With 2015 now in the books, we can take a look back at some of the successes and failures during the past year for what's arguably the most controversial law to come out of President Barack Obama's presidency: the Patient Protection and Affordable Care Act.
Know best by its informal moniker, Obamacare is a law that's generally disliked. Despite being signed into law all the way back in March 2010, you can count on two hands how many months respondents have had a "favorable" view of Obamacare in nearly six years based on Kaiser Family Foundation's Health Tracking Poll. At the heart of the disdain toward Obamacare is the individual-mandate penalty, which requires individuals to purchase health insurance, or face a penalty when filing their tax returns.
How did Obamacare fare in 2015? Let's briefly look at the positive and negatives, and where it stands heading into the New Year.
Obamacare's shining moments
Starting with the basics, Obamacare increased its enrollment by a substantial amount in 2015 from the inaugural year of enrollment (2014).
If you recall, in 2014, Obamacare signed up more than 8 million people during the six-month open-enrollment period -- a period that was marred by technical glitches galore. However, attrition due to lack of payment and citizenship issues, along with a miscalculation of enrollees -- approximately 400,000 dental enrollments had incorrectly been accounted for as healthcare enrollments -- led to a total enrollment of 6.7 million by the time the second open-enrollment period kicked off in mid-November 2014.
But 2015 witnessed a large uptick in total enrollment. Inclusive of HealthCare.gov, the federal exchange responsible for 38 states, and the one dozen states operating their own exchange, approximately 12 million people selected a plan in the second open enrollment period, which covered calendar year 2015. After accounting for the expected attrition, Obamacare enrollment still stood at 9.9 million as of the end of June 2015 per the Department of Health and Human Services. All told, Obamacare enrollment grew by nearly 50% in its second year.
Obamacare also survived another challenge that made it to the Supreme Court. The case, King vs. Burwell, sought to halt the ability of the federal government to pay subsidies to consumers in the more than three dozen states covered by HealthCare.gov. The language of the law suggests that only states are allowed to divvy out subsidies, and because the federal government isn't a "state," the prosecution looked to halt allegedly illegal subsidy payments.
Ultimately, the Supreme Court voted six-to-three in favor of the defense, with Chief Justice John Roberts suggesting that the ruling was designed to support the PPACA's efforts to improve health-insurance markets. The move saved 38 states from frantically having to create their own marketplace exchanges, and kept the program very much alive and well.
Of course, Obamacare also ushered in its fair share of disappointments in 2015 -- perhaps the biggest of which was the announced closure of more than half of the 23 approved healthcare cooperatives due to lack of funding to the risk corridor.
The risk corridor is a failsafe for Obamacare that takes excess profits from insurers that are doing well, and gives it to insurers losing excessive amounts of money on Obamacare's marketplace exchanges. Unfortunately, just 12% of the $2.87 billion in requested risk-corridor funds was given to insurers heading into the 2016 open-enrollment period which began on Nov. 1, 2015. With a funding shortfall imminent, many low-cost health-plan providers closed their doors, exposing more than 800,000 consumers to the process of finding a new health plan -- and potentially primary-care physician -- once again in the ongoing enrollment period.
Another disappointment came in the form of young adult enrollment, which is still lagging relative to what insurers would like to see. Young adults are critical to Obamacare because they're often healthy and less likely to go to the doctor. Thus, premium payments from young adults help to counteract the high costs associated with treating terminally ill and elderly patients. Without substantial enrollment in the age 34 and under category, insurers have struggled to remain profitable on Obamacare's exchanges.
Case in point: UnitedHealth Group (NYSE:UNH) recently lowered its full-year profit forecast for 2015 due to losses suffered from its marketplace plans. UnitedHealth doesn't view these initial problems as hiccups, either. The nation's largest health insurer sees systemic problems with Obamacare, such as the ease of switching health plans for consumers. It has halted all advertising for calendar year 2016 and may wind up pulling out of Obamacare altogether by 2017.
What's next for Obamacare?
2015 was exactly what you'd expect from a law that has essentially split the nation: an up-and-down year. But what matters most is where Obamacare is headed next. Here are some key issues to take note of in 2016.
First, pay attention to enrollment from young adults in 2016. We've already seen an uptick in young adult enrollment through the first seven weeks of the third open-enrollment period, and it's my contention that the increase in the shared responsibility payment is what's driving this enrollment surge.
In each of the first three years of Obamacare, the penalty for not buying health insurance has increased. In 2014, it was the greater of $95 or 1% of an individual's modified adjusted gross income (MAGI). The following year, it rose to the greater of $325 or 2% of MAGI. This year, it jumps once more to the greater of $695 or 2.5% of MAGI.
According to H&R Block, the average penalty paid in 2014 was $190, and Kaiser Family Foundation estimates that the average shared responsibility payment will rise to $661 in 2015, and $969 in 2016. That's a big enough jump to certainly get holdouts to consider buying health insurance -- insurance that may not only protect someone against a financially catastrophic unexpected illness, but which may also qualify for a tax deduction in certain instances.
Secondly, we should be paying close attention to how consumers react to rising premium prices. The absence of 12 Obamacare co-ops, coupled with newer entrants coming to the realization that their premiums were simply too low, has pushed premium prices around the country up at the quickest pace we've witnessed in about a decade. The transparency of Obamacare's exchanges was expected to promote competition, but with some insurers struggling and closing their doors -- or threatening to close their doors -- on Obamacare, higher prices could make the Affordable Care Act quite unaffordable.
Finally, keep your eyes peeled on the 2016 elections. As long as President Obama remains in the oval office, you can count on few changes to the PPACA. However, the election of a new president, and a possible change to the makeup of Congress, could dramatically alter Obamacare as we know it.
For instance, every Republican presidential candidate wants to repeal Obamacare as we now know it, and institute a separate health program. The elections could ultimately seal Obamacare's fate, or it may further strengthen the program. We'll know more in about 10 more months.
In short, it promises to be another exciting, and controversial, year for Obamacare.