President Obama’s signature health law achieved a major milestone on Oct. 1, when its subsidized insurance exchanges went online. But Obamacare is already reshaping the health insurance landscape. If you want to track how well the law is working, keep an eye on three aspects of it.
Is it driving up the cost of insurance?
According to the Congressional Budget Office, 25 million Americans today shop for health coverage on their own. That figure could hit 46 million by 2017, as Obamacare’s exchanges get under way.
But a critical problem is emerging with the exchanges. The health law imposes a battery of new regulations, mandates, taxes and fees upon the individual-insurance market. According to research conducted by my colleagues and me at the Manhattan Institute and published at Forbes.com, many will see their rates double or even triple under the law. Healthier and younger individuals will face the steepest hikes.
The White House argues that subsidies will protect most people from these rate increases. But our interactive map (Google “Obamacare cost map“) shows that, on average, one’s income must be 40% below the median in order to save money on premiums.
In addition, many of the law’s taxes and regulations apply to people with employer-sponsored health insurance. In June Delta Air Lines wrote a letter to the Obama Administration complaining that its health care costs would increase by nearly $100 million in 2014. In September the AFL-CIO passed a resolution grousing that the law “will drive the costs of…union administered plans, and other plans that cover unionized workers, to unsupportable levels.”
Are young and healthy people signing up?
A key contention of the Obama Administration is that, despite the fact that health insurance will cost more under the law, the quality of that insurance is higher because it contains consumer protections, such as ensuring that no one can be denied coverage because of a preexisting condition.
But if you’re healthy and/or young today, you don’t have a preexisting condition. So doubling the cost of your insurance might not seem like such a great deal. And the success of the exchanges depends on the willingness of these healthier individuals to pay more for coverage in order to reduce the costs of other people who are sick.
We’ll know how this has all played out by the end of March, when the exchanges’ initial open enrollment period ends. The CBO has predicted that 7 million Americans will sign up for coverage on the exchanges by then. If the actual figure ends up being lower, or comprises a sicker population, exchange premiums will increase further, making it even harder for some healthy individuals to gain coverage.
Are employers dropping coverage and moving workers into the ACA exchanges?
In 2011 Shubham Singhal and his colleagues at McKinsey published a survey indicating that “30% of employers will definitely or probably stop offering [employer-sponsored insurance] in the years after 2014,” because the subsidized exchanges offer workers and employers a better option.
Large employers don’t appear to be dropping coverage. Instead companies like Walgreen are using outside vendors to set up private insurance exchanges, in which workers are given a defined contribution–say, $5,000 per year–to shop for coverage from a number of company-sponsored options.
What we do know is that it appears small employers with close to 50 full-time employees are shifting many of their workers to part-time status in order to avoid being forced by Obamacare to pay for their health coverage.
In the near-term, for most people the Affordable Care Act is likely to make health insurance less affordable, not more. But the law could also encourage more Americans to shop for their own coverage and care. If that happens, the law could end up seeding a consumer-driven health care revolution.