Articles on the implementation of ObamaCare.
Dec. 26, 2014, was strike three for Pamela Weldin.
The day after Christmas, Weldin, of Minatare, Neb., had logged on to Facebook to find a message from a friend of hers. Included in the note was a link to an article from the Omaha World-Herald announcing that CoOportunity Health, a nonprofit health insurance company offering plans in Nebraska and Iowa, had been taken over by state regulators.
The insurer, one of 23 Consumer Operated and Oriented Plans, or co-ops, started with the backing of the federal government and received $145 million in loans from the Centers for Medicare and Medicaid Services. But, CoOportunity’s expenses and medical claims would far exceed its revenue for 2014.
The Obamacare window technically just closed this weekend, but a new round of political headaches could just be beginning for the administration.
That’s because it’s tax season, and many Americans could soon be getting an unwelcome surprise that they owe the government a penalty for skipping health insurance coverage.
Up to 6 million Americans are expected to pay a penalty for not having coverage in 2014, according to recent Obama administration projections. The 2014 penalty for this tax season is $95, or 1 percent of family income — purposefully on the weaker side to let people adjust to this new coverage scheme. Most of the uninsured won’t actually face the penalty because they’ll qualify for an exemption, either related to their inability to afford coverage or some other hardship.
Behind the scenes, HealthCare.gov is still a mess.
The “back end” of the Obamacare website still isn’t properly wired to the health insurance companies. It’s slow going for health plans to make sure the 11.4 million people who have signed up end up in the right plan. Subsidy payments aren’t automated, so the insurers get payments based on estimates. And adding information like a marriage or the birth of a child is a convoluted, multi-step process.
Approaching ObamaCare With Humility
Washington can’t get out of Its own way on health care. Give states a chance.
President Obama spoke frequently of humility during last week’s prayer breakfast. Congressional Republicans could use a healthy measure of that virtue should the Supreme Court rule that ObamaCare subsidies are not available in the 37 states with federally-facilitated exchanges.
ObamaCare is the product of a yawning humility deficit. Its core conceit is that a group of very smart and ideologically like-minded people could reorganize the financing of a $3 trillion industry that touches the lives of 320 million Americans.
Its architects boast that more people have “selected a plan” this time around than during the program’s disastrous initial open season. They are quick to overlook the law’s wreckage – canceled policies, loss of employer-sponsored coverage, erroneous subsidies that will require people of modest means to repay the government with interest, and assorted other disruptions and deformations.
A law that is minutely prescriptive too often got its prescriptions horribly wrong. Its flaws will reach the point of absurdity should the Supreme Court rule that its attempt to subsidize health insurance made most health insurance subsidies illegal.
The case of King v. Burwell would be a simple one, but for its social and political implications. The Court is examining a defect in the law, one of many in what is perhaps the most poorly drafted statute in U.S. history. The provision in question provides that subsidized health insurance coverage is available only through an exchange “established by the state.”
The IRS effectively rewrote the law to allow subsidies to be paid as well through the 37 exchanges that were not “established by the state,” but by the federal government. In defending the agency, the Justice Department in essence argues that the IRS can change laws so that they conform to what Congress must surely have meant to write, rather than what they actually wrote.
The Court should instead base its ruling on the bedrock principle that only Congress has constitutional warrant to correct its own legislative blunders. If it does, health insurance subsidies will no longer be available to millions of people who live in states with federal exchanges, presenting 37 Governors with a stark choice between two unpalatable options: submit to ObamaCare’s flawed framework by establishing state exchanges or let their constituents forfeit subsidized coverage.
Democrats will pressure Governors to establish such exchanges while also pushing Congressional legislation to authorize the provision of subsidies through federal exchanges. Republicans are floating alternative proposals that would subsidize coverage for low-income people and those with pre-existing conditions, while stripping ObamaCare of mandates and relaxing some of its other requirements.
These proposals will meet with criticism, some of it justified. Getting the right subsidy in the right amount to the right person (or the right insurance company) on a monthly basis is tricky business. The Administration had 3-1/2 years from the law’s enactment to the launch of the exchanges to get it right. They didn’t. Erecting an alternative federally administered system in a matter of months would risk a similar fate.
