Obamacare was a good start and has saved a lot of people who didn’t have health insurance. Stories abound! It was based in part on expanding Medicaid by relying on individual states to raise the income limits for Medicaid eligibility. But according to the most recent data twenty states are still refusing any expansion whatsoever in their Medicaid programs. Furthermore, as is well known, the ACA relies exclusively on private medical insurers on newly created “exchanges” to offer competitive rates and coverage. Though there’s been improvement for some, many still find going rates out of reach. This is because much of the ACA consists of consumer protection measures such as the ban on dropping the insured when they get sick; a mandate to cover preexisting conditions; a mandate that companies must commit 80% of their net revenues to member coverage and minimum coverage standards that render many existing health plans in non-compliance under the ACA. This last measure is the one that has left many of working poor households (those at or below 200% of the federal poverty line or FPL) without coverage options as their cheaper, but poorer quality plans, had to be dropped and replaced by those that comply with the new health care law.
ACA was estimated to be a boon to the working poor. According to a Brookings Study from early 2014, those in the bottom twenty percent of the income scale would see an average annual income increase of six percent with the bottom ten percent experiencing roughly a 7.2% increase. The study’s predictions were somewhat born out; according to a Mother Jones article from earlier in the year;
Of the 11.7 million buyers of private health plans on the ACA exchanges, over 60 percent have incomes under 200 percent of the federal poverty level. The 11 million beneficiaries of the Medicaid expansion all have incomes under 138 percent FPL. Taken together, those numbers mean about 80 percent of the law's direct beneficiaries have incomes below 200 percent FPL.
It has been widely acknowledged that about 34% or one third of all US households are below 200% of the FPL and are thus considered working poor suffering chronic financial instability and job and income insecurity. Many poor states have working poor households that comprise over 40% of all households. These are typically the states that refuse to expand Medicaid. ACA has cut the overall uninsured rate by 15 million people or roughly one third of the total number of uninsured before the law was enacted. According to the MJ article, which cites Urban Institute figures, the uninsured rate for the poor has declined by half while for the working poor and middle class (those between 138% and 400% of the FPL) the uninsured rate has been cut by 7.6%. This is a significant accomplishment that has doubtless saved lives. But it is far from sufficient. About half of all those uninsured in 2010 when ACA passed in Congress still are uninsured lacking coverage by either Medicaid or a private plan. One reason is that the working poor are largely eligible for federal subsidies for their plans while more middle class households are not. It is the latter that has not been reached by ACA.
Darlena Cunha explains the problem in In These Times;
As soon as an individual or family finally moves above the federal poverty line, their insurance premiums and deductibles can skyrocket into the tens of thousands—meaning if they make use of this plan, they may well end up worse off financially than they were when considered impoverished.
This is the problem with relying on private insurance plans subsidized by federal tax dollars; there are no caps on premiums so costs can rise freely while monopoly pricing prevents affordability through the much anticipated competition. According to one Kaiser report the health insurance market remains highly concentrated and the introduction of the state wide exchanges mandated by ACA hasn’t changed this much. When Obamacare was first signed into law, about thirty states’ health insurance markets were dominated by one insurer with half or more of the market. Currently, despite more options and providers entering the market, monopoly conditions still exist making rates higher than expected. What was interesting about the report was that both ACA’s supporters and detractors agree on the monopoly pricing problem. The Heritage Foundation, whose ideas were originally the inspiration for an ACA type reform as a way to preempt single payer proposals in the 1980s, concluded that nearly four fifths of consumers nation wide face a choice of three or fewer providers with very similar premium rates. Alabama is famously dominated almost entirely by only one provider! ACA supporters admit that more than 90% of consumers will have five or fewer providers from which to choose and in most cases three or fewer.
In essence, the more than $1.3 trillion in federal health care spending for both Medicaid and private health care plan subsidies by 2024 will be significantly affected by the existing monopoly pricing system which the ACA has not succeeded in eliminating. This will hamper the extension of coverage to the middle class and the ability to hold down medical costs. Most of the US middle class already had coverage through employers or other private plans; it was the working poor who was mostly uninsured and who needed affordable coverage. The exchanges will do little in the long term to lower costs for the nation as a whole due to the failure to address the monopoly pricing system that existed long before ACA became law.
