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Is America Ready for Obamacare?

Specific answers to questions about what Obamacare means to consumers.

by
Rich Baehr

Bio

September 12, 2013 - 12:00 am

This is the second in a series of articles on the rollout of Obamacare and how the law will change our health care system. Each week, we will publish two articles: one on the changes in medicine and medical care, and one on changes in the insurance industry. We hope this series of articles will help you make better decisions when it comes to your health care and how you buy insurance.

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The Affordable Care Act (Obamacare) was passed in early 2010, but it will get its meaningful debut only in the next few months. The act was designed to make a significant dent in the number of Americans without health insurance. At the time the legislation was passed, the estimate of the number of uninsured Americans was 46.5 million, a number that had risen slightly after the financial crisis of 2008-2009.

The act anticipated providing coverage for approximately 30 million people, leaving close to 20 million uninsured by the middle of the decade. The bill assumed that the number of uninsured would rise without the legislation, to close to 50 million.

The number of uninsured is not a fixed number for a year — the same group of people are not uninsured for the full period of time. People lose their insurance, and others who were uninsured gain new insurance, sometimes through work. The total number of those uninsured for any time during a year is tens of millions higher than the 46.5 million number, and the number who are uninsured for the entire period during any 12-month cycle is tens of millions less than this number.

So, too, the composition of the uninsured population is quite varied. About a fifth earn $75,000 or more in annual income, a level well above the national median income for an individual or family unit. About 18 million, or near 40% of the uninsured, have incomes over $50,000, close to the median income level. Obamacare provides subsidies for those buying policies in the state exchanges with incomes between 138% of the poverty level and 400% of that level (now $94,000 for a family of four).  The legislation also provides expanded coverage under the state Medicaid programs for those with incomes between 100% of the poverty level and 138% of that level, depending on family size.

At the time the legislation was passed, there were some estimates that over 10 million Americana qualified for Medicaid, Medicare, or some other government program even without the new legislation, but had never enrolled. It is, of course, possible that many newly eligible for Medicaid will not enroll despite the eligibility expansion under Obamacare.

Another sizable group of uninsured are illegal immigrants, estimated at five million or more. These individuals would not be eligible to participate in the exchanges under Obamacare, and would continue to be ineligible even under the Senate’s version of immigration reform. However, immigration-reform advocates are now pushing hard to get that provision changed.  Even if they fail, the president has shown recently that he can change immigration policy by executive order.

Overall, the number of uninsured who were locked out of the insurance market because of denial of coverage or high-priced policies was only a fraction of the total uninsured population — probably less than 20% of the total uninsured, and less than 3% of all Americans.

Because this number was so small compared to the total population, the bill was sold as insuring coverage for 50 million Americans, even though 80% of this group, if not more, could already obtain insurance either through government programs or the insurance market. Many without insurance were simply unwilling to buy insurance.

That history of non-purchase decisions is a threat to the success of the Obamacare initiative, especially with regard to the new state exchanges. Those with incomes above the Medicaid eligibility limits can now purchase policies on the exchanges with guaranteed issue, and in many cases, with a partial subsidy from the federal government.

The big question: how many who have not bought policies in the past will choose to do so starting in October?

A second question: how many individuals now provided health insurance by corporations will soon find themselves needing to navigate the exchanges as a result of decisions made by their companies? Will their employers look to reduce their hours below 30 per week, or to terminate a corporate policy and dump all employees onto the exchanges?

The Obama administration recently announced that the employer mandate to provide health insurance for full-time workers (defined as those working over 30 hours per week) for companies with 50 or more employees would be waived for a year. As a result, the next year will be an opportunity for companies to move employees from company coverage to the exchanges, since the individual mandate to buy insurance is still scheduled to begin with the exchanges opening on October 1.

The  exchanges will likely offer attractively priced policies for those with pre-existing conditions who were denied coverage, or for those who could only buy very expensive policies or were stuck in group insurance plans whose cost increased rapidly from year to year. This is also likely to be true of older individuals too young to qualify for Medicare who have seen their health insurance costs rise rapidly in the individual market.

Most of the uninsured are not older Americans.

Those aged 18 to 34 make up a disproportionate share of the uninsured market. Because of the limitations on insurance companies charging risk premiums for older individuals in the new Obamacare exchanges, younger Americans will be offered polices that are more costly and which result in a subsidy of the older insured who purchase insurance in the market.  As a result, younger Americans’ lack of interest in buying health insurance could continue, especially since the penalty (or tax, as Justice Roberts defined it) for failure to buy coverage is comparably small. It starts at $100 the first year, and rises to about $700 in the third year.

