The Obama administration has wisely decided to lower expectations about new health coverage under the Affordable Care Act in the hope that by setting the bar low enough even mediocre enrollment gains become a political victory. Contrary to earlier predictions that the exchanges would enroll 13 million people during the second open enrollment period (which runs for 3 months starting Nov. 15), the administration now says the number is likely to range from 9 to 9.9 million people. Health and Human Services Secretary Sylvia Mathews Burwell said the administration is aiming for 9.1 million paid-up enrollees by the end of 2015.
That can hardly be considered a sign that Obamacare is working. The new enrollment target is just over 2 million greater than the number of people who currently buy their health insurance through the exchanges. It falls far short of the 25 million who, according to the Congressional Budget Office, will have exchange coverage within three years.
This is not surprising. The Affordable Care Act enrollment process is complicated even when the website is working. The second round of sign-ups will be that much harder. The 6.7 million people who ran the gauntlet of the 2014 open enrollment season knew they wanted health coverage and were willing to put up with the frustrations of broken websites and unclear answers.
New enrollees have to be convinced, and the insurance offered this year is as unattractive as ever. Many people will be discouraged by high costs (with deductibles often exceeding $4,000 a year) and not being able to keep their doctors.
To achieve high enrollment numbers, the exchanges must keep those who bought coverage this year as well as attract new customers. The administration announced at the end of June that anyone who had purchased insurance through the exchange could be auto-enrolled in the same plan next year. That reduces disruption in the insurance market and avoids having people lose coverage if they fail to take action. The auto-enrollment option would take pressure off the exchanges if millions of current enrollees decide not to look at the options for next year.
That could be an expensive mistake, and the Department of Health and Human Services has backed off its enthusiasm for auto-enrollment. Unlike employer-sponsored insurance, which uses auto-enrollment routinely for employees, the Affordable Care Act combines health coverage with a welfare program. The exchange subsidy is tied to the second-lowest cost silver plan. Anyone who selected such a plan for this year could find that their plan’s premiums for 2015 have increased 30 percent or more – much higher than that plan’s actual increase. What had been the lowest premium plan after the subsidy this year may become a very pricey option because a competitor did what smart competitors do: undercut the competition.
The health care law has turned the virtues of competition on its head. Plan competition helps lower the market price of insurance, as one would expect. But the complicated subsidy scheme converts those savings into higher costs for many low-income families who are eligible for federal subsidy payments unless they brave the enrollment process again.
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As difficult as enrollment has been for the Affordable Care Act, greater troubles are ahead. The individual mandate requires the Internal Revenue Service to withhold refunds from anyone who failed to maintain insurance coverage, starting with 2014 tax returns. The White House might excuse that requirement, at least for this year. Penalizing anyone who did not have insurance because the government’s contractors were unable to create a functioning HealthCare.gov is unfair and poor politics. Dropping enforcement opens the door for Congress to eliminate the penalty altogether, in what could be a bipartisan rebuke of regulatory overreach.
The IRS is also supposed to recover subsidy overpayments from families who underestimated their incomes when they applied for exchange coverage. Instead of a fine of a few hundred dollars for not being insured, some families will be faced with the demand to repay thousands of dollars that they cannot afford. In most cases, these overpayments are simply mistakes, not fraud. Aggressive enforcement will drive more people away from the exchanges. Better to pay the mandate fine than risk IRS collection actions that can ruin credit and destroy credibility.
The employer mandate has proven to be an unworkable and unnecessary mistake. Instead of forcing employers to give generous insurance coverage to their low-wage workers, the mandate is threatening to reduce the number of hours they work below 30 hours. Perversely, workers who most deserve our help will suffer the consequences of lower incomes with no greater access to insurance.
The pending Supreme Court decision on whether the federal exchange can distribute premium subsidies to its enrollees is another threat to the Affordable Care Act. If the court sides with the plaintiffs and agrees that only state exchanges may distribute subsidies, enrollees in the 37 states that rely on the federal exchange will lose their subsidies and enrollment will plummet.
By now it is clear that the political promises made by the president and his supporters could not be fulfilled. You cannot keep your old insurance and you cannot be certain that you can keep your doctor. Insurance costs are not lower, and the new subsidies are being paid through higher taxes and higher private premiums. These are not “glitches.” They are part and parcel of the law.
Over its entire history, a majority of the public has opposed the Affordable Care Act. As the open enrollment season kicked off, a Gallup survey found that only 37 percent of Americans approve of Obamacare. Maybe Americans are not so dumb, after all.
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