Is Obamacare Dead? Not Quite

Health Insurance

December 28, 2017

On Friday, December 22, President Trump signed into law the most significant tax reform bill passed in about three decades. The Tax Cuts and Jobs Act made sweeping changes to U.S. tax codes, arguably, according to some, for the exclusive benefit of corporations and the wealthy. Whether this tax reform bill will be a boom to the middle class – as Trump and Republican lawmakers insist – or a way to boost private income for top earners remains to be seen. But included in the conservative tax overhaul is a blow to former President Obama’s signature healthcare law: The individual mandate has been repealed.

Under Obamacare, or the Affordable Care Act (ACA) as it’s formally known, most Americans must hold minimum essential health coverage. This is health insurance that covers 10 essential benefits and meets other requirements of the law. If you don’t get health insurance and don’t qualify for an exemption, you’re required to pay a fine each year when you file your taxes. Thanks to the tax reform law, that requirement has been eliminated starting in 2019.

The Trump administration has taken great pains to undermine the law in recent months. Cutting the advertising budget during open enrollment, gutting navigator program funding, halting cost-sharing reduction payments to insurers and shortening open enrollment to just six weeks have culminated in low consumer turnout for the 2018 signup season. Other factors, including less competition on the ACA exchanges and higher premiums for those who don’t qualify for tax credits on the marketplace, have also contributed to nationwide unrest over the future of Obamacare.

But there’s more to the story than that. For starters, Obamacare hasn’t been defeated despite efforts by conservative lawmakers over the last year to dismantle the ACA. Portions of the law have been weakened, and repeal of the individual mandate is a significant strike, but the Affordable Care Act remains the law of the land – for now.

Still the Law

Claims by President Trump that Obamacare has been effectively dismantled notwithstanding, the Affordable Care Act is still in effect. The individual mandate was a key component of the law, to be sure, but much of Obamacare remains intact. In 2018, you can count on:

  • 10 essential health benefits in major medical policies
  • Protections for people with pre-existing conditions
  • Cost assistance on the ACA marketplaces for people with lower incomes
  • Out-of-pocket spending caps for ACA-compliant health plans

If you’ve got a pre-existing condition, you’re still guaranteed to get a policy if you apply, and you won’t have to pay more for coverage than your healthier neighbor. Major medical plans cover at least 10 essential health benefits, including mental health services, maternity care, prescription drugs and preventive care. Those who earn between 100 and 400 percent of the federal poverty level qualify for cost assistance on the marketplace, which can lower the cost of monthly premiums. Insurers can’t set limits on annual benefit payouts, and you’ll have an out-of-pocket maximum that, once met, means you won’t have to pay more than a certain amount per year for covered services under your health plan. These are just a few of the major aspects of Obamacare that you can depend on for the coming year.

Note that open enrollment for 2018 health insurance ended on December 15 for most of the country. Unless you live in one of the states that extended open enrollment, or you meet a special enrollment situation, you won’t be able to get major medical coverage for 2018. But if you’ve already secured your coverage for next year, rest assured that the tax bill’s repeal of the individual mandate won’t affect your plan or your rights under the ACA.

Ripple Effect

Critics of the tax reform law argue that repealing the individual mandate will create a ripple effect with far-reaching consequences in the healthcare industry. The Congressional Budget Office, a nonpartisan office that crunches the numbers on federal bills, estimated in November that repealing the individual mandate would result in 13 million fewer people with health insurance by 2027. As a caveat, it’s important to point out that this estimate primarily involves people who would voluntarily drop their health insurance. But it also includes people with Medicaid.

The logic behind Medicaid recipients dropping or losing their coverage is based on the idea that awareness leads to action. Those who qualify for Medicaid but don’t know it – because they’re not aware of expanded guidelines or how health insurance works in the first place – wouldn’t sign up. The ACA boosted Medicaid enrollment numbers by a lot. Thanks to expanded programs in the 31 states that adopted Obamacare guidelines for Medicaid eligibility, more people now enroll than ever before. Between 2013 and 2017, Medicaid enrollment increased by 37.6 percent in states that expanded their programs. Even in states that didn’t expand, Medicaid enrollment is up by about 12 percent overall since 2013. Just two states, Wyoming and Nebraska, saw a decline in Medicaid signups.

Without the mandate in effect, it’s been argued that millions of Americans wouldn’t know to check their eligibility. Because health insurance would no longer be required by law, some people would assume they couldn’t afford it and not bother to see if Medicaid was an option.

Another ripple created by repeal of the individual mandate involves premiums and the cost of health insurance itself. The mandate was designed to encourage young, healthy people to sign up for coverage. Because younger, healthier people use fewer medical services, their premiums would keep costs down for people with health issues or pre-existing conditions, which cost more to cover. Insurers initially priced their policies with the idea that there would be a balanced risk pool to cover more expensive enrollees.

By repealing the mandate, and with it any incentive for that target demographic to buy expensive health insurance, the private insurance market could suffer a pretty hard blow. Insurers would still be required to provide health insurance to anyone who applied, regardless of health history, but there would be even fewer healthy people to offset costs. Naturally, insurance companies would be forced to raise premiums.

And that’s where it gets even more complicated. Under Obamacare, cost assistance in the form of advance premium tax credits (subsidies) is available to people earning between one and four times the federal poverty level. How much you get in subsidies depends, among other factors, on how pricey premiums are. In other words, subsidies increase with the cost of premiums for those who qualify. For anyone who gets help paying premiums, price hikes won’t matter.

But for the people buying marketplace coverage who don’t qualify for assistance, premiums will become astronomical to account for a sicker and more limited risk pool. Higher premiums will drive even more people out of the market, thus perpetuating the problem.

It should be noted that these arguments are theoretical, and some have suggested that the effect won’t be quite so dramatic. The young and healthy demographic hasn’t been buying health insurance in the numbers needed for the ACA to succeed anyway, and it’s unlikely that repealing the individual mandate will create an instant collapse of the private health insurance market. The penalty fee for not having health insurance is too weak to encourage most people to buy insurance. And plenty of Americans still choose to pay the fine over spending thousands in premiums each year. Nevertheless, repeal of the mandate will impact the healthcare industry as premiums rise and more people look for less expensive alternatives to health insurance.

The Future of Healthcare

Republicans in Congress tried several times in 2017 to repeal the Affordable Care Act altogether, but they couldn’t come to an agreement even among themselves on how to go about it. Democrats, as expected, would not support any conservative effort to dismantle Obamacare. It’s clear that partisan politics will only go so far in creating a healthcare law that works for the American people. Several lawmakers have called for bipartisanship in the next attempt to overhaul the U.S. healthcare system, but it’s not clear how they would accomplish this or where they would even start.

For 2018, health insurance remains as it is this year. Repeal of the individual mandate won’t take effect until 2019. Some states extended the deadline for open enrollment to the end of January. In most states, enrollment ended on December 15 unless you meet the conditions of a qualifying life event, which would open up a special enrollment period for you. If you need health insurance or an alternative product, such as short-term coverage or critical illness protection, you can enroll anytime. The future of healthcare in America may be hazy, but Obamacare isn’t quite dead – yet.