Nearly a decade following the passage of The Patient Protection and Affordable Care Act (“ACA”), the American health care delivery system continues to face many of the same problems that the “Obamacare” reforms sought to address. Prior to the ACA, 50 million Americans were without health insurance—more than 16 percent of the population. Health care represented 17 percent of the nation’s gross domestic product, and costs were increasing faster than inflation rates.
The Act sought to achieve the “triple aim” of healthcare—improving the health outcomes through increased access, reducing per capita costs, and improving the quality of care. While access to health care has certainly improved since implementation of the ACA, cost of care has only continued to rise, and improvements in health outcomes have been insignificant. The inability of the ACA to accomplish this triple aim can largely be attributed to the constant state of change and instability in American health care law following the passage of the ACA, and the deep political divide surrounding health care policy.
Key Components of the ACA
Title I of the ACA addressed health insurance reforms, with key provisions designed as a set of interlocking requirements that The Center for American Progress has called, a “three-legged stool.” Together, the reforms that make up the three-legged stool were meant to counterbalance one another to provide access to affordable health insurance to those who previously could not afford coverage.
The first leg includes requirements for health insurance companies to provide nondiscriminatory coverage through guaranteed issue and community rated premiums. This means insurers are required to offer insurance to any applicant and set premiums on the basis of age. This reform targeted the selective practices in the health insurance industry that previously allowed insurers to deny coverage or vary premiums based on health status or preexisting conditions. Furthermore, insurance plans must meet new criteria and cover “essential health benefits” in order to be considered a qualified health plan sold on the ACA’s online insurance marketplaces.
The second leg is the individual mandate, which required all individuals to have minimum essential coverage or pay a penalty. The individual mandate served to widen the risk pool among consumers to include the young, old, healthy, and sick populations, thereby preventing adverse selection in the health insurance market. The individual mandate was satisfied by purchasing individual coverage, enrolling in employer-sponsored coverage, or maintaining government coverage through federally funded programs like Medicare, Medicaid, or TRICARE.
The third leg provides premium assistance tax credits for individuals with incomes between 100 and 400 percent of the federal poverty level (“FPL”), and cost-sharing reduction (“CSR”) payments for those earning between 100 and 250 percent of the FPL. These reforms serve as subsidies to make health insurance more affordable and thus increase overall access to health care. The premium subsidies help to pay for the actual cost of health insurance coverage, while the cost-sharing reduction payments serve to reduce the out-of-pocket costs that individuals face with health insurance, such as deductibles, copays, and co-insurance.
Meaningful Impacts due to ACA Reforms
According to the National Center for Health Statistics Health Interview Survey, the number of uninsured Americans decreased from 16 percent in 2010 to only 8.9 percent in 2016. The United States additionally saw a marked decrease in those who failed to obtain needed medical care due to cost, following the implementation of the ACA.
Title II of the ACA further accomplished an increase in access to health care through its expansion of the Medicaid program to cover all persons earning up to 138% of the federal poverty level. This provision ultimately set a price floor for state Medicaid programs. All but 14 states have opted to expand their Medicaid programs through the reforms set forth in the ACA, increasing Medicaid eligibility to cover not only the poor, but rather all citizens with incomes falling below the poverty level threshold.
While all three legs of the stool were intact, the ACA reforms significantly increased access to meaningful health insurance coverage for many Americans. From 2013 to 2015, 16 million people gained access to coverage according to a Centers for Medicare and Medicaid Services(“CMS”) report. Thanks to the ACA’s subsidies and Medicaid expansion, more than 20 million people have gained coverage since implementation of the ACA—by 2016, nine in ten Americans had health insurance.
Challenges to ACA Reforms
The ACA has remained a politically controversial topic since its inception, passing without a single Republican vote in Congress. With such a stark party-line divide, it comes as no surprise that the House of Representatives has voted over fifty times to repeal portions of the Act since its passage in 2010. The ACA has additionally met challenges from the courts. In 2012, the Supreme Court addressed the constitutionality of the ACA’s individual mandate and Medicaid expansion in National Federation of Independent Business v. Sebelius. The Court upheld the constitutionality of the individual mandate as a valid exercise of Congress’s taxing power but found that Medicaid expansion could not be required and instead must be a state-elected option.
With the 2016 election of Donald Trump and Republican majorities in both houses of Congress, efforts to chip away at the ACA were immediate. The 2017 Tax Cuts and Jobs Act reduced the ACA’s tax penalty for lack of coverage to $0, effectively repealing the individual mandate beginning in 2019. Furthermore, the Republican Congress filed a lawsuit challenging the Obama administration’s funding of CSR payments, arguing that such payments infringed on the constitutional authority of Congress to appropriate funds. For months, the Trump administration attempted to negotiate a favorable settlement, while continuing to fund the CSR payments. However, in late 2017 the Trump Administration announced that CSR payments would end immediately. The effects of the termination of CSR payments had an impact that trickled down and offset many other reform efforts of the ACA.
