The past five months have been nothing short of tumultuous for the Affordable Care Act (ACA), which most Americans probably know best as Obamacare. The health law of the land that was signed into law by Barack Obama on March 23, 2010, completely changed the way consumers shopped for and purchased health insurance, and in the process it wound up lowering the uninsured rate by approximately 7 full percentage points, according to data from the Centers for Disease Control and Prevention.
The colossal failure of the American Health Care Act
Nonetheless, the election of Donald Trump as the 45th president of the United States, and the fact that Republicans maintained their majority in both houses of Congress, all but assured the imminent demise of Obamacare. After all, Republicans in the House had attempted (and failed) to repeal Obamacare on more than 60 occasions while Obama was president.
But the eulogies for Obamacare proved a tad premature. Despite congressional Republicans introducing a replacement bill for Obamacare four weeks ago, known as the American Health Care Act (AHCA), it failed to garner enough support to even be put to vote.
The AHCA would have done away with Obamacare's individual and employer mandates, the penalties attached for not purchasing health insurance, and its subsidies (the Advanced Premium Tax Credit, which lowers monthly premiums, and cost-sharing reductions, which make doctor visits more affordable by lowering copays, coinsurance, and deductibles). At the same time, the AHCA allowed older adults to be charged up to 67% more than under the ACA for their monthly premiums compared to young adults, it would have replaced income-based subsidies with age-based tax credits, and it would have seriously corralled Medicaid funding by allocating money to states on a per-capita basis.
Today, the AHCA stands dead as a doornail, meaning Obamacare will remain the law of the land for at least the immediate future.
Obamacare is staying, but millions could still lose coverage by 2019
However, keeping Obamacare in place doesn't mean its numerous problems will magically disappear, or that the millions of current enrollees will be able to keep their insurance. It's no secret that the Trump administration wants Obamacare repealed, so there's going to be little incentive to help the already struggling program, which could mean coverage losses for millions of Americans in the years to come.
Arguably the biggest coverage loss could come from litigation began by House Republicans all the way back in 2014. At the time, House Republicans sued then Secretary of the Department of Health and Human Services (HHS), Sylvia Burwell, over the apportioning of funds to cover cost-sharing reductions, or CSRs. In order to qualify for CSRs, individuals and families need to earn between 100% and 250% of the federal poverty level, and they need to purchase a silver-level plan. Consumers who purchase cheaper bronze plans aren't eligible for CSRs.
As the suit alleged, Congress is supposed to apportion and authorize funding for CSRs. Since Congress never did this, House Republicans have argued that the CSR disbursements aren't legitimate. In May 2016, District of Columbia Judge Rosemary Collyer agreed with the House Republicans, but stayed her order due to the (correct) belief that the Obama administration would immediately appeal the findings. This case was never settled prior to the transition to the Trump administration, meaning at the moment Republicans are essentially suing themselves now that new appointee Tom Price is heading the HHS.
It's unclear what the Trump administration will do at this point. Initial perceptions are that the Trump administration will approve CSR payments, which are expected to total between $9 billion and $11 billion, for 2018. Beyond that, however, the Trump administration may choose to drop the appeal and let CSR funding lapse. If this happens, millions of low-income Americans would probably be unable to afford a doctor's visit, making their coverage essentially useless.
According to data from the HHS, of the 12.22 million people who enrolled in an Obamacare marketplace plan as of Jan. 31, 2017, 58%, or 7.05 million, qualified with CSRs. This means more than seven million people could lose this critical coverage by as soon as 2019.
But wait -- there's more
And that's not the end of it.
On top of CSR coverage being at risk, two other factors are at play that could cause an Obamacare exodus.
First, little is being done to make Obamacare more appealing to insurers. Young adult enrollment has remained subpar, and as a result, insurers have been losing money hand-over-fist on their individual ACA plans. A lot of this can probably be blamed on the Shared Responsibility Payment (SRP) -- the penalty consumers pay for not buying health insurance -- being nowhere near the annual cost of a bronze or silver plan, which has coerced many young adults to remain uninsured, providing no benefit to insurer risk pools.
As a result, three of the five biggest insurers have significantly reduced their coverage in 2017, and another has threatened to in 2018 if things don't improve. Fewer insurers competing probably means higher premium prices and less choice for the consumer, which could drive more people to remain on the sidelines.
Secondly, we're at the point where the federal government will begin paring back its federal funding for Medicaid expansion in the 31 states that chose to accept federal funds and expand Medicaid to individuals and families earning up to 138% of the federal poverty level. In 2016, the federal government covered 100% of the funding for Medicaid expansion. By 2020, it'll only cover 90%. While state budgets have improved in recent years, we're talking about potentially billions in extra funding they're going to have to come up with. This could be an incredible strain on some states, and we could see reimbursements for Medicaid fall, or people dropped from coverage altogether.
Obamacare may live on, but that doesn't mean millions aren't at risk of losing their health insurance coverage over the next couple of years.
The Motley Fool has a disclosure policy.