For a little more than a year now the Patient Protection and Affordable Care Act, which you probably know as Obamacare, has been the law of the land. Designed to reduce the number of uninsured in America and spread the high costs of medical care across a greater percentage of the U.S. population, Obamacare's long-term goal is to help slow the rate of medical cost inflation.
It'll be years before we have some concrete evidence on whether or not the health reform law is effectively controlling prices. But, one thing is for certain: since day one this has been a generally unpopular law.
Sorry Obamacare, few people like you!
According to the Kaiser Family Foundation's Health Tracking Poll, which takes a regular look into the public's opinion of Obamacare as a whole, as of Dec. 2014 46% of Americans shared an unfavorable view of the ACA, compared to just 41% who had a favorable view of the law. In fact, there have been just a handful of months over the nearly five years since the act was signed into law where the favorable view surpassed the unfavorable.
Why don't people like Obamacare? That's up to a lot of interpretation, but previous studies on the matter have come to a few conclusions.
A minority of people (mostly healthier young adults) feel invincible and believe that being required to purchase health insurance isn't very fair since they wouldn't be visiting a doctor regularly to begin with. For others it has nothing to do with invincibility, and is instead a reaction of disdain to the individual mandate -- the actionable component of Obamacare that requires people to purchase health insurance or face a penalty.
However, the majority of the unfavorable views still comes from the pricing of Obamacare. For those opposed to the law, their biggest objection remains affording health insurance. Even if consumers can afford the premium payments, there are no guarantees that they'll have enough cash left over to cover the copays and deductibles associated with actually going to the doctor.
Despite divided public opinion on the individual mandate and Obamacare as a whole, Republican leaders in the Senate have a very clear mission in mind in 2015: repeal the individual mandate.
Lawmakers look to repeal this critical component of Obamacare
This past Wednesday, Senators Orrin Hatch and Lamar Alexander, backed by 20 Republican co-sponsors, introduced the American Liberty Restoration Act, which is designed to repeal the individual mandate. It marks the first time that legislation to remove the individual mandate has been proposed in the Senate (remember, Republicans just gained control of the Senate in this latest election).
"Why is the individual mandate so important?" you ask? Aside from providing a foundation to encourage all consumers to sign up for health insurance, it's particularly critical in order to keep younger adults enrolled in the program.
You see, young adults are generally healthier and are much less likely to go to the doctor than the elderly. Therefore their premium payments are used by insurance companies to help offset the high cost of treating terminally ill patients and the elderly. The individual mandate says that if these young adults choose not to enroll in health insurance, and they don't meet one of the individual mandate's nearly one dozen exemptions, they'll be on the line for a penalty that's the greater of $325 or 2% of their modified adjusted gross income in 2015. That's up from the greater of $95 or 1% of their modified AGI in 2014.
Without the individual mandate in place, and assuming young adults aren't coerced by the potential for a subsidy, we could see very few young adults enrolled in Obamacare. That would be a devastating outcome for the law and could result in considerable price hikes for those who remain enrolled.
This is the repeal you should be more concerned about
All told, I wouldn't be too concerned about lawmakers' efforts to repeal the individual mandate. There are a number of hurdles that Senate Republicans would need to overcome in order to strike the individual mandate from Obamacare, including getting backing from Senate Democrats, as well as the support of President Obama, who has made it clear that he won't be striking down any components of the ACA.
Instead, the greater repeal concern lies with the upcoming Supreme Court case slated to be reviewed in June regarding whether or not the federal government's health exchange, Healthcare.gov, can continue to hand out subsidies to some nearly 6 million eligible enrollees. The wording in the ACA notes that "states" can pay out subsidies to qualified individuals but makes no mention of a federally run exchange operating on behalf of some three-dozen states.
If these subsidies were determined by the nation's highest court to be illegal, then Obamacare's future, at least in the near-term, would very much be in doubt. These three dozen states would have to scramble to set up health exchanges of their own, and who's to tell how quickly that would happen in select states with governors that have major political differences with President Obama.
The gray cloud over insurers and hospital operators
Insurers and hospitals operators are the two industries with the most to lose from efforts to repeal select aspects of Obamacare. Despite some reluctance by businesses to accept Obamacare when it first came out, both insurers and hospital operators have geared their businesses to work in sync with Obamacare. Scaling back the individual mandate or subsidies now could have devastating effects on these businesses.
Molina Healthcare (NYSE:MOH) and smaller insurers that tend to focus on a handful of states could be among the few that won't bear the brunt of these concerns. Molina primarily operates in states that run their own health exchanges, where subsidy repeals aren't in question. It also didn't exactly light things up, with fewer than 18,000 Obamacare enrollees in its first year on the individual exchanges in 2014. With Molina still focused on government-sponsored enrollees, I don't expect it will suffer much, if at all, if things get turbulent this summer.
But insurers such as Aetna (NYSE: AET), or hospital providers like Tenet Healthcare (NYSE:THC), which operate in a majority of the three-dozen states supported by Healthcare.gov, could be at risk of seeing a negative impact on their bottom lines if the Supreme Court rules in favor of the plaintiffs in June. A majority of consumers (87%) proved eligible for subsidies last year to the tune of $264 in savings per month for the average Healthcare.gov consumer. Remove those savings, and the chances of a person being able to afford a comparable plan go out the window in a vast number of instances. By a similar token, hospitals could see a surge in uninsured patients, which in turn may cause them to write off a higher percentage of their revenue as uncollectable.
It's hard to believe that 2015 could hold more drama than 2014 when it comes to Obamacare, but the number of uncertainties that continue to arise just might make this belief a reality.