The Uncertain Future of the ACA
The ACA was ultimately a legislative balancing act. Each leg of the stool was critical for achieving the intended purpose of the Act. Because the three-legged stool framework created an extensive network of complex, interdependent policies, the revision or repeal of any one provision would inevitably undercut the stability and effectiveness of the entire Act.
With requirements in place that promise access to coverage regardless of health status, the individual mandate was a critical countervailing measure for stabilizing the cost and risk pool for health insurance. Moreover, the CSR payments and tax credits made compliance with the individual mandate feasible—and often more appealing, in light of the penalty payment.
The Consequences of Removing the Individual Mandate
Without the individual mandate, the sick population will begin to be the only consumers of health insurance, causing the risk pool to shrink, and the price of coverage to sky-rocket. According to a CMS report, the number of new consumers enrolling in health insurance plans in 2019 dropped by 16 percent, from 3.2 million to 2.7 million. Ultimately, this means that the market for health insurance is becoming smaller as a result of taking away the various “carrots and sticks” in the ACA that previously incentivized enrollment in health insurance coverage. It is likely that premiums will only continue to rise as healthy people withdraw from the market and insurers adjust premiums to account for a decrease in consumers and an increase in risk. With the healthy population being phased out of the system due to high cost of health insurance, the sick population with coverage are the only ones taking advantage of the subsidies. The end result: Government spending only decreases marginally—at the cost of loss of coverage to about 8 million Americans, the Congressional Budget Office (“CBO”) suggests.
The cost of coverage in the private market for those who lack subsidies has increased substantially since repeal of the individual mandate. Chris Sloan, director at Avalere Health, a policy and research think tank in Washington, D.C., commented on the unfortunate predicament that the privately-insured middle class citizen faces, stating that, “It’s a cruel reality for those above the income cutoffs. But it’s not clear that the administration’s actions are the best solution.” With the termination of the CSR payments and corresponding rises in premiums, middle class privately insured individuals are hit especially hard by the efforts to dismantle the ACA. This is because the cost of premiums is increasing, but the average middle class citizen has income too high to qualify for a subsidy to help ameliorate some of the high cost of coverage.
Removal of the individual mandate also undermines employer-offered health insurance coverage. The CBO projected that repeal of the individual mandate would result in a reduction of employer-sponsored coverage by 13.5 million persons. The rationale behind the CBO’s projection aligns with the purpose for the individual mandate from the start—to increase the number of insured individuals. Repealing the individual mandate ultimately eliminates the enrollment from individuals that previously enrolled in insurance plans offered through their employers solely to meet the requirement of the individual mandate.
What happens when Cost-Sharing Reduction Payments are Discontinued
With regard to the uncertainty of the continued existence of CSR payments, insurers responded by adjusting for the potential loss. The cost associated with the loss of CSR payments was passed on to consumers and resulted in immediate increases in premiums. Prior to the Trump Administration’s official termination of CSR payments, The Kaiser Family Foundation estimated that without such funding, rates on Marketplace plans would increase by an additional 19 percent in 2018, with more significant increases in states that opted not to participate in the ACA’s Medicaid expansion.
The CBO projected that termination of CSR payments would have the unintended effect of increasing the federal deficit by $194 billion from 2017 through 2026. The ACA provision for premium tax credits was interdependent with the CSR payments—together, both provisions, along with the individual mandate, balanced the price of coverage and protected the private market from astronomical premium hikes.
The result of terminating CSR payments may have appeared to reduce federal spending, but the corresponding rise in cost of premiums meant that the premium assistance tax credit for those with incomes up to 400 percent of the poverty level would also rise alongside increasing premium prices. The premium tax credit provision insulates the individuals it was designed to assist from market fluctuations in premium costs—the size of the premium tax credit is determined based on household income and the cost of benchmark plans within an individual’s specific geographic location. According to the CBO, “When the premiums for the benchmark plan go up, the amount of the tax credits goes up, and the amount of the premiums paid by an enrollee who is eligible for the credits is generally unchanged.” Furthermore, the CBO estimated that, “increases in premium tax credits for those with income between 200 percent and 400 percent of the FPL would substantially exceed the small reductions in CSR payments for this group.”
The Consequences of Partial Steps toward Repeal and Replace
With the baby boomer population aging, the current trajectory of the United States health care system is not sustainable. The “Repeal and Replace” platform has only partially been delivered, leaving the United States health care system in a shifting climate characterized by inefficiency and uncertainty. As the United States moves towards the next election cycle, the future direction of health care policy is a critical issue that can no longer be ignored.
Overall, the efforts to undermine and dismantle the ACA have completely offset the equilibrium of the three-legged stool that once stood, pushing the nation’s health care delivery system into a crisis that resembles the state of American health care prior to the ACA reforms. Ultimately, it will be up to the legislature to look beyond partisan division on health care policy and explore bipartisan reform efforts. Establishing a health care model through political compromise will help to ensure that future reform efforts are not met with the same ill-fate as the ACA.