The United States health care system is a non-system amalgamation of public and private health insurance options. The Affordable Care Act (ACA) (more commonly known as “Obamacare,”) did not rationalize the system. Instead, the ACA built on and around existing systems, expanding insurance options for 47 million uninsured people. If you can imagine the American healthcare system as a piece of Swiss cheese with the holes representing the uninsured, the ACA patched some of the holes. It is a major step in the right direction and covers millions of previously uninsured people, but it is still costly, complex and incomplete.
Most large employers provide health insurance to employees and their dependents. In contrast, many small business and some larger companies with lots of low-wage workers do not provide health insurance. Nearly 100 percent of retirees in the U.S. receive publically provided Medicare insurance at the age of 65. A portion of low-income families and some individuals are eligible for Medicaid insurance, which is funded jointly by the federal and state governments. Medicaid eligibility and benefits vary significantly across the 50 states. However, Medicaid has historically covered just 40 percent of the poor. The program primarily helps single parents with children and people with disabilities. Individuals without children were generally ineligible. Before the ACA there were 47 million uninsured people in the U.S. Some states, like Texas, had uninsured rates of around 25 percent.
The ACA extends coverage to the uninsured in three ways. First, it expands the Medicaid program so that all states cover all low-income citizens. This is paid for primarily with federal funding. If implemented, the results would be a health insurance safety net for the lowest income, most vulnerable people throughout the nation. Unfortunately, due to a Supreme Court ruling, Medicaid expansion became optional for the states. Despite losing millions in federal revenue, 19 states have not expanded their programs, leaving many uninsured and a gaping hole in the safety net. It’s complicated, it’s political and it’s shameful.
Second, the ACA creates state-based health insurance exchanges. Exchanges are similar to web-based travel websites where people can compare costs and purchase health insurance in the same way they might buy flights or hotel accommodations. The exchanges make platinum, gold, silver and bronze level health plan options available for purchase. The different between medal categories is “actuarial value,” which is a complex way of saying how much the insurer pays and how much the enrollee pays. For example, the platinum plan has a high monthly premium and low out-of-pocket costs (deductibles and copayments due at the time of service). The bronze plan has a cheaper monthly premium but high out-of-pocket costs. Health plans are subsidized on a sliding scale depending on a person’s income, ranging from 138 percent of the poverty level (people below this are eligible for Medicaid) to 400 percent of the poverty level. So subsidies would phase out at about $44,000 for an individual and about $90,000 for a family of four.
Third, the ACA includes an individual mandate requiring people who can afford to purchase insurance to do so. It also requires employers with over 50 employees to offer health insurance or pay a fine to the federal government. These efforts are designed to increase the number of people covered and the number of affordable options. The individual mandate is designed to bring healthy people into the insurance risk pool and is essential to its overall success. If subsidies were provided without a mandate, the sick or unhealthy would sign up right away and the healthy may wait until they get sick to obtain coverage. This would lead to higher premiums, making it less affordable and even less attractive to healthy people– leading to an insurance death spiral.
The politics surrounding the ACA are contentious and its fate may well rest in the outcome of the next presidential election in November 2016. The U.S. House of Representatives, currently controlled by the conservative Republican Party, voted to repeal the law over 70 times. Another barrier to smooth implementation has been state governments. Twenty-nine state governors are Republican and most openly despise ACA. As you may guess they protest by refusing to expand Medicaid or run insurance exchanges. In some cases the poor go without coverage and in other cases the national government steps in.
According to the Kaiser Family Foundation, the ACA has cut the number of uninsured by 9 million, reducing the uninsured rate from around 16 percent to below 11 percent with an ongoing downward trajectory. But the reforms could still be in jeopardy. All Republicans running for president pledged to repeal Obamacare, most as a first order of business. While they may be unable to get a repeal through Congress, they could do considerable damage to the ACA. Even if a Democrat is elected, they are likely to face a recalcitrant House of Representatives hell-bent on repeal. My prediction is that these reforms will stay and be built upon. No one will look back on the “good old days” when 45 million Americans lacked health insurance. But I still wouldn’t bet my health on it.
Michael Doonan is Associate Professor in The Heller School For Social Policy and Management, Brandeis University
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