Opinion

A 10-Year Prediction for the Affordable Care Act

Our research indicates that within 10 years, the number of uninsured Americans may increase by 10 percent.

Michael Ramlet is an adjunct faculty member at the University of Minnesota and a Principal at Paragon Insights, a research firm specializing in public policy and political analysis.  
National Journal
Aug. 29, 2014, 12:55 a.m.

The Af­ford­able Care Act can­not be broken down in­to sound bites. This holds true for both its most ar­dent sup­port­ers and its most fer­vent op­pon­ents. The law is simply too com­plex to be labeled either a total fail­ure or a smash­ing suc­cess.

But that doesn’t mean it isn’t trend­ing in one of those two dir­ec­tions. Across the coun­try, in­di­vidu­als and fam­il­ies are be­gin­ning to learn wheth­er their in­sur­ance premi­ums will change for 2015 — early es­tim­ates in­dic­ate an over­all na­tion­al in­crease of 7.5 per­cent, ac­cord­ing to a Price­wa­ter­house­Coopers ana­lys­is. That’s what is ex­pec­ted des­pite the early prom­ise that the ACA would lower over­all premi­ums by as much as $2,500 per fam­ily.

These hikes, which add to those ex­per­i­enced by many con­sumers last year, are likely just the tip of the ice­berg. In re­cent months, I have worked with Dr. Steph­en Par­ente, a pro­fess­or of Health Fin­ance at the Uni­versity of Min­nesota, to as­sess how the Af­ford­able Care Act will af­fect Amer­ic­ans’ ac­cess to health care over the next dec­ade.

Our find­ings don’t bode well for the law’s long-term suc­cess.

We es­tim­ate that with­in 10 years, the num­ber of un­in­sured Amer­ic­ans may in­crease by 10 per­cent. At the same time, premi­ums will rise faster than fed­er­al sub­sidies. The lat­ter prob­lem will be most severe when in­surers re­lease their 2017 rate in­creases in the sum­mer and fall of 2016 — per­haps the most awk­ward tim­ing for the law’s sup­port­ers.

We reached this con­clu­sion us­ing the 2014 en­roll­ment num­bers, which the Health and Hu­man Ser­vices De­part­ment an­nounced in April. We ana­lyzed them us­ing a con­sumer sim­u­la­tion mod­el fun­ded in part by HHS. The mod­el uses the reg­u­lat­ory re­quire­ments man­dated by the ACA to es­tim­ate the cause-and-ef­fect re­la­tion­ship between health care plan pri­cing and con­sumers’ buy­ing habits.

The law will play out in two phases. The first will take place between now and 2016. Dur­ing that time, the price of health care plans will in­crease. We already saw this hap­pen last year and will likely see the same again this sum­mer and fall. An­oth­er event will also likely re­peat it­self. This is one the law’s op­pon­ents may prefer to ig­nore. The num­ber of un­in­sured will de­crease as people sign up for Medi­caid or the Af­ford­able Care Act’s health ex­changes.

But this trend will come to a sud­den end in 2017. That year, health in­sur­ance com­pan­ies will lose their abil­ity to ar­ti­fi­cially de­press health care costs us­ing tax­pay­er money. (Two ACA pro­vi­sions, both of which ex­pire in 2017, cur­rently let in­surers tap fed­er­al tax­pay­er funds for vari­ous reas­ons.)

This will send shock waves through the health care world.

We es­tim­ate that av­er­age an­nu­al costs for the cheapest in­di­vidu­al plans — the “bronze” plans — may in­crease by 96 per­cent, from roughly $2,100 to nearly $4,200. Bronze fam­ily plans prices, mean­while, may in­crease by nearly 50 per­cent. The av­er­age plan in this cat­egory could come close to $13,000 a year in total premi­ums. Al­most every plan will see a price in­crease of some kind.

Con­sumers will learn these un­pleas­ant truths in the fall of 2016 when they at­tempt to ex­tend their policies.

No mat­ter where you live, the ef­fects will ripple across the en­tire in­dustry. The dra­mat­ic­ally high­er prices will al­most surely drive some con­sumers out of the ex­changes. But they won’t have many places to turn. Many — per­haps most — won’t be eli­gible for Medi­caid, while oth­ers won’t have jobs that of­fer re­place­ment health in­sur­ance. People in this po­s­i­tion will thus choose between health in­sur­ance they can’t af­ford and be­com­ing un­in­sured. Not even the IRS pen­alty will con­vince every­one to bite the bul­let.

In 2017, we es­tim­ate that the num­ber of un­in­sured Amer­ic­ans may in­crease by nearly 20 per­cent, un­do­ing the gains of the pre­vi­ous two years. In sub­sequent years, that num­ber may con­tin­ue to grow — some years by 1 per­cent, oth­er years by a bit more. With­in a dec­ade, some 40 mil­lion Amer­ic­ans will once again lack health in­sur­ance.

Al­though our study does not cal­cu­late the demo­graph­ic break­down of the un­in­sured, it is reas­on­able to con­clude that Afric­an-Amer­ic­ans and His­pan­ics will be hit the hard­est by the Af­ford­able Care Act’s fail­ure to ex­tend in­sur­ance cov­er­age. Both groups his­tor­ic­ally have high­er un­in­sured rates than the wider popu­lace. A June Gal­lup Poll found that 17.6 per­cent of Afric­an-Amer­ic­ans and 37 per­cent of His­pan­ics were, at that time, un­in­sured. As health care costs con­tin­ue to rise, they will likely be dis­pro­por­tion­ately af­fected and pushed out of the health in­sur­ance mar­ket.

This stands in stark con­trast to the Af­ford­able Care Act’s stated pur­pose to in­crease health in­sur­ance cov­er­age while mak­ing it more af­ford­able. Des­pite its au­thors’ best in­ten­tions, the law — as it cur­rently stands — will ac­com­plish neither of these goals.

By the end of the dec­ade, Amer­ica’s health care crisis could be worse than it was be­fore the law was passed. Wash­ing­ton is do­ing the Amer­ic­an people a dis­ser­vice by let­ting us find this out the hard way.

Mi­chael Ram­let is an ad­junct fac­ulty mem­ber at the Uni­versity of Min­nesota and a prin­cip­al at Par­agon In­sights, a re­search firm spe­cial­iz­ing in pub­lic policy and polit­ic­al ana­lys­is.

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