The (Un)Affordable Care Act and the Future of US Health Insurance

December 18, 2018
Simon Murray, MD

Over the past 5 years, the US healthcare system has gradually become a victim of its own success.

Recent evidence has emerged that the Department of Defense failed to account for a trillion dollars of its own spending. It’s shocking at first, but shouldn’t come as a surprise when we realize just how inefficient the US government can be in spending taxpayer money.

Consider the Affordable Care Act (ACA), the legislation that I suggest can perhaps be better referred to as the Unaffordable Care Act. The bill is complex and poorly understood, even by the Congress that approved it. Considerable debate has surrounded the bill since its inception, but few effective changes or improvements have been made to what’s amount to a hastily conceived and massive overhaul of the US healthcare system. Most of the energy that could’ve been spent on an improved solution has gone instead toward partisan polarization: The Republicans have been determined to undo all aspects of the landmark healthcare bill without offering any meaningful alternatives, while the Democrats are determined to turn our healthcare system into a single payer system based on Medicare.

In the process, we are at a deadlock.

What’s worse, a tax on healthcare premiums which will tax private healthcare companies and states for money they collect in premium dollars for health insurance will go into effect in 2019. This is one of the ways that President Obama tried to ensure that the bill would be budget-neutral. The other 2 ways were to cut Medicare spending and to impose a series of other taxes on things like tanning salons, capping deductions that large companies can deduct for health care benefits, and fining individuals who don’t have health insurance for at least 9 out of the 12 months in a given year.

Since the ACA’s inception 5 years ago, insurer participation and competition has steadily declined. Rather than spur competition, fewer insurers offer coverage to the population. The trend continued this year, at both the state and county levels. In 2017, nearly one third of counties (32%) had only 1 insurer offering exchange coverage. In 2018, more than half (51%) of all counties have only 1 insurer because insurers have exited the exchanges, with the remaining competitors offering higher premiums and narrow network plans.

All of the 4 large national insurers have almost entirely exited the Obamacare exchanges. Aetna and Humana no longer offer exchange coverage in any state, while Cigna participates in just 6 states, and United Healthcare offers exchange coverage only in New York and Nevada.

The data indicate that the number of individuals enrolled in subsidized exchange coverage has decreased or at least plateaued at levels far below target rates that were predicted to make sure the program worked. An estimated 15% of Americans did not have health insurance in May 2018—a jump from the 12% rate reported 2 years earlier, despite there being a large drop in the unemployment rate since. It’d be reasonable to suggest that drops in health insurance rates in an era of employment growth indicates that fewer people are insured by Obamacare—and that those who are enrolled are more likely to be sicker, in poorer health, or unemployable.

Republicans managed to eliminate the penalty for not having health insurance, which essentially allowed healthier people to opt out of the insurance system, waiting to get sick before enrolling. The net effect is that insurance companies are left with sicker patients, who use more resources, and are forced to drive up costs of premiums. Many people don’t realize that the federal government is already subsidizing premiums for health insurance, not just for the health care exchanges, but for Medicare advantage plans, Medigap plans, and private insurance plans.

With the next federal health care premium tax set for next year, companies that collect premiums are expected to pass along the increased cost to their customers. Federal, private, and state-level enrollees will all experience premium increases. The federal government hopes to raise about $161 billion in the following decade. That’s great—except as premiums go up, the federal subsidies will increase by $261 billion over the 10-year period. For example, some economists predict the premium tax will result in $58 billion in additional spending on Medicaid premiums between 2020 and 2029. Premiums will rise $73 billion in Medicare Advantage, $92 billion for employer-sponsored coverage, $29 billion for individual-market coverage, $4.7 billion for Medicare drug plans, and $3.8 billion for federal employees.

When you do the math, it is clear that spending $261 billion to collect $161 billion in tax revenue is just as crazy as the Department of Defense losing track of $1 trillion. If you wanted to spend a billion dollars, you would need to dish out $1000 a day for 2740 years before you ran out of money.

To add insult to injury, rising premiums will force even more people to drop insurance, equating in the insured population being more and more represented by those burdened with severe, chronic illnesses, unable to drop coverage. Perhaps as a result, studies show that younger patients are choosing urgent care centers and emergency clinics over traditional doctors’ offices for care. This is short-sighted: other studies have shown that patients who establish relationships with a regular doctor over long periods of time ultimately enjoy better health outcomes. Too many young people view a traditional office visit like visiting Disneyland, where they are going to have a long wait for a short ride.

The problems faced by the American healthcare system are complex, and in many ways we have become victims of our own successes. Patients view all doctors as having the same abilities. They have grown to expect a simple, quick solution to their problems. They assume there always is a solution, when often there is not. Technology has advanced at an amazing pace, which has made modern medical care expensive, in contradiction to other industries, where technology tends to decrease costs of service.

The federal government created a system by which they said, “send us the bills and we will pay them.” And then they created an insurance system to pay the bills, and made it attractive for employers, states, and federal subsidies to pay for the insurance. No one expected that ambition and greed would fuel the medical inflation that will surely bankrupt us if it’s not fixed.

Simon Murray, MD, is an internist based in Princeton, NJ. The piece reflects his views, not necessarily those of the publication.Healthcare professionals and researchers interested in responding to this piece or contributing to MD Magazine® can reach the editorial staff here.