The Supreme Court gave their seal of approval to Obamacare by a 5-4 margin in the Spring 2012 term. But Justice Roberts, who voted with the four liberal justices to uphold the mandate, was joined by six other justices in ruling that states could decide not to expand their Medicaid program under Obamacare without risk to the current Medicaid funding provided by the federal government for those earning below 100% of the poverty level.

This decision meant that the ability of the federal government to expand the Medicaid program was now dependent on the willingness of the states to expand their program. So far, only about half the states have elected to expand their programs, and some of the states with large Medicaid populations — such as Texas, Florida, Ohio, and Pennsylvania — have not signed on. Governors in some of those states support the expansion but have had trouble persuading their state legislatures to pass the required legislation. Michigan’s state Senate, after a contentious battle, voted this week to expand Medicaid through Obamacare.

Many governors see the Medicaid expansion as nearly free money: the expansion has a 100% federal support level for a few years before dropping to 90%, whereas the current Medicaid program is funded by a 50%-50% federal/state mix of support. Providers, especially hospitals, are excited about the program expansion, since it will replace non-paying patients with patients paid for by Medicaid. Even though Medicaid payment levels are generally considered inadequate and below the cost of care, they are still a lot higher than zero, which is what charity care or bad debts among the uninsured produce in revenue per patient.

In any case, if half of the expansion of care to the uninsured under Obamacare was going to come from the Medicaid program, it seems today very unlikely that the number of new enrollees will come anywhere close to 15 million. A number of about half of that may even be a stretch, given current levels of state buy-in. If the state participation rate stays low, then the cost of the Medicaid expansion will of course be lower than anticipated.

The dynamics at work on the exchanges is different. The designers of Obamacare counted on participation (purchase of policies on the exchanges) by enough younger people to help subsidize the cost of care for those who are older and sicker, and far more likely to buy insurance if offered the chance. Younger people use far fewer health care resources than older people (doctor visits, tests, inpatient stays, surgeries, etc.), so if only heavy consumers of care sign up, the policies will prove to be disastrous for the insurers. Many of whom will then abandon the markets. Already, many big health insurance carriers are choosing not to participate in the exchanges, since they expect their claims costs versus insurance premiums will be unsatisfactory.

The Obama administration has released the number of seven million as its first-year target for signups in the exchanges. This represents less than half of those eligible to sign up, not a very aggressive goal.

One of the most foolish provisions in the law was the low cost of the penalty for non-participation in the individual market (the penalty is higher per worker in the corporate market, but almost certainly too low there as well to incentivize participation). The easiest policy for many individuals will be to continue having no health insurance and to only buy coverage if something bad happens.

There is no reason at this point to expect a smooth rollout of the exchanges or of the new Medicaid coverage.

The president seems committed to spending the fall where he is most comfortable — on the stump, campaigning for people to give Obamacare a chance. Yet unlike his two presidential campaigns, so far Obama has never managed to move the needle positively regarding support for Obamacare.

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Also read Dr. Paul Hsieh’s “How Big Medicine Will Affect Patient Care

Richard A. Baehr is the co-founder and chief political correspondent for the American Thinker. For his day job, he has been a health care consultant for many years doing planning and financial analyses for providers.

Comments are closed.

All Comments   (16)
All Comments   (16)
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uptil I looked at the paycheck which had said $5732, I didnt believe that...my... father in law was like truly making money in there spare time at their computer.. there friends cousin had bean doing this 4 less than 11 months and resantly cleared the morgage on their apartment and bought a top of the range Chevrolet Corvette. my latest blog post http://www.wep6.com
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50 weeks ago
50 weeks ago Link To Comment
I was just talking with a recruiter who wants me to take a new job. When it came to health care benefits, he was defensive and I was probing.

From my point of view, a very critical function of an employer is running interference on medical insurance. An individual will find it increasingly difficult to navigate the system and prohibitively expensive to get insurance. A group plan offers big advantages in information processing and in buying power.

Liberals seem to know that and intend to crush private powers wherever they exist outside government.

Of course the pre-Obamacare medical system has its problems too and politically, there needs to be a vision from free market advocates for a reform to both counter Obamacare and to improve the pre-Obamacare system.
50 weeks ago
50 weeks ago Link To Comment
If it had truly been a free market in the first place, we wouldn't have needed "reform" of the system at all.
Our (self-purchased) insurance was quite affordable till the state we live in started regulating what insurance companies had to cover for everyone, regardless of what the customer actually wanted. Then we stopped being able to purchase insurance from out of state. Then it got REALLY expensive. Now, as they gear up for compliance with obamacare, it has become absurd.
Let a REAL free market fix it.
50 weeks ago
50 weeks ago Link To Comment
When the leftstream media is done, the low-information voters will blame the coming fiasco on Republicans' failure to fix Obamacare.
50 weeks ago
50 weeks ago Link To Comment
The short answer is no, the US is not ready for this takeover.

