Up Front

Implementing the Affordable Care Act: Why Is This So Complex?

Alice M. Rivlin

Last week, the Obama administration made a sensible, pragmatic decision to postpone until 2015 the implementation of the employer mandate under the Affordable Care Act (ACA). The postponement allows the government to simplify the reporting requirements, which companies alleged were unnecessarily burdensome, and gives employers more time to figure out how they want to adjust their health insurance coverage to the ACA environment. No postponement is without cost, but delaying the employer mandate allows the Administration to concentrate its energies on implementing the most important part of the ACA—the on-line market-places or exchanges being set up in each state to facilitate purchase of health plans by the uninsured. Getting the exchanges running—along with a way to determine the subsidies that make those purchases affordable—is a daunting, complicated task and should be given highest priority.

But why do we have all this complexity? Even strong supporters of the ACA winced at the length of the legislation, while opponents point to its complexity as a reason for rejecting it. Couldn’t we have done something simpler?

Unfortunately, governmental complexity goes with being the United States of America for two fundamental reasons. First, we have a long history of relying on private sector markets and resorting to government regulation and provision of services only where markets fail. This pro-market mindset has given us a high standard of living and brakes on centralized power, but it makes governance inherently and permanently complex. In the case of health care, our commitment to markets prevented us from adopting a national system to provide or pay for universal health care as most advanced countries did decades ago. That was the simple approach. Instead, we relied primarily on employers to purchase health coverage for their employees in the private market, with the government filling in the gaps. Two big gaps were filled in 1965 by Medicare for seniors and the disabled and Medicaid for the poor. The remaining gap—people without employer coverage, but not eligible for Medicare or Medicaid—widened while the political system dithered until the ACA finally became law in 2010. The goal of the legislation was to fill this remaining gap without destabilizing the employer-sponsored coverage on which most people rely. The solution, which involved both expanding Medicaid and subsidizing purchases of private insurance by the uninsured, was inherently complex, but there is no simple way to patch a patchwork.

The second reason for complexity is, of course, our federal structure. As a big diverse country formed originally by sovereign states, we still fear central government power and rely heavily on the states to formulate and execute domestic policy. Our federal system has great strengths, but it is inherently complicated.

The ACA’s employer mandate requires that companies with 50 or more employees offer health insurance to their full-time workers or pay a penalty. This provision is not expected to affect most workers, since the overwhelming majority of large employers offer health coverage, often with more generous benefits that the new law requires. However, compliance necessitates companies and insurers reporting employee coverage in considerable detail, and it is worth taking time to set up minimally burdensome systems for doing so. Postponement may also diffuse some unrealistic fears. Opponents of the ACA predict that companies will reduce employee hours to less than full time (defined at least 30 hours a week), split into multiple companies with fewer than 50 employees to avoid the mandate, or drop the coverage they now offer. More time and better information is likely to prove most of this apprehension exaggerated.

Federalism complicates not only the expansion of Medicaid, which some states are resisting, but creation of the exchanges, which are the heart of the ACA. It would have been simpler to put the federal government in charge of creating exchanges—indeed, that was an early plan. However, insurance is regulated at the State level and varies greatly across the country, so states had to be heavily involved in any case, and some wanted to set up their own exchanges. Hence, fifteen states and the District of Columbia are now working feverishly to get their own exchanges ready by the looming October first deadline for starting enrollment, while the federal government works in various ways with the other thirty-five. Reports differ on readiness in both groups.

In the polarized politics of our time, the opponents of the ACA have attacked it both as a federal government power grab—described as “socialism” by people who have forgotten what socialism is—and as overly complicated. But if it really were a federal power grab it wouldn’t be so complicated. The complexity is created by our two traditions of relying on private markets whenever possible and preserving diversity at the state level. These traditions are part of our political DNA, and if we value them—and most of us do–we should not complain that they make governance complicated.