Perhaps what is needed is not an alternative national system at all. ObamaCare’s serial pratfalls have led millions to question the federal government’s capacity to administer the law. A judicial smackdown five years after the law’s enactment will reinforce the view that Washington can’t get out of its own way on health care.
Republicans should embrace this sentiment and argue that health care is too important to be entrusted to the people who brought us ObamaCare. They should advocate that Governors be empowered to advance alternative ways of expanding coverage, springing them from ObamaCare’s take-it-or-leave-it trap.
Congressional Republicans could accomplish this by advancing a bill to provide capitated allotments to states that would be based on the amount of refundable tax credits that its residents received during 2014. To qualify for an allotment, a state would be required to develop a plan for providing affordable coverage to low-income residents and those with pre-existing conditions. Each state would decide how best to achieve these objectives, with the results subject to rigorous evaluation.
States that already have set up exchanges could keep them and those that have not could still establish them. But they also could instead choose to be freed from ObamaCare’s one-size-fits-all rigidities by opting to receive allotments. These allotments would provide the resources to launch innovative and effective alternatives to ObamaCare tailored to their state’s unique characteristics. If some states institute defective regimes, the damage would at least be quarantined and not induce national contagion.
Resisting the temptation to develop comprehensive national legislation will prove no easier for Republicans than it has been for Democrats. But if ObamaCare has taught us anything, it is that the good intentions behind sweeping legislation are often overcome by unintended consequences. The humility that might engender perhaps will make them think twice about devising a national regime of health insurance subsidies and instead give each state the opportunity to fashion programs best suited to their circumstances.
It takes a journalist to clear the fog about Republican health policy alternatives. (Yes, they do have alternative plans.) In his new book, Overcoming ObamaCare, Philip Klein, who is the commentary editor of the Washington Examiner, presents a timely and accessible review of the three primary approaches that Republican officials and policy analysts are offering.
Klein acknowledges that Republicans failed to implement serious health reforms when they had control of the White House and of Congress during the George W. Bush administration, and the nation paid dearly when Democrats jammed their still-unpopular health law through when they had control of both branches of government in 2010.
He implicitly warns that if Republicans don’t come up with an alternative to ObamaCare, we could be saddled with ObamaCare’s “government takeover of health care” for good.
“During their time in the wilderness [after HillaryCare], smart liberals took lessons from their Clinton era defeat and refined their health care strategy in preparation for their next opening,” he writes. The book makes it clear that now is the time for conservatives to get to work coalescing around a plan.
Overcoming ObamaCare is a solid primer on conservative policy alternatives – a very useful tool especially for the army of conservatives elected to office in November who are intent on repealing, and in some cases replacing, ObamaCare.
Klein is a good student of conservative health policy, acknowledging “there’s one prominent area in which the U.S. does not have anything approaching a functioning consumer market, and where instead, the consumer is completely left in the dark, given few choices, elbowed out of the decision-making process by large bureaucracies, and given very little incentive to seek out the best deal. Unfortunately, this area accounts for $2.9 trillion in spending, representing more than one-sixth of the U.S. economy. I am, of course, referring to health care.”
As a former journalist, I am biased toward his clear, straightforward approach and his birds-eye reporting of the policy debate as it has unfolded in the political and policy realms.
Klein compares and contrasts the various reform plans and explains the three schools of thought and the philosophies driving them:
Reform. The margins aren’t always as clear as the categories would imply, but he places me in the reform school, saying I favor “a step-by-step approach to undoing ObamaCare.”
I am as opposed as anyone to this law (co-authoring Why ObamaCare Is Wrong for America in 2011), but five years out, reality has taken over. So far, Congress has passed and the president has signed 17 major changes to the law, including repeal of the 1099 reporting provision for small business, the CLASS Act long-term care Ponzi scheme, and blocking funding for the financially-troubled non-profit co-op health plans. Many more are teed up.
