Commentary: A look at the good, the bad and the future of Obamacare

The Affordable Care Act, also known as Obamacare, continues to be characterized by conservative politicians as being a disaster for Americans.

Those criticizing it avoid detail, typically referring to the “skyrocketing premiums” and to two remarks made by President Obama: “If you like your doctor, you can keep him,” and “Everyone will save $2,500 on health care costs.”

The reason that opponents of Obamacare avoid detail is that an examination of the data shows the health care law has done far more good than bad.

First I will discuss the Affordable Care Act critics said and did, then I’ll examine what good it has done, and look at the ACA’s prognosis in light of recent changes incorporated into the tax law. I don't think Obamacare was perfect, but I do think it could have been cured.

What Obamacare critics said and did

Critics say premiums skyrocketed:
Premiums went up for a number of reasons, including changes imposed by Republican lawmakers that increased insurer’s costs.

I will use the benchmark second lowest price “Silver” insurance plan, the plan upon which the tax credits (subsidies) are based, to show premium changes over time since the Health Insurance Marketplace opened for the year 2014.

In 2014, I am pretty sure that premiums offered were higher than most pre-Obamacare insurance plans, because the plans had to meet higher standards as Qualified Health Plans, or QHPs. Under the QHP rules, people with pre-existing medical conditions can not be excluded and must be offered the same premium rate as a healthy person with the same age living in the same county.

QHPs include free preventive care coverage, including yearly wellness checks, flu shots, female-specific testing and colonoscopies for people over 50. Ten essential elements must be included in every plan, including maternity, psychological treatment, prescription drugs, doctor visits, imaging, lab tests, emergency care, hospitalization, outpatient surgery and rehabilitation.

Finally, a QHP is not allowed to impose a lifetime cap on insurer coverage and includes yearly limits on total out of pocket costs to the policyholder. People purchasing a QHP have had few surprises of the type where an insurer denies coverage because the patient’s treatment was not included in the plan’s coverage.

In 2015, the average increase in the benchmark plan across the U.S. was 2 percent. In 2016, the increase was 10.6 percent. Those increases for the first two years, when averaged together, are very reasonable when compared to historical increases from year-to-year. (Click here to see an article by for more detail on historic costs. )

A feature within Obamacare is reinsurance support, called the “Risk Corridors.” This feature provided for the federal government to reimburse insurers if they sustained more than moderate losses during any the first three years of the Health Insurance Marketplace. However, the funding for this feature was removed in October  2015 by the Republican-controlled Senate, before any payments were even made for the year 2014.

As a result, the insurers did not receive payments which totaled $2.5 billion for that year and were faced with not receiving reimbursement for losses that they might incur in 2015 and 2016. The funding was removed after the premiums had already been set for 2016, so the 10 percent average increase in that year was not unreasonable.

“Risk Corridors have become a political football,” said Dawn H. Bonder, the president and chief executive of Health Republic of Oregon. Bonder’s insurance co-op announced in October of 2015 it would close its doors after learning it would receive only $995,000 of the $7.9 million it had expected from the government.

“We were stable, had a growing membership and could have been successful if we had received those payments. We relied on the payments in pricing our plans, but the government reneged on its promise. I am disgusted,” Bonder said in the company statement announcing it would close.

Blue Cross and Blue Shield executives warned the administration and Congress that eliminating the federal payments could have a devastating impact on insurance markets. Of the 23 nonprofit insurance cooperatives created under the law, 19 had failed by the end of 2017. Co-op executives such as Bonder have angrily cited the sharp reduction in federal payments as the primary reason for the closings.

The elimination of the federal government’s Risk Corridor payments undermined the Health Insurance Marketplace and was a large contributing factor to the average benchmark premium increase for the year 2017 of 23 percent. Several health insurance companies, including Humana, Aetna and United Health Care, either totally left the Marketplace or restricted their participation to small regions of the U.S. 

The health care law requires insurers to sell better plans (lower deductibles, copayments and maximum out of pocket expenses) to people with family incomes less than 250 percent of the Federal Poverty Level,  but the law was unclear that the insurers would be refunded by the government for expenses incurred as a result of the better policies.

The Republicans took this to court, claiming that any government payments were unauthorized. The court concluded that their claim was valid but said that, while this decision was winding its way through the appeals process, it would be left up to the U.S. Department of Health and Human Services to make the payments or decide not to do so. During the remaining years of Obama’s presidency, the payments were made. 

After taking office, President Trump threatened to stop the payments. In anticipation of his move, insurers raised their premiums for 2018 from 7 percent to 38 percent more than they would otherwise have done. And in October, not long before the premiums had to be finalized, Trump did just that. As a result, the average increase of the premium for the benchmark plan was 32 percent. In addition, more insurers left the Marketplace in many areas, due to the uncertainty of whether they would ever receive these reimbursements.

