When looking back, I often find it amazing how quickly a year can whisk by. But if you think the previous 12 months went by in the blink of an eye, you might be amazed at how quickly the three-month enrollment period for the Affordable Care Act, better known as Obamacare, can come and go.
The open enrollment period for Obamacare kicked off 15 days earlier this year compared to last year, which was delayed on account of the midterm elections. Since Nov. 1, 2015, Obamacare enrollment via HealthCare.gov, the federally run exchange that covers 38 states, has accounted for more than 8.5 million plan selections (data through Dec. 26, 2015). Based on initial enrollment, the program looks to be well on its way to topping last year's 12 million plan selection benchmark.
Two important upcoming dates include Jan. 15, the last day to enroll for coverage to start at the beginning of February, and Jan. 31, which is the last day of open enrollment. Consumers have proven to be notorious procrastinators before, so this latter date could yield another surge in plan selections.
However, Obamacare is also facing a slew of unanswered question in 2016. Chances are that you'll be talking about one, or more, of these Obamacare stories at some point throughout the year.
Perhaps the biggest story of 2016 concerning Obamacare is the degree to which premium prices are rising. The Great Recession wasn't welcomed by families and businesses, but one of the best outcomes of the recession was the pressure it placed on premium prices. Nearly seven years removed from the end of the recession, insurers are once again finding their stride, and their pricing power.
Arguably one of the biggest faults with Obamacare is that it doesn't do very much to encourage insurers to curb premium cost inflation. The premise had been that creating transparent marketplaces that allowed side-by-side comparisons of health plans would create competition and keep premium inflation relatively low. Additionally, the idea that insurers had to submit premium rate adjustments of 10% or more to their states' Insurance Commissioners with justification was designed to limit big premium hikes.
What we're actually seeing may be the complete opposite. Instead of growing competition, we've seen the closure of more than half of Obamacare's healthcare cooperatives due to losses, and UnitedHealth Group, the nation's largest insurer, has threatened to completely pull its plans off marketplace exchanges by 2017 as losses mount. Furthermore, while some Insurance Commissioners have been able to haggle with insurers on premium increases, they ultimately hold no power to force insurers to lower their rate requests if there's justification for an increase. This is why Kaiser Family Foundation predicted a 10.1% average premium price increase in 2016 across the country.
Premium inflation could be a hotly debated and somewhat sore subject for consumers in 2016.
On the other end of the spectrum, the shared responsibility payment (SRP) will be the big discussion among persons who've decided to remain uninsured through 2016.
The individual mandate is the actionable component of the ACA, which requires an individual to purchase health insurance or face a penalty come tax time. The good news for some people is there are ways to be exempted from paying the penalty: if you qualify as low-income, or for one of more than a dozen economic hardships, you may be able to avoid paying the penalty despite not purchasing insurance. If, however, you don't qualify for an exemption, the shared responsibility payment could have you opening your wallet wider than ever when you file your 2016 tax return.
When Obamacare was officially implemented in 2014, the SRP was the greater of $95 or 1% of a person's modified adjusted gross income. The initial year wasn't designed to financially sting consumers, so much as to make them aware that a new law of the land existed, and that they need to purchase health insurance moving forward. Nonetheless, consumers were surprised to find that the average SRP for 2014 totaled $190, or double the minimum penalty. In 2015, the SRP rose to the greater of $325 or 2% of MAGI, and in the current year it'll catapult once more to the greater of $695 or 2.5% of MAGI. According to estimates from the Kaiser Family Foundation, the average SRP in 2015 should be $661, and a whopping $969 in 2016.
The SRP is one of the most universally disliked aspects of Obamacare, so seeing these penalties rise at such a meteoric pace is bound to rile up consumers. What'll be worth noting is whether or not the SRP actually encourages people to enroll -- specifically young adults whose premium payments and generally low medical expenses are needed to help offset the costs of sicker and older patients -- or if rising premium prices and/or the penalty prove to be too much of a financial burden to bear.
One final note of good news: beginning in 2017, the SRP will increase in step with the rate of inflation, so no more gigantic leaps in the minimum penalty rates.
Medical device excise tax
You may also wind up talking about the medical device excise tax in 2016 -- or, more specifically, the lack of one. The passage of the 2016 federal budget came with a number of concessions from both political parties, one of which was the two-year suspension of the medical device excise tax.
The medical device excise tax went into effect in 2013, and it essentially taxes qualifying medical devices manufactured in the U.S. at a rate of 2.3% of the sale price. The amount of revenue raised by the medical device excise tax is pretty negligible when compared to the Congressional Budget Office's projected decade-long cost of Obamacare (around 2%), but it was nonetheless viewed as an added source of revenue to help pay for the program's many costs.
The problem with the medical device excise tax? Medical device makers claim it stymies innovation. Since the tax is only applied on devices manufactured in the U.S., some device makers simply threatened to take jobs and equipment overseas. Stryker, for instance, let 5% of its workforce go in 2012 in order to save $100 million annually. Its reasoning? It pointed directly at higher costs tied to the medical device excise tax.
The good news for device makers is that the tax has been temporarily shelved through 2017. What you'll likely be talking about is whether or not that means more jobs and investments from device makers in the U.S. as opposed to overseas markets. If the tax is permanently removed from the picture it could spur investment, which would be viewed positively; but a lot will likely depend on the results of the 2016 elections and the makeup of Congress.
2016 promises to be another highly eventful year for Obamacare, and whether you're for or against this law, there will be a lot to talk about.
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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