The controversial Affordable Care Act (ACA) actually affected only a small proportion of Americans because most of us already had health insurance through our employers or other groups, or were covered by Medicare or Medicaid. The ACA was designed to patch the hole in the complex system of U.S. health insurance by making health insurance affordable for those not otherwise covered.
In its short life—five years since enactment, but only two since the start of enrollment—the ACA has shown solid success. Its first accomplishment was much-needed reform of the small and badly-structured individual insurance market. The ACA outlawed medical underwriting, which had enabled insurance carriers to court the healthiest customers while denying coverage to people likely to need costly care. The ACA guaranteed that all applicants could buy insurance and that their premiums would not be adjusted for gender or personal characteristics other than age and smoking. It eliminated life-time spending limits and allowed children to stay on their parents’ insurance up to age 26.
The ACA insurance market reforms are extremely popular and highly unlikely to be rolled back by political action. But they were also extremely disruptive. Insurance carriers were highly skilled at attracting the least costly (healthiest) customers. Now they must compete for customers by offering better coverage at lower cost and sell to an unfamiliar population that has not had insurance before. They have to figure out how to structure and price their products so they can make enough profit to stay in business. Moreover, customers buying insurance for the first time have to learn confusing new terms—deductible, coinsurance, network—and figure out what kind of insurance they need, how to use it, and how to keep enrolled.
The ACA set up electronic market places (or exchanges) on which consumers, armed with income-related federal subsidies, could purchase health insurance from an array of competing plans. Like many new technological projects, the federal exchange, Healthcare.gov, crashed spectacularly when it launched, causing great frustration for the unexpectedly high number of people who tried to sign up in the first few days. Some state-based market places did better and some worse. But technological glitches are fixable. The federal exchange is operating smoothly now and has been greatly improved it launched two years ago. Several states which were operating their own marketplaces have decided to use the federal one after all.
The result has been a spectacular increase in insurance coverage. Over 11 million people now have purchased health insurance on the ACA market places. The ACA also offered strong federal incentives to the states to expand their Medicaid coverage, but twenty states primarily in the South, rejected the expansion due to political opposition to the ACA or fears of future increases in cost. There were 13.3 million more people in Medicaid in 2015 than in 2013. The flip side of the enrollment increase, of course, was a steep drop in the percent of population without insurance coverage—from 17.1 percent in 2013 to 11.6 percent in 2015.
Despite these successes, daunting challenges remain if the ACA is to deliver on the promise of providing near universal insurance coverage at sustainable cost. The immediate task is to retain the current enrollees on the exchanges while attracting more of the estimated 10 million households eligible to purchase on the exchanges who have not done so. Retention will not be a slam dunk. Many enrollees purchased plans with low premiums only to encounter high deductibles or narrow networks that did include providers they needed. The current open enrollment period offers them the opportunity to purchase a plan more suitable to their needs, but quite possibly at a higher cost. Those who failed to enroll in the first two years of the program will be a tough group to attract even though penalties for not having insurance are going up. Some are “young invincibles” who think nothing bad can happen to them or people with moderate incomes who are only eligible for small subsidies. Some just don’t understand the complexities of health insurance or know that they qualify for a subsidy.
The drafters of the ACA understood that many potential enrollees would have difficulty finding their way on the health insurance exchanges, and provided for assisters and navigators to help them out. In some states these efforts worked extremely effectively; in others political opposition or inexperience impeded their operation. The drafters also realized that insurance companies were reluctant to enter unfamiliar markets and offered to share the risk. The risk corridor program, modeled on a successful provision of Medicare Part D, offered companies limited compensation for their losses. But a little-noticed restriction inserted in a spending bill last year forced the government to renege on the promised risk-sharing. This restriction, which was extended in the recently passed omnibus appropriations bill, contributed to losses by some insurance companies and the demise of others, including several of the co-ops created by the ACA to enhance competition on the marketplaces.
The fact that some states did not expand Medicaid creates the anomaly that significant numbers of people have incomes too high to qualify for Medicaid and too low to quality for subsidies on the exchanges. Fortunately, some, but not all, of the original objectors are moving to expand.
In sum, the ACA is a work in progress. The individual insurance market is far more accessible, millions more Americans have acquired health insurance, and the proportion of the population that is uninsured has plummeted. Moreover, thanks in part to multiple demonstrations and incentives in the ACA, the health care industry is moving toward rewarding value of care and patient health, rather than just volume of services. But the ACA still faces major challenges, which arise partly from the inherent difficulties of creating a new type of health insurance market and partly from sabotage by political opponents who would rather see the ACA be repealed than help to make it work more smoothly.