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Source: White House on Flickr.

It's nearly been two years since the Patient Protection and Affordable Care Act, better known as Obamacare, ushered in a new wave of healthcare reform and redefined how we purchase health insurance and receive medical care. Although reviews of the health law are mixed, the early enrollment numbers would appear to suggest that Obamacare is finding the mark.

Healthcare reform hits the mark, at a cost
According to the most recent update from the Centers for Medicare and Medicaid Services, as of the end of June some 9.95 million people were enrolled in Obamacare health plans (including yours truly), down from the roughly 11.7 million people who selected an Obamacare plan as of February 2015, when the enrollment period closed. Though down, the 9.95 million is still well ahead of the Department of Health and Human Services' projection of 9.1 million enrollees by year's end.

Additionally, we've witnessed a marked improvement in the percentage of Americans who lack health insurance. The Centers for Disease Control and Prevention's latest figures show that just 9.2% of the U.S. adult population, including Medicare enrollees, lacked health insurance coverage. It's the first time in history that the uninsured rate dipped into single-digits.

But headline numbers may not be telling the whole story. Millions of Obamacare enrollees found themselves displaced from a prior health plan and/or their primary care physician because of the broader minimum essential benefits profile required of health plans under Obamacare. Select physicians also refuse to take Obamacare insurance, likely due to the fear that they wouldn't be reimbursed adequately for services rendered (this is primarily a concern with patients covered by Medicaid).

In a way, you could say that Obamacare has been successful in lowering the uninsured rate, but at a cost to millions of other Americans.

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Source: Centers for Disease Control and Prevention. 

Healthcare reform: three ways to fix Obamacare
But could America's most sweeping healthcare reform law be improved? I believe so, and would suggest that three fixes be implemented to help Obamacare be more effective.

1. Increase the penalty associated with non-compliance to the individual mandate
One of the keys to making Obamacare a success over the long-term is its ability to draw in younger adults. Young adults are far less likely to go to the doctor or run up extensive medical bills, thus their premium payments are needed by insurers to help offset the costs of treating chronic and terminally ill individuals. With around 5% of the population making up nearly half of all medical costs in this country, and insurers no longer able to turn away consumers with pre-existing conditions, the importance of young adults is magnified now more than ever.

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Source: Flickr user Steve Wilson.

The tool presented by the most recent healthcare reform efforts to persuade young adults to enroll is the individual mandate. The individual mandate is the actionable component of the PPACA that essentially states an individual needs to purchase health insurance and remain insured for nine out of 12 months during the calendar year or face a penalty.

In 2014, the first year Obamacare was in effect, this penalty was the greater of $95 or 1% of an individuals' modified adjusted gross income, or MAGI. This year, the penalty rises to the greater of $325 or 2% of MAGI. Next year, it'll be the greater of $695 or 2.5% of MAGI. Beginning in 2017 and every year thereafter it'll rise in step with the inflation rate.

Now here's the problem: even when the penalty rates rise next year, a non-compliant individual is likely only going to be on the hook for between $695 on the low end and perhaps $1,500 to $2,000 on the high-end, assuming they don't qualify for an exemption. This probably encompasses almost all of the individual mandate violators by my best guess. However, in 2015, according to Bloomberg, the average price for a silver plan throughout the country was $3,700. Sure, an individual could cut their costs by purchasing a bronze plan, but the penalty is often cheaper than buying a plan (it's a different ballgame for people who are eligible for subsidies).

The fix is simple: bring the cost of the penalty up to (or very near to) the cost of the lowest-cost bronze plan. If there's minimal cost difference between remaining insured or uninsured in all cases, and consumers could have some peace of mind by being insured, as well as potentially benefit from the tax deductions associated with paying healthcare premiums, then young adults will be more likely to enroll for health insurance than pay the penalty.

2. Adjust how Advanced Premium Tax Credits are calculated
The second step to revamping our recent healthcare reform law is to make adjustments to how the Advanced Premium Tax Credit, or APTC, is calculated.

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Source: Pictures of Money via Flickr.

The APTC is nothing more than a subsidy paid to individuals making more than 100% of the federal poverty level but less than 400% of FPL. This works out to about $11,770 on the low end, and $47,080 on the high end. If your income falls within this range, you may qualify for some financial assistance in paying your health insurance premiums.

The APTC is paid in two ways: either as a prepayment to your insurer (which is the route a majority of consumers take), or as a lump-sum payment to the consumer, who then is responsible for paying their insurer throughout the year. Unfortunately, the APTC has a big flaw that we learned about this past tax season. Basically, that the American worker isn't a very good estimator of what he or she expects to earn in the upcoming year.

You see, the APTC is divvied out based on a worker's expected income in the upcoming year. If a worker makes less than they estimated 10-13 months prior when applying for the APTC, then they could be due a bigger refund come tax time. However, the opposite is also true of workers who underestimated their yearly income and received more in subsidies than they should have. More than 3 million people, according to H&R Block, wound up having to pay back some of their APTCs due to underestimating their full-year income. 

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Source: H&R Block.

Is this the fault of the worker? Perhaps, but only partially -- it can be nearly impossible for a worker to predict their income if they work on an hourly wage, or if they have multiple part-time jobs. With the exception of a salaried individual, variables such as hours worked or bonuses can cause incomes to vary on an annual basis. 

How can this be fixed? It's actually painfully simple: Congress should consider basing the APTC on last year's wages. If a worker wants to update their APTC with their state's health services office, then that would be their responsibility. But basing the credit off of a prior year's wagescould eliminate a lot of the income underestimations we witnessed in 2014.

3. Eliminate the Medicaid Gap with the use of waivers
Lastly, our nation's most sweeping healthcare reform law needs to address the Medicaid coverage gap, which is keeping millions of low-income Americans from gaining access to health insurance.

Based on a ruling from the Supreme Court, every state has the right to decide whether it will use federal money to opt into, or out of, expanding the Medicaid program in their state to cover individuals up to 138% of FPL (currently Medicaid covers individuals earning less than 100% FPL per year). The advantage of opting in is that the federal government initially supplies 100% of the funds needed to cover the expansion of Medicaid services to eligible low-income consumers. The downside is that beginning in 2017 the federal government will start paring back its assistance, eventually requiring the states to be responsible for 10% of the cost of the Medicaid expansion. As of now, 20 states have chosen not to participate, often citing the long-term costs of expansion as an obstacle.

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Source: Flickr user LaDawna Howard.

Herein lies the problem: in states that have chosen not to take federal money and expand their Medicaid programs there are millions of consumers who make too much to qualify for traditional Medicaid, but not enough to qualify for Obamacare subsidies. They are left without a means to access affordable health insurance.

The solution here is much trickier, because once the Supreme Court ruled that individual states could choose their own path on Medicaid expansion it removed whatever chance the federal government had of coercing states into joining. The answer might be found in implementing state waivers, which would allow states to access federal funds which can be used to provide health insurance to low-income individuals without necessarily having the strict one-size-fits-all guidelines as seen in the Medicaid program expansion in about two dozen of the 30 states. If states such as Texas and Florida were able to use waiver amendments to establish cost-sharing reductions or health savings accounts for low-income beneficiaries, it might encourage many of the holdout states to join.

Obamacare is definitely a work in progress, but I suspect a few changes to the broadest healthcare reform we've witnessed in decades could make a substantially positive impact.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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