By Merrill Matthews, Ph.D. and Mark Litow
Could ObamaCare, the goal of which was universal health coverage, actually increase the number of uninsured? If it does, the blame will fall almost entirely on provisions in the law, not Republican opposition to it.
ObamaCare has three key parts intended to greatly expand the number of Americans with health coverage:
(1) The individual mandate requiring nearly every American to have insurance or pay a penalty tax; (2) health insurance exchanges, where people below 400% of the federal poverty level will get federal subsidies (i.e., tax dollars) to help pay for coverage, and (3) a massive expansion of Medicaid up to 138% of the poverty level.
What has become clear is that all three legs of the ObamaCare stool are wobbly and could collapse as more pressure is applied.
The health insurance mandate was supposed to force the uninsured, especially the young and healthy, to get coverage. And the employer mandate, which the president has postponed for one year, was supposed to keep employers from dropping coverage.
But the penalty on individuals is much less than the cost of coverage: the greater of $95 or 1% of income in 2014, rising to $695 or 2.5% of income by 2016.
However, the IRS, which enforces the mandate, only has the authority to deduct the penalty from a person's tax refund. It won't take long for the working uninsured to figure out how to withhold only enough income to meet their income tax obligation, thus facing no effective penalty.
The Congressional Budget Office (CBO) estimated last year that 6 million Americans would forgo coverage and pay the penalty. But now we know that premiums will increase substantially for many Americans.
For example, a National Journal assessment of the individual market expects two-thirds of workers with single coverage and 57% of workers with family coverage will see their costs go up in the exchange, increasing the likelihood that millions will drop their coverage or remain uninsured.
The second leg of the stool is the health insurance exchanges, which are supposed to facilitate buying a policy and provide federal subsidies that will lower the effective cost of coverage.
The law's drafters assumed states would create their exchanges, but the federal government will impose one on states that don't. The CBO estimates 18 million Americans could benefit from the subsidies provided through the exchanges.
However, as the Cato Institute's Michael Cannon and Case Western Reserve University's Jonathan Adler have explained, the law clearly says the federal subsidies are only available in the state-created exchanges.
Officials at the IRS intend to provide subsidies to all exchanges regardless of what the law says. The state of Oklahoma has sued the federal government to stop the IRS, and a federal court recently ruled the case can move forward.
If the courts decide that federal subsidies are available only in state-created exchanges, people in the 34 states that didn't create one will not have access to the subsidies. Under the law, people are not required to have coverage unless it is "affordable," which is defined as not exceeding 8% of household income.
Given that the average family policy costs about $15,000, coverage will be unaffordable for virtually all middle-income families, thus exempting them from the mandate.
The final leg is the Medicaid expansion. So far, 25 states have not yet voted to expand the program. For the opt-out states, not much will change for those with incomes below 100% of the federal poverty level; those with incomes above that level could choose to go into the exchange.
A recent Urban Institute study suggests there are 7 million potentially eligible beneficiaries who won't have access to Medicaid coverage because not all states expanded Medicaid.
About 50 million Americans lacked health insurance in 2010 when ObamaCare passed.
The CBO, expecting moderate premium increases, estimates that about 33 million will remain uninsured when the law is fully implemented — a difference of 17 million under the best of circumstances.
But with (1) dramatically higher premiums discouraging young and healthy people to drop coverage, (2) states rejecting state-created exchanges leaving perhaps 10 million without subsidies and unable to afford coverage, and (3) 7 million low-income Americans who won't be getting expanded Medicaid, the CBO's estimate may prove to be wildly optimistic.
In short, as various ObamaCare assumptions have begun to unravel, we should start to worry that we could have as many if not more uninsured after the law takes effect.
If so, the lawmakers who gave Americans this bitter, multi-trillion-dollar health reform pill may find their medicine hard to swallow.
Matthews is a resident scholar with the Institute for Policy Innovation in Dallas. Litow is a retired actuary and past chairman of the Social Insurance Public Finance Section of the Society of Actuaries.