Other actions taken by the White House in 2017 to intentionally destabilize the Marketplace were cutting the enrollment period in half, reducing funding for advertisement by 90 percent and  and reducing the funding by 40 percent for salaries of Navigators, who assist people in the enrollment.

In spite of all of these actions to undermine Obamacare, 8.8 million people enrolled in the Marketplace for 2018 coverage, about 92 percent of the 2017 total.

Critics recall Obama’s inaccurate remark, “If you like your doctor, you can keep him:”
This comment by our former president was unfortunate, because people have, before Obamacare, often been faced with the decision to either switch doctors or pay out of pocket for a doctor who is no longer in the network of a new insurer chosen to manage their employer’s group plan.

I suspect that many adults have been faced with this decision at some point in their lives. With Obamacare, the same situation exists where the consumer discovers that he or she can purchase a plan that meets all medical needs for a much lower price except … their doctor is not in network.

Critics point to Obama’s claim that people would save $2,500 per year in health care costs.
This claim is true if you examine the average cost benefit received by policyholders.

The Congressional Budget Office (CBO) projected that the Obamacare subsidies for private insurance would cost $43 billion in 2016. Therefore, the 10.1 million who enrolled in plans in 2016 received an average subsidy of $4,257.

This cost savings is an average, and many of the younger or higher-income policyholders did not enjoy this level of savings.

In fact, individuals and families with incomes above 400 percent of the federal poverty level have been hurt badly by the actions taken to sabotage Obamacare, as they have been faced with the premium increases described earlier.

What good has come from Obamacare?

Removing obstacles for those with preexisting conditions:
The healthcare reform law prohibits insurers from denying a health insurance plan to individuals with preexisting health issues. The law also specifies that the premium (before any government subsidy) for a specific plan must be based only on a person’s age and county of residence. The insurer can raise the premium for those who are regular smokers. The Commonwealth Fund investigated the impact of this feature of the law. Here are some excerpts from its study:

“In 2016, the Henry J. Kaiser Family Foundation, in its review of pre-ACA medical underwriting practices, estimated that 27 percent of nonelderly American adults had health conditions that ‘would likely leave them uninsurable if they applied for individual market coverage.’ Similarly, a Commonwealth Fund study found that, in 2010, 36 percent of adults ages 19 to 64 who had tried to buy a plan in the individual market over the prior three years were turned down, charged a higher price, or had a condition excluded from their coverage because of a health problem.

“Between 2013 and 2015, 16.5 million nonelderly adults gained coverage following full ACA implementation. Of those, 2.6 million had preexisting conditions that could have otherwise precluded them from coverage because of discriminatory denials and pricing; 9.4 million had conditions that could have otherwise affected insurance cost.” (For more detail from the Commonwealth Fund report, click here.)

Making insurance affordable for lower income individuals and families:
The Affordable Care Act specifies that the premium paid by a policyholder for the benchmark Silver plan, the second lowest-priced plan offered by an insurer in the county of residence, will be limited to a certain percentage of household income (modified adjusted gross income). These percentages vary by the ratio of income to the the federal poverty level and they increase as household income increases. Modified adjusted gross income is adjusted gross income plus non-taxed portions of Social Security and tax-free interest income.

The percentages are not maintained by controlling premium prices offered by the insurer but, rather, through a tax credit or subsidy paid by the federal government to the insurer. The tax credit, paid to the insurer on a monthly basis, makes up the difference between the premium charged by the insurer and the percentage of income that the policyholder is required to pay.

In the years since the Health Insurance Marketplace became active, between 83 percent and 86 percent of enrollees have received tax credits. Those households with higher incomes receive no subsidies and have been punished with large yearly premium increases in 2017 and 2018, primarily due to actions taken by the White House and the Republican party to undermine the ACA, as explained earlier.

Expanding Medicaid to cover adults with household income of less than 138 percent of federal poverty level: The ACA, as originally passed by Congress and signed into law by President Obama, enabled adults with household income of less than 138 percent of the federal poverty level to enroll in Medicaid, which offers essentially free health care.

One hundred percent of the cost of adding these adults to the Medicaid program was absorbed by the federal government for the years 2014, 2015 and 2016. Beginning in 2017, the states were required to pay a small portion of their total cost, with a state’s share eventually capping at 10 percent.

When the U.S. Supreme Court ruled in 2012 that the ACA was in compliance with the U.S. Constitution, it also declared that, since the states were ultimately having to pay for a share of the cost of the Medicaid expansion, states would be required to vote to opt into this feature. As of the end of 2017, 32 states and the District of Columbia have opted into the program. Those states who have accepted the Medicaid Expansion have achieved significantly higher percentages of insured versus those who did not choose to do so.

According to the Kaiser Family Foundation, approximately 12 million enrolled in the Medicaid expansion in 2016. (For details, click here to see the Kaiser Family Foundation report.)