A fairly exhaustive report by the McKinsey Center for US Health System Reform from 2015 concludes that competition in both carriers and available plans has been improved by ACA over the last couple of years. They state that of the 41 states providing data on health care exchange participation, number of providers and available products, the number of carriers increased by 26% (which often means the entrance of only one or two new providers) while in 19 states the number of available new types of plans increased by about two thirds. But one point that is reiterated over and again is that in roughly half of all states with exchanges, net premiums (cost after subsidies are taken into account) will increase for 70% of those eligible while for 29% there will be a slight decline (one percent will see no change). Even by the Center’s overall optimistic outlook, the impact of ACA on competition and pricing in the near future is limited at best.
Premium caps and subsidies contain increases for those below 200% of the FPL while those between 200% and 400% (the middle class) will see the greatest net increase in premium rates. This is not to say that the middle class was harmed overall by ACA, Many received improved health care coverage at affordable rates. But the problem is that for most of those in the 200 to 400% of the FPL range, income increases have been offset by subsidy decreases and premium increases. One problem, as previously mentioned, is the 2012 US Supreme Court decision allowing states to opt out of the Medicaid expansion for those from working poor households earning up to 138% of the FPL. These folks are ineligible for the ACA subsidies but can’t get Medicaid. The resulting “coverage gap” has contributed to increased premiums by putting upward demand pressure on the exchanges from those who would normally get Medicaid, and by also deepening the “adverse selection” problem by putting many higher risk entrants into the private insurance market. Medicaid expansion would thus reduce private premium costs now being born by the middle class.
The main problem of ACA is that it based its reform on exactly what conservatives and private industry has always advocated, the private health insurance industry. Though ACA has increased the number of carriers and available health insurance plans it has done almost nothing to cope with monopoly control of the market. An AMA study from early 2015 established that after one year of the state exchanges, national concentration of the health insurance market had continued unabated with “a lack of competition in 72% of urban markets. The study noted further that“...17 states had a single health insurer with a commercial market share of 50% or more, and 45 states had two health insurers with a combined commercial market share of 50% or more.” This level of concentration exceeds that of pre-ACA levels.
This is not to imply, as some conservatives have ingenuously done, that ACA is responsible for this trend. It’s just that it has failed to stem the tide of increased concentration normal under late capitalism. Relying overwhelmingly on the private market is part of the general problem. Naturally, ACA has extended coverage to millions who would not have otherwise gotten it. It is also too early to pass judgement on whether or not ACA is a long term success. Nearly half of all the previously uninsured are covered now under either private plans or Medicaid. Were it not for Republican obstruction, we might be closer to 100% of the uninsured getting coverage mostly through expanded Medicaid rolls in the states.
And this is the exact point. There really is no private solution to health care insurance. Despite all the efforts of small government conservatives, nearly 70% of all US health care spending is born by government at some level up from 59% at the start of the 2000s. This inexorable trend is not politically driven at all. It is the logical outcome of capitalism whereby income is increasingly concentrated and monopoly pricing and profit driven rates place more and more people further out of reach of vital services like health care. Inevitably, government must step in to fill the gaps just as it has to relieve the problem of chronic stagnation with higher levels of government spending at all levels (now 40% of GDP) and to stabilize a society with growing social needs unmet by the private sector.
Health insurance coverage under the ACA is still less than two years old. Only time will tell us of its real merit. Though it has actually accomplished more than expected, only a universal single payer system can really solve the problem of access to health care by the working poor and middle class. Persistently high levels of uninsured, rising premiums, rising out of pocket costs for plans covering the poor and growing industrial concentration in private health insurance is evidence of that. Capitalism is not a charity operation. It is a system driven by profit alone regardless of the social consequences. Perhaps this will be Obamacare’s ultimate historic lesson.