President Obama's signature health reform law, the Affordable Care Act -- which you probably know as "Obamacare" -- has been controversial and generally disliked by about half of Americans since it was signed into law in March 2010.
The Kaiser Family Foundation Health Tracking Poll has been closely monitoring the public's sentiment toward Obamacare on a near-monthly basis since it was signed into law. You can essentially count on two hands how many months over the past six years the general public had a "favorable" view on the law.
Although Obamacare enrolled about 12.7 million people through its marketplace exchanges in 2016, and a nearly equal number of lower-income individuals and families have gained medical coverage through the expansion of Medicaid in 31 states, the program's long-term survival is still in question, with premium prices looking as if they could soar by a double-digit percentage in 2017. Another analysis conducted by the Kaiser Family Foundation found that a weighted average increase of 11% could be in store, based on the price of the lowest-cost silver plan in 2016 compared to 2017.
Obamacare's shortcomings threaten its future
"What's wrong with Obamacare?" you might be wondering. Unfortunately, there's no single or centralized problem, but rather a confluence of factors that have come together to put the future of President Obama's hallmark legislation in doubt.
First, young-adult enrollment hasn't been up to par. Young adults are typically healthier and less likely to go to the doctor, meaning their enrollment and premium payments are vital for insurers looking to offset the higher costs of treating sicker and/or older Americans. By a similar token, the Shared Responsibility Payment, or SRP, may not be steep enough to encourage young adults to enroll. The SRP is the "penalty" assessed for violating the individual mandate by not buying health insurance. In 2014, the SRP was the greater of $95 or 1% of modified adjusted gross income, or MAGI. In 2016, it has jumped to the greater of $695 or 2.5% MAGI. Even with this jump, the Kaiser Family Foundation predicts an average penalty of $969, which is still far less than the cost of a full year of healthcare premium payments.
Secondly, the "risk corridor" has failed badly. The risk corridor program was designed to provide payments to insurers losing excessive amounts of money on Obamacare's exchanges. This loss protection was meant to encourage more insurers to enter the marketplace by giving them a safety net while they figured out an appropriate level for premium prices. The funds for these payments were to be provided by overly profitable insurers on Obamacare's exchanges. Ultimately, only 12.6% of the $2.87 billion requested wound up being paid out, leading more than half of Obamacare's healthcare cooperatives to close their doors.
Finally, the checks and balances designed to keep insurers from jacking up premiums aren't sufficient. Each state has an Office of the Insurance Commissioner to which insurers submit requests for any rate increases (or decreases) of 10% or more. While the OICs can negotiate with insurers, they essentially have no bargaining power if the rate hike is justified. They can call out insurers on a public platform, but health-benefit providers still remain largely in control of their premium pricing.
Colorado could ditch Obamacare for a single-payer system
The long-term uncertainty surrounding Obamacare has the trailblazing state of Colorado to propose ditching Obamacare altogether and instead implementing a statewide single-payer healthcare plan.
This November, residents of Colorado will vote on Amendment 69, also known as ColoradoCare, which, if approved, would set up a single-payer healthcare system within the state. Under single-payer plans, there are no copays or deductibles, and coverage is universal. It's similar to Democratic presidential candidate Bernie Sanders' Medicare-for-All proposal.
There are obvious advantages to a single-payer system, and we don't have to look any further than our neighbors in Canada to see that single-payer can be quite successful. Within the U.S., the biggest advantage of single-payer is that it would dissociate healthcare from the workplace. Some workers get stuck in a job they dislike because they don't want to go without health insurance. Universal healthcare allows people to leave their jobs without the fear that they'd lose their insurance coverage.
Presumably, a single-payer plan could also result in long-term savings for the residents of Colorado. Think about it this way: When a big corporation with 10,000 employees seeks out health coverage, it can often garner premium discounts for bringing the insurer such a large new pool of patients. Now magnify this 10,000 figure more than 500 times to Colorado's population of approximately 5.5 million. With the Coloradan government fighting for its residents, and a patient pool of 5.5 million people at stake, it seems likely that insurers would be willing to make a deal with Colorado, possibly reducing the final cost of single-payer healthcare.
Single-payer could have problems, too
While Colorado's single-payer plan -- if approved -- could work wonderfully, there are also concerns.
Front-and-center is the expected cost to implement the program. The federal government has pledged $13 billion in funding, but that would still leave Colorado's residents to come up with the extra $25 billion needed to pay for a single-payer system.
According to opponents of ColoradoCare, this would result in a 10% payroll tax that would be paid for by employers and employees. Employers would be on the hook for a 6.67% tax per employee, regardless of whether they were full-time, part-time, or seasonal, and workers would be required to contribute 3.33% (making a total of 10%). Persons receiving non-payroll income -- such as rental income, Social Security income, pensions, dividends, capital gains, and so on -- would owe the full 10%. The state's income tax rate would also rise from 4.63% to 7.96%. Added taxes could be especially harmful to low-wage and middle-class workers who might already be struggling to make ends meet. Small businesses could also struggle under the weight of the newly proposed taxes.
Another concern is what might happen to Colorado's physician network. Having millions of people suddenly insured could overwhelm Colorado's healthcare networks and lead to mile-long waits to see a doctor. Healthcare providers would also be required to enter into contracts with the state and accept reimbursement that's "competitive with other states." This vague terminology could cause doctors to leave the state.
Nov. 8 is the day to watch
Election Day is Nov. 8, so in a matter of roughly four months we'll have an answer as to whether or not Colorado's residents want single-payer healthcare, or if they believe it's too costly for them or for their state.
The results of the vote could certainly hold weight, because success in Colorado could lead the dozen other states tinkering with the idea of altering how Obamacare is administered to make the transition to single-payer. Conversely, a trouncing of ColoradoCare in November could crush any near-term hope that single-payer will get off the ground. I, for one, am eager to see the outcome of this vote, and as investors -- and healthcare consumers -- you should be, too.