The uninsured population has declined dramatically: The share of the nonelderly population that was uninsured hovered around 16 percent between 1998 and 2007, then peaked during the ensuing economic recession. As early provisions of the ACA went into effect in 2010, and as the economy improved, the uninsured rate began to drop. When the major ACA coverage provisions started in 2014, the uninsured rate dropped dramatically and continued to fall in subsequent years. In 2016, the nonelderly uninsured rate was 10.3 percent, the lowest in decades. For more, click here to see the Kaiser Family Foundation fact sheet.

In the first three months of 2017, just 8.8 percent of Americans — or 28.1 million people — lacked health insurance, according to the Centers for Disease Control. In 2017 there were 20.5 million fewer people without health insurance than in 2010, when Obamacare, as the ACA is popularly known, began taking effect, the agency said. In 2010, 16 percent of Americans, or 48.6 million people, were uninsured, according to the

What's Ahead for Obamacare?

How Obamacare will affect the deficit:
A report from the nonpartisan Congressional Budget Office in November of 2017 estimated that Obamacare will reduce the budget deficit by $143 billion for the period 2010 through 2019. The cost of implementing the law would be offset by additional savings from Medicare and added taxes and fees. For more on this topic, click here.

In my view, this report was a rough take on the health care law’s expenses and receipts, but did indicate that it was unlikely that Obamacare was adding significantly to the total deficit. However, the new tax law passed at the end of 2017 may change the financial outlook and a new forecast from the CBO is needed.

How the new tax law affects Obamacare:
The tax reform law, passed at the end of 2017, eliminated the individual mandate (requirement to own a health insurance plan or pay a tax) beginning in 2019.

The individual mandate was a key element in the health care law in Massachusetts, which served as the basis for much of what was ultimately included in Obamacare. The purpose of this feature of a health care law is to balance the pool of individuals such that the high cost of medical care for some policyholders is offset by the minimal cost for a much larger number of healthy people.

This approach was recognized as essential to the success of a “universal health plan” by the conservative Heritage Foundation, which owns the distinction of having first introduced the idea. The organization has since refused to accept that honor as noted in the Wall Street Journal article here.

The truth is that the mandate is a valuable ingredient for a health care system such as Obamacare, whose basis is the sale of insurance plans through a marketplace occupied by private insurance companies.

According to the CBO, ending the mandate will ultimately result in 13 million fewer people having health insurance and much higher premiums for middle class individuals and families with incomes too high to earn a subsidy. These conclusions are explained in this article in the New York Times and in this article in Fortune Magazine.

What Could Have Mended Obamacare's Ills

Obamacare, as originally passed into law, represented a gigantic step forward in improving Americans’ access to affordable health care. It was the only realistic way forward that could be achieved at the time, based on the country’s history of the use of a private insurer system to care for all except the elderly, veterans, and the exceptionally poor or disabled people in the population.

In my view, in its original form, Obamacare was deficient in these areas:

  1. There should have been features to control and standardize pricing of doctor visits, medical procedures and prescription drugs. This element of a plan is tricky and must be balanced to take into account the needs of the providers to received reasonable fees and prices and maintain the incentives that continue to attract people and investment into the healthcare industry.
  2. The range over which subsidies were offered should have been extended at the upper end to incomes of six times the federal poverty level (For 2018, approximately $72,000 for an individual, $97,000 for a couple and $148,000 for a family of 4).
  3. The subsidies offered should have been more generous for the upper end of the income scale so the maximum premium for the benchmark plan would be no more than 6 percent of family income. 
  4. The Medicaid expansion should have been totally paid for by the federal government. The requirement that the states pay 10 percent of the additional cost of having more people on Medicaid led to the Supreme Court ruling that the expansion was optional, with the states having to opt into that feature of Obamacare. As it has turned out, only 32 states plus the District of Columbia have chosen to opt in, leading to many more uninsured than would have otherwise been the case.


Both the second and third changes would add to the cost to implement the law but the first would reduce the cost borne by insurers and would, therefore, work to lower the average subsidy. The combination of the second and third moves would have brought more young, healthy people into the health insurance pool, helping to better stabilize the average cost to insurers and to lower rates of increase of premiums.

Unfortunately, rather than seeking to improve Obamacare, opponents of the law have instead worked diligently to impair it, and they have been successful in doing so. Middle class families and medical providers have been harmed, as a result of action taken by opposed factions. Low income families in the 18 states, including Texas, that did not expand Medicaid, have few options for care outside of emergency room facilities.

President Trump, during the 2016 campaign, promised to make healthcare cheaper and better for all of us. The opposite has happened, tragically for political reasons only. There has never been an attempt by the political party in control of Congress and the White House to improve this public policy. Rather they have merely worked to undo President Obama’s legacy.

I would like to foresee a better future for health care in our country but I cannot. This makes me very sad.