It is 2017 and it is hard to believe that the Patient Protection and Affordable Care Act (aka Obamacare or the PPACA) is seven year old already.  However, if you look at the results, by most measures it is failing miserably. 

On the positive side, the number of uninsured Americans has been reduced by 22 million.  Yet this is only 73% of the expected number of 30 million.  Similarly, while Obamacare supporters predicted that there would be 17 million new enrollees in Medicaid, the actual number is only 13 million, or 76% the expected number.  However, when you look at the newly covered under the exchanges, that number is only 12 million, which is only 57% of the expected number of 21 million.  By any measure, only achieving 57% of your goal can hardly be considered anything but a failure.  And it gets worse, if you can believe it.

With exchange enrollment down 43% and Medicaid enrollment down 24%, one would expect that the cost of the PPACA would be down significantly as well.  However, costs are only 17% below the expected figures.  How can this be?  Obviously, the cost of covering Medicaid enrollees and exchange subsidies must be significantly higher than was predicted.  In fact, the government now believes that the average subsidy in 2016 was be 18% higher than was predicted in March 2015.  That’s almost 20% higher than was predicted just a year earlier, not what was predicted back in 2010 when the program started.  This is a clear indication that enrollees are less healthy (resulting in higher claims and thus higher premiums) and poorer (resulting in higher subsidies) that was predicted just one year ago. 

As if that is not bad enough, the story gets even worse.  Since those being covered are sicker than expected, insurers will need to continue to raise premiums to maintain coverage given the higher claims expense.  These higher premiums will likely discourage new enrollees while potentially causing some enrollees to drop their coverage, while at the same time increase the government expense for subsidies.  Yet, the ones most likely to drop coverage are those who are healthy, so the trend to an unhealthy population in the exchanges will continue to accelerate.  This in turn will cause premiums and subsidies to increase further.  This has been supported by studies that have shown claims processed under exchange policies are approximately 20% higher that under the employer group insurance market. 

So with escalating costs and underperforming enrollments, PPACA supporters still estimate that there are 6 million exchange eligible Americans who continue to be uninsured, even despite individual mandate penalty of at least $695 per year.  Now more and more carriers are dropping out of the exchanges due to excessive losses so that some states such as Ohio no longer have any insurance carriers in their exchange.  With these results, how can this be deemed anything but a failure?

So how do you fix it?  As President Trump admitted after taking office, this healthcare issue is much more complicated that he had imagined.  Still, Republicans are determined to take on this healthcare issue and attempt to either fix it or replace it with new legislation.  Their first attempt failed to garner enough support from their own party to make it out of the House of Representatives and their second attempt that was passed is unlikely to make it through the Senate in its current form.  The dilemma is how to maintain insurance for the 20+ million newly insured in a sustainable manner.  One option is to eliminate the numerous and expensive mandates to allow individuals to purchase low cost/no frills policies that were available prior to the PPACA, but there is plenty of opposition to this.  In the end we will need to wait and see what Congress can do.

For more information on the employee benefits, please contact John Morlock at jmorlock@ttspro.com.

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