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Wednesday, November 04, 2015
The Unaffordable Care Act
By NCPA @ 1:02 PM :: 3177 Views :: Health Care, Cost of Living

Unaffordable Care Act Third Open Enrollment Nothing to Celebrate

by Devon Herrick NCPA Health Alert, November 3, 2015

The third Obamacare Open Enrollment period began November 1st. As a result, many families are faced with a tough choice: purchase coverage they cannot afford with few tangible benefits, or pay an equally unaffordable penalty and hope they do not become sick. The Internal Revenue Service determined that 7.5 million individuals opted to pay the penalty rather than purchase health coverage in 2014, far more than originally projected. The penalty for going without coverage in 2014 was only $95 or one percent of income, whichever was greater. Yet the tax year data found the average penalty paid was double the minimum. This suggests it wasn’t the poor who were going without coverage; the poorest individuals either qualified for generous subsidies, Medicaid or got an exemption from the penalty. Many of those who paid the penalty were likely individuals who did not qualify for subsidies and could not afford Obamacare coverage due to the costly mandates. To make matters worse, the costs are rising fast.

According to data from the Kaiser Family Foundation, premiums for coverage in Alaska, Colorado, Hawaii, Idaho, Minnesota, Montana, Oklahoma and Tennessee, for example, will rise by about one-third in 2016. Rates in Arizona, Delaware, Nebraska, North Carolina, Oregon, South Dakota and West Virginia will increase by 20 percent to 25 percent. Residents in Iowa, Kansas, Louisiana, Nevada, North Dakota, South Carolina and Utah will see increases of above 10 percent or more.

No one will escape these rising costs. Americans with employee health plans also experience rising premiums when insurers are forced to sell bloated policies in unprofitable markets. Individuals who forego insurance and chose to pay the penalty will face a greater fine. In 2015, the penalty more than doubled from 2014; in 2016, it will increase yet again. Those failing to obtain health coverage in 2016 will face a penalty of $695 or 2.5 percent of income, whichever is higher.

Americans were led to believe the Affordable Care Act would save the average family about $2,500 per year. That dubious claim was actually just a sound bite with no basis in fact. Unfortunately, in a health reform debate about complicated insurance regulations, a simple assertion that families would save a couple hundred bucks a month resonated more than wonky counterarguments about adverse selection, moral hazard and rising deficits. The Obama Administration would ultimately be proved wrong about cost savings; it recently acknowledged that the “Affordable Care Act” is not affordable for many individuals. An “I told you so” may be in order, but it hardly makes people saddled with high insurance premiums feel any better.

These premium hikes are significant for several reasons: 1) the Affordable Care Act is anything but affordable for taxpayers, who have to subsidize these costly premiums; 2) moreover, the Affordable Care Act is unaffordable for many despite generous subsidies. Finally: 3) many of those who have Obamacare coverage are concluding it’s not a good value for the money.

Take the case of a self-employed professional I know. She always purchased coverage through her business. Since Obamacare became the law of the land, her premiums shot up even as the quality of her coverage deteriorated. Her retirement savings effectively meant she was too rich for Obamacare subsidies. In order to have affordable health coverage, she had to settle for a $6,000 annual deductible — a threshold so high she would never even approach it. To make matters worse, many of the services her pre-Obamacare health plan used to pay for were no longer covered. Many of her doctors were no longer in her network. Her compounded drugs were no longer covered. She calculated the only benefit she received from her $389 monthly premium was one “free” well-woman preventative care visit each year. She concluded that $4,668 in premiums provided almost nothing of tangible value; and that her well-woman visit was far from free. Two days before 2016 open enrollment, she called her health insurer and canceled her coverage for the final two months of the year. She reasoned the $778 she will save by dropping coverage for two months would be well worth the risk. She will not have to pay a penalty for a coverage gap that lasts only two months. In a few days she could sign up again for coverage to begin January 1.

Apparently, she is not alone. Nearly one-in-five enrollees drop their coverage before yearend. Moreover, people expected to pay their own way are few and far between. The data shows the only people likely to enroll in Obamacare exchange plans are those eligible for generous subsidies; nearly 80 percent of enrollees receive subsidies.

In October Health and Human Services Secretary, Sylvia Burwell, admitted that 2016 enrollment in the Obamacare exchange was expected to hardly change from 2015 levels. That’s less than half what the Congressional Budget Office estimated not long ago. But that may be overly-optimistic. As the sheen wears off of subsidized health coverage, and more Americans find they are paying hundreds per month for coverage that provides few benefits, they too may decide to sit this one out.

An earlier version of this Health Alert appeared in Town Hall.

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