Over the past few months of the election, In Theory will be asking policy experts to weigh in on the critical questions our presidential candidates should be addressing — but often aren’t. This week we’re discussing health insurance exchanges.
The Affordable Care Act was signed into law in 2010 with the intention of increasing the quality and affordability of health insurance and lowering the uninsured rate by expanding health insurance coverage, through a combination of mandates, subsidies and insurance exchanges.
The legislation was passed over much opposition, but after the Supreme Court upheld the health insurance subsidies in King v. Burwell in 2015, health policy pundits argued that since the law effectively survived its last major legal challenge, it would now have to withstand the marketplace. Would insurance companies offering plans in the exchanges be able to cover their costs? Would enough people enroll to reduce the risk pool and keep premiums at a manageable level?
By 2016, the portion of uninsured Americans had fallen to 11 percent, a record low. Yet over the past few months, a number of major insurance companies — Humana, UnitedHealth Group and recently Aetna — have announced plans to significantly reduce their involvement in the exchanges, citing losses. It’s clear that the next president — regardless of his or her intent to strengthen or dismantle the ACA — will face a difficult task to make health-care coverage affordable. Are the Affordable Care Act exchanges sustainable? What is one change the next president could implement to make the program a better value for Americans?
Avik Roy is Forbes’ opinion editor and a former adviser to Sen. Marco Rubio and former governors Rick Perry and Mitt Romney.
All but the most hardened partisans understand that the Affordable Care Act’s insurance exchanges are in serious trouble. In 2010, the Congressional Budget Office predicted that 21 million people would have exchange-based coverage in 2016; the real number was about 12 million. As insurers head for the exits, the gap between initial hype and final reality will widen.
The tragedy is that this was entirely avoidable. The ACA’s exchanges were fundamentally flawed in their design, something that private-sector experts tried to point out at the time. In October 2009, PricewaterhouseCoopers published a report projecting that by 2016, the ACA would cumulatively increase individual-market health insurance premiums by 47 percent. (PwC’s estimate was conservative. In fact, premiums increased by 49 percent in 2014 alone and by 77 percent through 2016.)
PwC’s careful analysis was pilloried by Democrats and like-minded journalists, who called the report “deceptive” and compared PwC’s insurer clients to corrupt tobacco companies. Jonathan Gruber, MIT-based architect of the ACA exchanges, told The Post that “what we know for sure is that [the bill] will lower the cost of buying non-group health insurance.” For sure!
What else were PwC and other analysts saying in 2009 and 2010? That Gruber’s “three-legged stool” — with legs made of regulations, mandates and subsidies — was built by unlicensed carpenters. The regulations, intended to help the sick and the elderly, drove young people out of the market. The individual mandate, intended to force those young people to stick around, was too feeble. And the subsidies weren’t large enough to make those higher premiums, caused by the law’s regulations, affordable for most.
It didn’t have to be this way. A smarter health-care reform package that preserved the ACA’s premium assistance program, but with a light regulatory touch and no individual mandate, could have covered more people with lower costs and far less government intrusion.
I won’t waste space discussing Donald Trump’s empty Obamacare rhetoric. But for Hillary Clinton, repairing the exchanges would require ideological and political risks she thus far has been unwilling to take.
Clinton could roll back the ACA’s costliest regulations, but she has long advocated most of them, going back to 1993. She could double the individual mandate’s fines for noncompliance, but that’s political suicide. She has advocated throwing more taxpayer money at the exchanges, but taxpayers are unlikely to go along.
If I could give Clinton one suggestion, it would be to work with Republicans to repeal the ACA’s “age-based community rating” provision. It’s an obscure part of the law that makes insurers charge their oldest enrollees no more than three times what they charge their youngest ones. That drives premiums up 75 percent for 19-year-olds, who consume one-sixth the health care that 64-year-olds do. Repealing that provision would do more than any other single measure to bring young people back into the ACA exchanges. Without the young, Obamacare will continue to unravel.
Could Hillary Clinton and Paul Ryan be the Ronald Reagan and Tip O’Neill of health-care reform? For everyone’s sake — especially the uninsured — let’s hope so.