll in Medicaid
2) More people remain uninsured and face the tax penalty imposed by the law's "individual mandate".
In another paper co-authored by Mr. Parente but not yet published, "Medicaid enrollment will increase by "2%-3% annually through 2024." and by that time, "there will be more than 40 million uninsured, roughly 10% more than today."
These results are the real reasons why ObamaCare will not fulfill its promise of near-universal health care and, in fact, will make the situation worse.