Thousands of legislators, millions of companies and tens of millions of Americans have had to make changes in their health care arrangements to comply with federal law. That means our health sector has been changed irreversibly by ObamaCare. We can no longer go back to the system we had before the law passed any more than we can go back to the 1990s. Most of the policies that people had before don’t exist. Many of the doctors that were in the networks their health plans before have retired or have sold their practices to hospitals. Hospitals have merged, and all providers have built new business models to comply with the law. State approval of previous health insurance plans has expired, and the plans can no longer legally be sold because they don’t comply with ObamaCare.
Americans “don’t want a big gigantic replacement plan. That scares them,” he quotes me as saying.
Avik Roy of the Manhattan Institute agrees. “His overarching idea is for Republicans to perform what he’s referred to as a ‘jiu-jitsu’ maneuver. In short, he has proposed that Republicans reform Obamacare to make it more market friendly and then use that modified structure to achieve broader reforms to the nation’s older health care entitlements.” He provides a detailed explanation of the reform plan Avik has offered, “Transcending Obamacare.”
Replace. Jim Capretta of the Ethics and Public Policy Center and Yuval Levin, also of EPPC and editor of National Affairs, are quoted extensively here. “You’re going to have to do replace with repeal,” Capretta says. “You can’t displace this incumbent program without a replace program, in my judgment.”
Jeff Anderson, executive director of the 2017 Project, says the law isn’t “remotely fixable.” Ditto, Budget Chairman Tom Price with his “Empowering Patients First Act.”
He also provides a Cliff’s Notes overview of one of the replace proposals that has received significant attention: The Coburn-Burr-Hatch proposal by the three leading U.S. Senators.
But even some in this “replace” school implicitly agree that reform must evolve from the changed landscape of ObamaCare.
Restart. Finally, he talks about the Restart school, starting with Louisiana Governor Bobby Jindal’s reform proposal and his criticisms of those who would propose “ObamaCare Lite.” Cato’s Michael Cannon also is in this school, with his “Large HSA” proposal.
Klein takes a deep dive in each of these chapters into the tax treatment of health insurance – which is at the heart of conservative health reform. Conservatives have long supported providing financial assistance to the uninsured, especially those who are not offered or cannot afford employer-based health insurance but who make too much to qualify for public programs, especially Medicaid.
But the debate continues on the right about how to structure those subsidies – through tax credits, refundable tax credit, or tax deductions — with many variations in different plans. Klein portrays the vigorous debate that takes place in the policy community including, for example, an intense discussion with Louisiana Gov. Bobby Jindal (a tax deduction supporter) and policy experts Klein attended in April of 2014.
Klein doesn’t take sides. But he acknowledges, in his conclusion, “Republican control of the Senate and a spirited GOP presidential nomination contest should provide a great opportunity to debate many of the ideas explored in this book.”
And then we warns: “Those who aren’t happy about the direction of American health care need to start the process of coalescing around an alternative approach. If they can do that, there’s a chance to overcome ObamaCare and move toward a health care system that puts the consumer first.”
One final plug: I am biased in thinking that we must move to a new system that puts consumers in charge of their health care decisions and that we must seize opportunities to begin that process. The pending Supreme Court decision in King v. Burwell provides opportunities to make such changes: If the High Court were to decide that the IRS acted illegally in providing subsidies through federal health care exchanges, Congress and 36 governors are highly unlikely to sit back and watch as five million people lose their health insurance coverage. Congress already is working on plans to use the possible opportunity of a win in the courts to give citizens new options that could lead to the transformative change that underpins each of the conservative philosophies.
