The Patient Protection and Affordable Care Act (ACA), more commonly known as “Obamacare,” has been a contentious issue ever since President Obama made healthcare reform a major part of his campaign in the 2008 general election. Despite being signed into law in 2010, Congressional Republicans have made several attempts since then to “defund” it. Last year, btw checked in with the healthcare mandate, two years in. But this week, we look at challenges to the law from a different source.
Challenges for Insurers
Aetna and UnitedHealth Group, two of the largest providers of health insurance, recently announced that they will pull out of some Obamacare Marketplaces in 2017. Both health insurance companies say that they experienced considerable losses in the past two years, specifically from the marketplace exchange policies. While the ACA initially created a surge in demand for paid policies, loses are being blamed on the high costs of participants in the plans who are heavier users than had been predicted. (In order for insurance to be profitable, there must be a higher number of healthy patients enrolled to balance out the sick ones.)
This withdrawal will affect southern and rural states the most. UnitedHealth Group and Aetna plan to remain in the marketplace exchanges in coastal and northern states. But in at least seven states—Alabama, Alaska, Kansas, North Carolina, Oklahoma, South Carolina, and Wyoming—there will likely be only one company offering coverage, usually Blue Cross Blue Shield. In Arizona, there could be none. With no competition, there is no motivation to offer competitive policies.
Challengers for Consumers
In order for the ACA to fulfill its promise of providing a route to insurance for the uninsured and protecting the insured from potential abuses, the program needs widespread participation. This is currently not happening. Before the ACA went into effect, insurers could deny coverage outright to those who suffered what are known in the industry as “pre-existing conditions.” The protection part of the law has been a considerable step forward for certain populations, many of whom live in rural areas where the income level is low.
The part of the law intended to ensure high participation included a mandate that requires most Americans to have insurance or face a penalty. The penalty is equal to 2 percent of a household’s income or $325 per adult/$162.50 per child (whichever is higher). Instead of enrolling, many healthy people are willing to “roll the dice” and hope they won’t get sick and are willing to pay the fine. With the announcement from the major healthcare companies, experts have suggested that resources be directed toward influencing healthy people into the exchanges. This includes boosting subsidy levels, providing attractive incentives, or raising the amount of the penalties. Alaska, one of the states that will only have one carrier in 2017, created a special fund that will help offset the expense of high-cost patients.