One of the presidential campaign’s most controversial advertisements came from President Obama’s supporters. It was the one about the steelworker who lost his job, after Bain Capital took over, and whose wife eventually died from cancer. As the ad explained, when the steelworker lost his job, he lost his health insurance, too. Critics protested that ad was unfair, because it supposedly implied that Bain, and Mitt Romney, was responsible for the woman’s death.
That part didn’t really bother me. I was among those who thought the ad was making a sound argument about policy—that Romney, by opposing universal health care, opposed efforts to make sure all Americans could get insurance. When people don’t have health insurance, they frequently don’t get health care. Sometimes they even die.
But, as I also noted at the time, the ad raised a legitimate, if narrower, question. If Obamacare had been in place, back when the steelworker lost his job, would he have been able to get insurance for his wife? We finally have an answer: Probably not. It turns out they would have fallen into a group of people whom Obamacare will not be able to help. The group is relatively small, particularly relative to the tens of millions of Americans that the law will help. But their situation is a reminder that plenty of unfinished business will remain after January 2014, when most of Obamacare takes full effect.
The reason we know all this now, but didn’t before, is a set of regulatory rulings the Obama Administration issued last week—one of many dozen decisions the administration will be making between now and the beginning of next year.1 These particular rulings affect people whose employers offer insurance. That’s how most working-age people get insurance today and, as you may know, the architects of Obamacare have tried to keep it that way.
But accomplishing that goal turns out to be no small feat. It entails imposing requirements or penalties both on employers (so that they provide good insurance) and employees (so that they will buy the insurance when it is available to them). It also entails creating an alternative system for buying insurance—a system that provides good coverage for people who truly need it, but without somehow encouraging employers to drop what they are already offering.2
Yes, it’s a big, complicated mess. Obamacare’s solution is to create new marketplaces, where people can get subsidies that make insurance more affordable, and then to limit access to those subsidies. If your employer offers you affordable coverage, defined by the law as premiums that cost less than 9.5 percent if income, then you can’t get the extra financial help. The logic behind this was that the subsidies are roughly equivalent to the employer insurance contribution—the portion of your premiums that your employer pays. And the system, however jerry-rigged, should work pretty well in most cases.
But suppose you work in a relatively low-paying job and you have dependents—a spouse and maybe some kids. And suppose that the insurance that your employer offers is a lot more expensive if you add the dependents. That’s how employer policies usually work—adding people jacks up the premiums—and in your case it means the premiums go from, say, 8 percent of your income to 12 percent. Should you have access to the subsidies? This was essentially the situation that former steelworker faced: He eventually got a new job, but it paid a lot less and, as a result, family coverage suddenly became a lot more expensive relative to his income.
One solution would have been to make dependents in such situations—in other words, people like the steelworker’s wife—eligible for subsidies. The Government Accounting Office actually recommended that the administration consider this option.3 But critics, inside and outside the administration, raised a series of legal and policy objections.4 Cost was also an issue: One analysis suggested that allowing depends to get subsidized coverage could end up costing the government tens of billions of dollars a year. That analysis was almost surely wrong, by an order of magnitude. But widening eligibility for the subsidies could easily have added costs of a few billion dollars a year.5 And these days, finding a few billion dollars in the budget is no easy thing.
Apparently those arguments were enough to persuade the administration not to make these dependents eligible for subsidies. Instead, it simply declared that they will be exempt from the law’s requirement to get insurance. As a result, people who end up in situations like the steelworker’s late wife will continue to do what they do now—they’ll go ahead and pay for the employer insurance, even though it’s very expensive, or they’ll remain uninsured. They won’t be worse off than they are today, but they won’t be better off, either. That’s missed opportunity to help people in need—including, according to GAO estimates, up to a half million children who still won’t have health insurance.
My favorite quote about the Affordable Care Act comes from Tom Harkin, the retiring senator who is chairman of the Health, Education, Labor and Pensions Committee. When Congress finally passed the law, Harkin described it as a “starter home”—with a solid foundation, a sturdy roof, and room for expansion. Last week’s decision is a reminder of just how much expansion will need to be done.
If you a full explanation of what the administration decided and what it will mean, read Timothy Jost at the Health Affairs blog. Jost, a law professor at Washington and Lee University, knows as much about the statutory language of Obamacare as anybody on the planet. Health Affairs is the gold-standard journal for health care policy. If you care about this stuff, you should be following them both.
You may be shaking your head, thinking things would be a lot easier if we had just blown up the whole health care system, started over, and created a single-payer program like Medicare for everybody. You’re right! But that was likely not possible politically, in part because people who already have decent, job-based insurance freak out when they think somebody is going to take it away.
Judith Solomon, of the Center on Budget and Policy Priorities, explained the logic behind this idea in a blog item at the Center’s website.
Lawyers at the Treasury Department argued that the statue, properly interpreted, didn’t justify the liberal option. Other critics warned it might encourage more employers to drop coverage.
The best analysis I've seen comes from scholars at the Center for Labor Research and Education at the University of California-Berkeley.