The Galen Institute today released an updated version of its list of significant changes made to the Affordable Care Act by the Obama administration, the Congress, and the U.S. Supreme Court since the law was passed in March of 2010. Today’s list includes four additional changes made by the Obama administration, most of them contrary to statutory language. By our count, more than 46 significant changes have been made to the law: at least 28 that the administration has made unilaterally, 16 that Congress has passed and the president has signed, and 2 by the Supreme Court. Here are the latest additions:
•Bay State Bailout: More than 300,000 people in Massachusetts gained temporary Medicaid coverage in 2014 without any verification of their eligibility, with the Obama and Patrick administrations using a taxpayer-funded bailout to mask the failure of the commonwealth’s disastrously malfunctioning website. (January 2014)
•Failure to enforce abortion restrictions: A GAO report found that many exchange insurance plans don’t separate charges for abortion services as required by the ACA, showing that the administration is not enforcing the law. In 2014, abortions were being financed with taxpayer funds in more than 1,000 exchange plans. (Sept. 16, 2014)
•Risk Corridor coverage: The Obama administration plans to illegally distribute risk corridor payments to insurers, despite studies by both the Congressional Research Service and the GAO saying a congressional appropriation is required before federal agencies can make the payments. (Sept. 30, 2014)
•Transparency of coverage: CMS delays statutory requirements on insurance companies to disclose data on the number of people enrolled, disenrollment, number of claims denied, costs to consumers of certain services, etc. (Oct. 20, 2014)
By Tom Miller & Grace-Marie Turner
Tax subsidies are one of the mechanisms through which the Affordable Care Act expands access to health insurance. These subsidies are available only to those who purchase highly regulated policies through government-run exchanges, and are allocated on a monthly basis to insurance companies to offset the costs of premiums and sometimes out-of-pocket costs.
The law’s formula for determining the amount of these premium subsidies specifies that people are eligible for them if they are enrolled in qualified plans offered in “an Exchange established by the State under [section] 1311 of the Patient Protection and Affordable Care Act.” Only 13 states are operating such exchanges this year. The rest are relying on exchanges created by the federal government. But in 2012, the IRS wrote a rule that allows the subsidies to flow through the federal exchanges as well. About 6 million people were enrolled on the federally run exchanges after open enrollment closed for the 2014 plan year, about 85 percent of whom received the subsidies.
The Supreme Court has agreed to hear a case, King v. Burwell, challenging the IRS rule. Plaintiffs argue that the law clearly restricts the subsidies to state exchanges, that this gives states an incentive to create their own exchanges, and that administrative agencies like the IRS cannot alter legislation or spend taxpayer dollars without statutory authorization by Congress. Defendants say that “established by the State” is at worst a drafting error, not a reflection of legislators’ intent, and that Congress wanted subsidies to be available in all of the states.
Will Congress Act?
The Supreme Court justices will hear oral arguments in the case on March 4. If the justices decide that the IRS acted illegally, residents of as many as 37 states soon will become ineligible for the subsidies. As a result, most will begin to face the full cost of the unsubsidized premiums on their policies and will be more likely to drop their coverage.
Many court watchers believe the decision could hinge on whether Congress has a viable plan to provide for alternative, if not continued, coverage for these millions of people. As a result, efforts are underway to develop legislation to transition those on the federal exchanges — especially lower-income individuals — to other types of subsidized coverage. The legislation should not only take care of people who are at risk of losing their current coverage, but also take the opportunity to move our system toward a more competitive market, centered around individual choice.
The congressional proposals exist primarily in draft form so far. Most aim to hold people in federal exchanges harmless going forward, providing an extension of their current coverage through the end of the current plan year. Most also would give people a much greater range of health-insurance options, while removing federal regulations and mandates for individuals to purchase or for employers to offer policies.
There is general agreement that Congress will need to act to provide assistance to the roughly 5 million people who would lose their subsidies as a result of the court decision. There are two schools of thought about how to do this: either through new, less restrictive federal tax credits to individuals; or through allocations to the states to distribute through other mechanisms, such as those used for the Children’s Health Insurance Program.
The public-relations wars over the pending Supreme Court decision already have begun: Families USA is leading the effort on the left and will try to show how many people will be harmed if the subsidies are struck down. Supporters of free markets and limited government are mounting their own serious media-outreach effort to show the harm that this law is doing, emphasizing the soaring cost of health insurance, the threat of mandate penalties, the labor-market disincentives, the disruptions in previous coverage, and patients’ reduced access to their preferred medical providers. Critics of the IRS rule need to explain very clearly that Congress is ready and willing to act to take care of the people who will lose their coverage if the Supreme Court decides not to allow subsidies on the federal exchanges.
