Law Review: Too early for prognosis on Affordable Care Act's effects

Posted: February 20, 2014

As millions of policyholders learned late last year that their health insurance was being canceled, recriminations began to fly.

Who was to blame? Was it incompetent, devious Democrats intent on soaking the rich, or menacing Republican saboteurs taking time out from their relentless war on women to take away health care from the poor?

Then a new and seemingly soothing narrative emerged.

It was sagely suggested that policymakers always understood there would be winners and losers, and anyway, this was all in the service of making health care better in America.

Set aside for the moment that there was never any talk of winners and losers during the legislative debates of 2009 and 2010 on the Affordable Care Act. The losers only learned of their hard-luck status after the bill was signed. You could have read millions of words about Obamacare in the mainstream press from the time the legislative debate began until the day, March 23, 2010, that President Obama signed it into law and never really known much useful about how it would work.

Certainly there never was any hint of the looming website fiasco or the mass policy cancellations that followed.

Now, of course, we know how little is actually known.

One unassailable lesson from the tumultuous onset of Obama's health-insurance law is that its ultimate shape and magnitude remain hazy images on a distant horizon. This is a vast restructuring of the nation's health-care financing scheme, and a project that, if continued to completion, might take many years. Claims that it has flatly failed, or has turned the corner and is on its way to brilliant success, are suspect on their face.

Some or all of it may yet work, and the many millions of people in the United States who once had little or no health care may one day be brought into a system whose high costs were beyond their means. What is not knowable is who is going to pay for that, and how much.

It is the slow accretion of details as the act is implemented that is filling in blanks, and few are in a better position to see how this is playing out than the lawyers advising big companies and trade unions on how to comply with law.

Some lawyers thought at the outset that many of their corporate clients would rush to cancel coverage because of the way incentives were lined up under the act. The ACA mandates that employers who choose not to provide health insurance for their workers are subject to a penalty of $3,000 per employee, much less than the cost of family coverage per employee at $15,000 and up.

But Andy R. Anderson, a partner in the employee benefits and executive compensation practice at the Philadelphia firm of Morgan Lewis & Bockius L.L.P., says there is no sign large employers are canceling plans for full-time employees. It turns out that health insurance is viewed by most employees as part of the compensation package. Cancel their coverage, and they will head to the employer down the road.

For some part-time workers, it is a different story. Some companies, such as Target, are canceling coverage. But Anderson said that most of these part-time workers are likely to come out ahead if they obtain coverage through the health-insurance exchanges set up under the act, because the insurance likely will be better, and - with subsidies - cheaper.

So, about those winners and losers.

As if the website problems were not enough, the political uproar over Obamacare only intensified late in 2013 as millions of individual policyholders learned that their insurance was being canceled because their plans did not meet minimum standards set by the act.

A similar wave of cancellations hit small businesses. Mark Pauly, a professor of health-care management at the University of Pennsylvania who has studied health-insurance costs following enactment of the act, says many individuals and small-group plans are finding that when they renew, their rates are going up to help offset the costs of the previously uninsured.

Many of those formerly uninsured are older, or have chronic conditions and pose higher risks. The costs of insuring them are pushing up rates for the individuals and small groups that are now part of the same risk pool.

Pauly says he supports the ACA because it seeks to solve America's most pernicious health-care problem: the nation's millions of uninsured. But he grants that its impact on rates and the cross-subsidies - conservatives would call this wealth redistribution - never were fully debated before Congress passed the law.

Pauly says the big unknowable is, who is purchasing insurance through the digital marketplaces? There simply are no reliable data on whether the millions who have enrolled are largely people who had been insured but whose policies were canceled, or people getting insurance for the first time. Nor are there crucial data on incomes, which determine taxpayer-financed subsidies, or their health conditions.

Until that information emerges, expect more debate by dueling anecdotes.

215-854-5957 @cmondics


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