The regime knows this but the intent was not to have a workable system but to destroy the private health insurance industry, which it is doing very well.

Thus, the people will clamor to the government to fix it all.
50 weeks ago
50 weeks ago Link To Comment
Instead of an omnibus or a CR why don't House R's just go back and do an agency by angency/committee by committee procedure like they used to. This way the entire process doesn't revolve around one component of government. When they get to the HHS portion of thr funding they can fight it out on a narrowed battlefield. It robs Democrats and the President from the blame game of pinning a government shut down on the R's. It puts all the focus of the Obamacare fight squarely on it rather than diluting it through the legitimate cries for funding of the rest of government. My guess is that the R leadership doesn't want the work or for this path TO work.
50 weeks ago
50 weeks ago Link To Comment
Clearly, the ''Affordable Care Act'' IS NOT affordable. Obama has provided a plethora of waivers ranging from unions to congress. Contrary to Obama's disingenuous rhetoric everyone in America does NOT get a "fair share." Moreover, our political & business elites do NOT play by the same rules as the public. In short, plutocrats continue to control this nation based on self-serving ends.
50 weeks ago
50 weeks ago Link To Comment
Easy answer: No.

Welcome to Policy On The Fly.
50 weeks ago
50 weeks ago Link To Comment
I can't afford health insurance, and I won't beg for Medicaid. That exhausts my control of the situation.
50 weeks ago
50 weeks ago Link To Comment
My wife has a preexisting condition. She is bipolar. We struggled unsuccessfully for months to find major medical health insurance for her. We were finally able to join a high-risk state supported pool plan. High deductibles, very basic coverage and extremely high premiums. We have now been informed that the pool will "be out of business" by January 2014 forced to quit because of Obamacare. Not to worry though, we were given a web address to "shop" for replacement insurance for my wife. The link they gave us is dead.

Welcome all to the world of Government run health care.
50 weeks ago
50 weeks ago Link To Comment
Just curious what you considered high deductibles, basic coverage and high premiums? We've had to buy our own insurance for 25 years also, and have always had high deductibles, basic coverage, and high premiums also. In the last 3 years, while the insurance company has been gearing up with compliance to obamacare, our deductibles haven't changed, but our premiums have sky rocketed. We're paying over $15K a year for a 70/30 plan with a $4K deductible. We make $50K a year. 3 years ago we were only paying $10K a year.
I suppose we're "lucky". So far, our insurance company is staying in the state. 3 of the 5 that were here have decided to discontinue coverage here.
If Obama REALLY cared about getting people covered, he'd have done something about allowing companies to provide coverage across state lines. That would make a huge difference in prices for consumers. But no, he doesn't actually believe in competition. He believes in fascism.
And yes, one point in the article was that Many without insurance were simply unwilling to buy insurance. I know that to be true. I know people who said insurance was too expensive, but they managed to always have Hawaiian vacations and new cars, dinners out several nights a week, and all the newest phones and TV's. But not medical insurance. It's too expensive.
Priorities. Government never takes human nature into account when it's running over our rights with its Sherman tanks.
50 weeks ago
50 weeks ago Link To Comment
70/30 with 10K deductible @ $9k per year for my wife alone. I'm retired and on Medicare. Our total yearly premiums run about $12k. Medication adds another $4k so retirement is not as rosy as we had hoped.
50 weeks ago
50 weeks ago Link To Comment
It's a bear. We haven't even hit our 60's yet. I shudder to think what we'll be paying before medicare kicks in. If it ever does. Good luck to you too.
50 weeks ago
50 weeks ago Link To Comment
I can tell you what Obamacare will mean to me: My insurance company has already told me that my premium will go up 30% when it takes affect.
50 weeks ago
50 weeks ago Link To Comment
ObamaCare should called Dem Vote buying Care, Bill & Hilary pushed for it in 1994 and no one wanted it, in 09 no one wanted it but the Left Liberals got their way with Obama as he pushed it thru in back door deals with low life Dems - this entire scam is a way for Dems to tell the POOR we did this for YOU now VOTE, Illegals WE DID THIS FOR YOU- now vote, Dead people we paid for your burial no VOTE 3 times
50 weeks ago
50 weeks ago Link To Comment
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