Presidential historian Michael Beschloss said that history demonstrates how effective a President’s program will be, so with more time we gain a better understanding of a legislation’s impact. President Obama’s healthcare law is no exception. After the first year under the Affordable Care Act the New York Times wrote a piece to examine the law’s effectiveness, so with another year down we decided we should check back in on the legislation and briefly update last year’s assessment. With the prospect of rising premiums and limited plans, results for the Affordable Care Act have become more mixed than they were a year ago.
Has the Percentage of uninsured people been reduced?
At its core the Affordable Care Act was intended to reduce the number of uninsured people, and we find in general that the law has been successful in this pursuit. The number of uninsured Americans reached a seven-year low in July, as only 11.4% of adults lacked some form of health insurance. That number has fallen 37% since late 2013, a marked victory for the Affordable Care Act. Coverage has been extended fairly uniformly across age groups below age 65, and we saw the most significant increases in coverage for Blacks, Hispanics, and households making less than $36,000 per year. The chart below from Gallup shows the percentage changes of those uninsured for different demographics; each group has seen increased coverage.
Similarly sized populations have signed on to Medicaid and bought their own plan, but Medicaid expansion looks to be the key to improving coverage across the country. After the Supreme Court made state Medicaid expansion optional, the Congressional Budget Office’s estimate for the number of Americans who would gain coverage by 2017 dropped from 32 million to 26 million. The current estimate for those who have gained insurance who would not have without the Affordable Care Act is capped around 16.5 million people, so we should not expect to hit 26 million over the next few months.
What could make that higher number possible over the next few years, however, would be Medicaid expansion across more states. Thirty states had expanded Medicaid as of April 23, and Alaska and Utah look like they may in the near future. Gallup polls this year indicate that states that expand Medicaid see a larger decline in the uninsured rate, so we still have a clear path to increased coverage.
We should note that there is still room for concern about the effectiveness and accuracy of such positive news. For one, as the New York Times article noted last year, critics worry that some people may have signed up and cycled out of coverage because they failed to pay premiums. Second, plans may cover too few doctors or require such high out of pocket payments that those plans may not provide “meaningful access to coverage.” Furthermore, millions are still in a policy gap in states that have not expanded Medicaid, and those who have not already gotten coverage are likely the hardest to reach. Those who have resisted gaining coverage may never purchase a plan, so it is unclear how low the percentage of uninsured can go for the time being.
Has insurance under the law been affordable?
The critics’ concerns mentioned above should lead us to question whether insurance has been affordable, and this section may mark the most significant change from last year’s New York Times article. Consistent with last year’s reporting is that the percentage of those receiving subsidies remains high: of the 10.2 million people who obtained coverage through federal and state marketplaces this year, 85 percent receive subsidies in the form of tax credits to help pay premiums. When we consider the limitations of these plans, however, coupled with the significant rise in premiums, the results on affordability become more mixed.
The most significant change is the projected increase in premiums for the year ahead. According to the rate requests on Healthcare.gov, nearly every state has multiple plans facing over a 10% premium increase (although many have not been approved), with many plans that could see hikes of up to 50%. And according to research in the Wall Street Journal, the average 2016 family plan could see premium increases of 11.2%, the average individual plan could see 8% increases, and the average bronze plan could see up to 16.6% jumps.
Projected premium increases look to stem from a conflict in providing affordable health insurance while sustaining a health insurance company. According to a recent New York Times article, health insurance companies across the board must raise premiums to stay afloat. These companies, saying their new customers under the Affordable Care Act turned out to be “sicker than expected,” are calling for rate increases of 20 percent to 40 percent or more; some insurers said their claims payments totaled more than 100 percent of premiums. We should expect to see premiums rise over the next few years until they reach a sustainable level for insurers.
In addition to premium increases, current plans may be limited in the care one can receive. As mentioned before, many plans require seeing a primary care physician before a specialist, and many of these plans may not offer a wide array of in-network doctors. With a smaller network of physicians, surprise balance billing is more likely to add significant cost. This billing may occur when someone goes to the emergency room, for example, and only after the fact learns that one of the doctors who treated him wasn’t in his insurance network. About a quarter of states have laws against the practice known as balance billing, but there is no federal protection against the act.
Did the Affordable Care Act improve health outcomes?
Since changes in health care take years to have a noticeable impact, it is still too early to measure whether the Affordable Care Act has improved health outcomes. Similar to what the New York Times article noted last year, the only metric that may already indicate improvement is the percentage of people undergoing colon screenings. A team of researchers of the American Cancer Society found that overall colon cancer screening rates among people ages 50 to 75 rose from about 57 percent in 2008 to about 61 percent in 2013. We can only repeat the New York Times article in its findings that the Affordable Care Act has improved self-reported health and access to healthcare for young college graduates. While there is a little evidence that the Affordable Care Act is improving health outcomes, it will be years before we know for sure.
Has the healthcare industry been helped or hurt by the law?
The answer to this question is less clear than a year ago. On the one hand, we are seeing a period of extraordinary growth and investment in health care. The S&P 500 health care index in the past year returned over 27%, while the S&P 500 returned under 9%. On the other hand, we are also seeing health insurers losing money and consolidation in the industry.
Levels of investment and entrepreneurial activity in health care has hit a level that participants say may be “unprecedented” for the industry. More than 90 new health-care companies employing as many as 6,200 people had been founded since the Affordable Care Act became law as of March 20. Start-ups have continued, and investment in digital health care since the start of 2013 has reached almost $8.2 billion according to Rock Health.
For many health insurers, however, increasing premiums have resulted from claims payments exceeding premiums. Many of the 23 co-ops established at the time of the Affordable Care Act underpriced their coverage and have seen negative cash flow. According to a Goldman Sachs analysis from November, only about 50 new health carriers have entered the commercial market, and almost half are the struggling co-ops. Tens of health plans have also left the market, either through liquidation or mergers. Even the biggest companies are not immune, as the five largest insurers will likely shrink to three; Aetna acquired Humana for $37 billion, and Anthem and Cigna are in merger talks. Whether this news helps or hurts the health care industry depends on one’s perspective, as it would reduce competition and consumer choice. It may help the industry at the expense of consumers, or the mergers may enable larger insurers to afford the increase in claims payments with a lower premium hike.
Has the law contributed to a slowdown in health care and spending?
Authors of the New York Times article last year proposed that in the short term the health care law could increase spending, and that’s exactly what we have seen. According to analysis from Altarum Institute, health spending increased by 5 percent last year, compared with 3.6 percent in 2013, which if accurate would mark the biggest jump since before the recession. This growth is evidenced by the pick-up in health care hiring. Of course, more people are being insured and so more premiums and thus more money is being paid. Behind the obvious reason, however, lies the huge sum people are spending on drugs. According to a Bloomberg report, a lot of the increased spending is due to high drug prices.