The most important thing the Affordable Care Act does is create a health coverage guarantee for all Americans. By the time the ACA passed, all other advanced countries around the world had already established similar guarantees. But most of them did so pretty straightforwardly: by taxing citizens and then paying their medical bills. Obamacare, by contrast, establishes the guarantee by fiat, and then makes it a sustainable promise by compelling people to purchase one of many private insurance options using carrots (subsidies) and sticks (the penalty for lacking coverage).
Needless to say, this is a much more complex system than single payer. But it was the system Democrats settled upon, in part because it was theoretically less disruptive to existing insurance systems than other reforms, and in part because they mistakenly took Republicans at their word that it was the kind of universal health care system they would support. Massive industry opposition to single payer played a big role, too.
The system is working today. But, as we’re about to see—and as many liberals warned—there are inherent problems with its architecture, beyond the fact that most people don’t equate guaranteed health care with being required to buy insurance from Aetna or one of its competitors.
If you enrolled in a health plan through an Obamacare exchange in the past 10 months, you could be forgiven for assuming that your work was mostly done—that if your income didn’t rise significantly, and you were satisfied with your plan, you were good to go until, say, your employment or marital status changed.
But you actually have to re-enroll every year. And there’s no guarantee that a) your existing plan will still be available, b) its premiums won’t increase, or c) the government’s contribution to your premium won’t fall.
Items a) and b) will be familiar to anyone who’s purchased insurance before. Item c) is an artifact of the formula the government uses to calculate subsidy values. Congress understandably didn’t want to structure premium assistance in a way that encouraged people to buy the most expensive plans on offer. So they tied it to the cost of something less prone to inflation, called the “benchmark plan,” which is the second-lowest cost silver-plated available in a particular exchange. If the benchmark plan doesn’t change then neither do the relative subsidy values. But if the law works as expected, and lower-cost plans become available on the market, then the value of the subsidy will decrease relative to the cost of your plan.
That means beneficiaries who do the easy thing and re-enroll automatically are likely to discover at some point in 2015 that they’re on the hook for more money than they were this year. Others, who decide to initiate the Healthcare.gov process all over again, might find cheaper plans, but those plans might not carry the same cost-sharing arrangements or provider networks that their current plans do.
This is not a glitch, like the Healthcare.gov software failure or the provision of the law that unintentionally withholds subsidies from the families of people whose employers offer them, and only them, affordable coverage. It’s a natural outgrowth of the scheme. It’s one of the many concessions liberals made to conservative Democrats and that conservative Democrats in turn made in a doomed attempt to entice Republicans to support the ACA and avoid the smear that they supported a government takeover of health care.
It’s a relic of the ACA’s conservative design—the same template Republicans still envision for Medicare. When they inevitably use tales of frustration over this issue to attack Obamacare, it will be disingenuous. But that will be little solace to the administration and the Democrats who voted for the law. And in the short term there isn’t much they can do about it.
In the longer term, they can smooth things out by, for instance, making a public option that uses Medicare’s purchasing power available on every exchange, and setting it as the benchmark plan. That would hold down premiums within the system overall, and offer people who choose the public option an assurance that their out-of-pocket costs won’t bounce around as arbitrarily year-to-year.
It would also reorient the political fight over the Affordable Care Act in interesting ways. As things currently stand, the same people who want to hand Medicare over to Aetna love pointing out that the ACA has locked Democrats and insurers into a corporatist alliance of necessity. That’s disingenuous, too. But it’s basically true. The push for a public option would break the alliance, though, and reunite insurers and Republicans in an ironic fight to preserve the Obamacare status quo. And that’s probably a better alignment for Democrats, and for the law itself, than one that produces problems like these and allows Republicans to point and laugh at them from a safe distance.