Rivlin: Affordable Care Act and what’s next
The controversial Affordable Care Act 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 the ACA has shown solid success. It outlawed medical underwriting, which had enabled insurance carriers to court healthy customers while denying coverage to people likely to need costly care. The ACA guaranteed 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 lifetime spending limits and allowed children to stay on their parents’ insurance up to age 26.
These reforms are popular and highly unlikely to be rolled back by political action. But they were also disruptive. Insurance carriers were skilled at attracting the least costly (healthiest) customers. Now they must compete by offering better coverage at lower cost.
The ACA set up electronic market places (or exchanges) on which consumers, armed with income-related federal subsidies, could purchase health insurance from competing plans. Like many new technological projects, the federal exchange, Healthcare.gov, crashed spectacularly when it launched. But it is operating smoothly now and has been greatly improved since it launched two years ago.
The result has been a spectacular increase in insurance coverage. More than 11 million people now have purchased health insurance on the ACA marketplaces. The ACA also offered strong federal incentives to the states to expand their Medicaid coverage, but 20 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, challenges remain. 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 bought plans with low premiums then encountered high deductibles or networks that did include needed providers. Plans more suitable to their needs will quite possibly cost more. Those who failed to enroll in the first years of the program will be a tough group to attrac, though penalties for not having insurance are going up. Some are “young invincibles” who think nothing bad can happen or people with moderate incomes who are eligible for small subsidies. Some don’t understand the complexities of health insurance or know that they qualify for a subsidy.
Then there are the payers. The drafters of the ACA understood 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, extended in the recently passed appropriations bill, contributed to losses by some insurance companies and the demise of others, including several co-ops created by the ACA to enhance competition on the marketplaces.
In sum, the ACA is a work in progress. Millions more Americans have acquired health insurance, and the proportion of the population that is uninsured has plummeted. Moreover, 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.
Alice M. Rivlin is director of the Health Policy Center at the Brookings Institution and Leonard D. Schaeffer Chair in Health Policy.