Open enrollment for the Affordable Care Act is slated to kick off in less than two months, but based on early pricing data, it could be the most challenging year yet for Obamacare, as the ACA is more commonly known.
Since it was signed into law in March 2010, the ACA has been controversial. The Kaiser Family Foundation's Health Tracking Poll has kept tabs on public opinion surrounding Obamacare by regularly polling Americans on whether they have a "favorable" or "unfavorable" perception of the law. With just a handful of exceptions, the unfavorable view has been ahead of the favorable one over the past six-plus years.
Obamacare does appear to be fulfilling its mission of lowering the rate of uninsured people in the United States: Fresh data released last week from the Centers for Disease Control and Prevention showed that the uninsured rate had fallen to an all-time low of 8.6%, or about 27.3 million people. When the ACA was signed into law, about 48.6 million people lacked health insurance, implying that the ACA is responsible for as many as 21 million enrollments over the past couple of years.
But this could be where Obamacare's victories end.
Is Obamacare hurting American families?
According to a newly released poll from Gallup, an increasing number of people say that Obamacare is hurting, not helping, their family.
As you can see from the Gallup chart above, the majority of Americans (51%) still aren't affected by Obamacare, and I think that's an important thing to remember. Most consumers still receive healthcare through an employer, so tens of millions of Americans simply don't have to worry about Obamacare's impact on them or their families.
However, what is notable is that the number of consumers reporting that Obamacare has hurt their family has risen to a new all-time high of 29%. That's up 10% from the beginning of 2014, when the ACA went into full effect for individuals. Meanwhile, respondents who claimed to have been helped by the ACA dropped to just 18%. While this figure is also higher than it was in January 2014, it has gone in the wrong direction over the past year.
It's worth noting that Gallup suggests that the answers could be influenced by political bias, rather than actual evidence of Obamacare's impact on families. After all, Republican respondents were five times more likely than Democrats to state that Obamacare was hurting their family (46% versus 9%). Nonetheless, it's clear that Obamacare's sustainability is in question.
Adding more fuel to the fire, 36% of respondents suggested that Obamacare will make their families' healthcare situation worse over the long run, while only 24% said they expected Obamacare to make it better. Once again, a large proportion of respondents (37%) didn't have an opinion one way or another.
Affordability is becoming an issue
Why are Americans' views toward Obamacare dampening? A lot of the concern can be tied to the first "A" in the ACA -- because it turns out Obamacare isn't very affordable for everyone.
When Obamacare became the health law of the land in 2014, it was designed to keep premium inflation to a minimum. The implementation of transparent online marketplace exchanges where consumers could make side-by-side comparisons, coupled with the individual mandate -- which requires everyone to have insurance or face a penalty come tax time -- was fully expected to provide downward pressure on insurance premiums. Unfortunately, this hasn't been the case.
One of the biggest Obamacare disappointments was the failure of the "risk corridor," a type of risk-pooling fund that collected income from overly profitable insurers and redistributed that income to insurers that suffered steep losses as a result of pricing their premiums too low. The problem is that there weren't many highly profitable insurers, so only $362 million of a requested $2.87 billion was paid out to money-losing insurers. This lack of financial protection wound up putting 16 of Obamacare's 23 approved healthcare cooperatives out of business. These co-ops were an attractive low-cost option for hundreds of thousands of Americans.
Making matters worse, excessive losses have encouraged three of the five national insurers to dramatically pare back their Obamacare offerings in 2017. UnitedHealth Group (NYSE:UNH) was the first, announcing that it would reduce its coverage to just three states in 2017 from 34 in 2016. Aetna (NYSE:AET) and Humana (NYSE:HUM) followed suit after the Justice Department nixed any chance the two had of merging. Humana is planning to stop coverage in nearly 90% of the counties where it currently offers coverage by next year. Meanwhile, Aetna plans to stop offering insurance plans in nearly 70% of the counties it currently covers. Declining competition in the marketplace will likely push insurance premiums higher.
Based on the dozen or so states that have so far approved insurers' rate hike requests for 2017, premiums will rise a weighted average of well over 10%. In Tennessee, residents will see their monthly premiums increase by a weighted average of 59%. Although persons receiving a premium subsidy could be shielded from the brunt of these increases, middle-class families could be hammered by premium inflation next year.
The cause of the finger pointing
However, Obamacare's woes may well be tied to its Shared Responsibility Payment, or SRP. The SRP is the penalty attached to the individual mandate for people who don't purchase insurance.
In 2014, when Obamacare was first rolled out, the SRP was the greater of $95 or 1% of a person's modified adjusted gross income (MAGI). Tax specialist H&R Block noted that based on the tax returns it processed, the average penalty paid was just $150. But the SRP jumped substantially in 2015 to the greater of $325 or 2% of MAGI, and once more in 2016 to the greater of $695 or 2.5% of MAGI. The Kaiser Family Foundation estimated that the average penalty in 2015 and 2016 would be $661 and $969, respectively.
Herein lies the problem: If the average penalty is below $,1000, then it's much cheaper to pay the SRP than to purchase insurance that you may not use often -- or at all. The lowest-cost bronze-tier plans across the country tend to run about $200 a month, or $2,400 a year.
The SRP is targeted at getting healthier young adults to enroll. Young adults are less likely to head to their doctor, meaning their premiums are usually pure profit for insurance companies. Young adults are especially important to the success of Obamacare, because the ACA no longer allows insurers to pick and choose whom they'll insure. This forces insurers to enroll sicker individuals who had previously been shut out of the system, pushing up medical expenses ratios.
The huge cost difference between the SRP and the lowest-cost bronze plan is not conducive to young-adult enrollment, perhaps dooming insurers to failure on Obamacare and threatening the health law's long-term sustainability.
One thing's for sure: Resolving Obamacare's issues will be a monumental task for whoever becomes the next president.