The Consequences of Doing Nothing
If the Supreme Court rules that the IRS acted illegally, the government’s authority to distribute tax subsidies through federal exchanges will end within a month, assuming no new action by Congress. These exchanges can continue to operate, but the expensive insurance sold there will be much less attractive to customers without tax subsidies. States that created their own exchanges will be able to continue to operate and distribute subsidies, and other states may consider qualifying as a state exchange after a King ruling.
In states that have not established their own exchanges, the federal government will effectively be unable to impose any employer-mandate penalties. That is because the penalties are triggered when someone without access to employer-based coverage receives subsidized coverage on an exchange.
The individual mandate will take a blow as well. The mandate does not apply if the lowest-priced coverage available costs more than 8 percent of one’s household income, and the lack of subsidies will drive up the net cost of coverage. So, individuals in states that don’t establish exchanges will face higher income thresholds before the mandate can apply to them.
There will be numerous indirect effects as well. With both the employer and individual mandates weakened, the ACA’s other insurance rules will be weakened too. In states that don’t run exchanges, employers won’t be penalized for offering non-qualified coverage, and fewer individuals will have to, or will want to, buy ACA-prescribed coverage.
Insurers on the federal exchanges, meanwhile, will have fewer enrollees, likely skewed toward higher-risk patients who lack other coverage options. Many insurers could drop out, and losses for those that remain will add to the claims against ACA’s “risk corridor” funds. This would accelerate pressure to resolve the issue of whether these payments are meant to be budget-neutral — that is, payments for losses can be no greater than payments collected from more profitable exchange insurers going forward..
Countermoves by state and federal officials wanting to keep ACA coverage afloat are likely to include changes to Medicaid coverage, with more states agreeing to the law’s Medicaid expansion and possibly seeking federal waivers to cover people above the current income ceiling (138 percent of the federal poverty level). Officials also may get clever with the definition of a state-established exchange, for example by renting the federal exchange website mechanisms, contracting out to piggyback on other state exchanges, revising federal regulations for what constitutes a section 1311 exchange, etc.
Members of Congress and state officials must not simply restore the current law’s many costs and regulatory burdens. Instead, they need to prepare now to take advantage of the opportunities that will be available to them to improve our health sector and the choices of coverage available to consumers if the Supreme Court rules against subsidies on federal exchanges.
Tom Miller is a resident fellow at the American Enterprise Institute. Grace-Marie Turner is president of the Galen Institute.
WHEN Karen Pineman of Manhattan received notice that her longtime health insurance policy didn’t comply with the Affordable Care Act’s requirements, she gamely set about shopping for a new policy through the public marketplace. After all, she’d supported President Obama and the act as a matter of principle.
Ms. Pineman, who is self-employed, accepted that she’d have to pay higher premiums for a plan with a narrower provider network and no out-of-network coverage. She accepted that she’d have to pay out of pocket to see her primary care physician, who didn’t participate. She even accepted having co-pays of nearly $1,800 to have a cast put on her ankle in an emergency room after she broke it while playing tennis.
Stunning figure comes from Congressional Budget Office report that revised cost estimates for the next 10 years
Government will spend $1.993 TRILLION over a decade and take in $643 BILLION in new taxes, penalties and fees related to Obamacare
The $1.35 trillion net cost will result in ‘between 24 million and 27 million’ fewer Americans being uninsured – a $50,000 price tag per person at best
The law will still leave ‘between 29 million and 31 million’ nonelderly Americans without medical insurance
Numbers assume Obamacare insurance exchange enrollment will double between now and 2025
“I’m sorry sir,” the polite Healthcare.gov customer-service agent said. “There’s nothing I can do. You’re either going to have to enroll in Medicaid or you’re going to have to pay the full health-insurance rate.”
“The rate you quoted earlier?” I asked. “That’s nearly 30 percent higher than my current insurance bill, I just can’t afford it.”
“You’ll have to pay the full rate, yes,” the agent replied.
“I don’t understand,” I explained. “I have plenty of money to pay you a reasonable rate, but I can’t afford to pay the same rate a millionaire would be asked to pay. Why can’t I just receive a partial subsidy? I’m willing to pay more than what Medicaid offers.”
“Sir, that’s just not how the system works.”
Right. That’s not how ObamaCare works; it doesn’t work at all.