Complications arising from the Affordable Care Act (ACA) premium tax credits (PTCs) are causing millions of people to effectively break the law. People who benefit from advance premium tax credits (APTCs) must file tax returns and include a form to reconcile the advanced amount to the actual end-of-year entitled amount. The failure of so many people to fulfill this new legal requirement has led the government to spend more than it should have as APTCs tend to be higher than legally entitled amounts.
The big news is that tax filers, as of April 28, 2016, reported $15.8 billion in total APTC payments. According to data released by HHS, I estimate the amount of APTCs paid in 2015 equaled $26.7 billion—nearly $11 billion more than the amount reported by tax filers. It appears that about 3 million households that received an APTC in 2015 had not filed the required paperwork with the Internal Revenue Service (IRS) by the end of April 2016.
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They say you’re damned if you do and you’re damned if you don’t. So House Speaker Paul Ryan did, and got damned on both the left and right—and all but ignored by his own party’s presidential candidate—when he unveiled his caucus’s outline for a replacement of the Affordable Care Act.
Which raises the question: How serious can this ACA alternative be? Maybe not very. The centerpiece of Ryan’s proposal—tax credits for everyone who needs to purchase individual policies regardless of income—may not go far enough to prevent people from losing coverage while creating new spending that would benefit high-income earners who can already buy their own health insurance.
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The health insurance exchanges that are the beating heart of Obamacare are on the edge of collapse, with premiums rising sharply for ever narrower provider networks, non-profit health co-ops shuttering their doors, and even the biggest insurance companies heading for the exits amid mounting losses. Even the liberal Capitol Hill newspaper is warning of a possible “Obamacare meltdown” this fall.
Three states – Alaska, Alabama, and Wyoming – are already down to just a single insurance company, as are large parts of several other states, totaling at least 664 counties.
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Humana recently announced that next year it is withdrawing from 88% of the counties where it sold Affordable Care Act (ACA) exchange plans this year. United Healthcare forecasts higher earnings in 2017, stemming in part from its decision to shut down most of its exchange business. Aetna has cancelled plans to expand its ACA market footprint and is instead reevaluating its current participation. At least four states, Alaska, Alabama, Oklahoma and Wyoming will likely have only one exchange insurer this coming year. Sixteen of the 23 co-ops initiated with ACA funding have collapsed. And researchers supportive of the ACA estimate that insurers are requesting average gross premium increases of 23% next year These data points suggest the ACA’s individual market changes are faring poorly thus far.
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House Republicans on Wednesday released their healthcare spending bill for fiscal 2017, boosting funding to fight opioid abuse and the Zika virus while taking aim at ObamaCare and abortion.
Insurers helped cheerlead the creation of Obamacare, with plenty of encouragement – and pressure – from Democrats and the Obama administration. As long as the Affordable Care Act included an individual mandate that forced Americans to buy its product, insurers offered political cover for the government takeover of the individual-plan marketplaces. With the prospect of tens of millions of new customers forced into the market for comprehensive health-insurance plans, whether they needed that coverage or not, underwriters saw potential for a massive windfall of profits.
Six years later, those dreams have failed to materialize. Now some insurers want taxpayers to provide them the profits to which they feel entitled — not through superior products and services, but through lawsuits.
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Insurers from Oregon to Pennsylvania, including a failed health-care co-operative and two long-established Blues plans have lost billions of dollars selling Obamacare policies. Now they are suing the federal government to recoup their losses. In a testament to industry desperation, insurers are asking federal judges to simply ignore a congressional ban on the payment of these corporate subsidies.
The regulatory atrocity that is Obamacare inspired this race to the courthouse. Despite billions in subsidies — to both low-income individuals and well-capitalized insurance companies — the industry has incurred big losses in the individual market.
In a paper published June 28 by the Mercatus Center, Brian Blase (Mercatus), Ed Haislmaier (Heritage Foundation), Seth Chandler (University of Houston), and Doug Badger (Galen Institute) used data derived from insurance-company regulatory filings to determine the extent and source of those losses. The study examined the performance of 174 insurers that sold qualified health plans (QHPs) in 2014 to both individuals and small groups (generally companies with 50 or fewer workers).
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The billboards went up quickly. The customers came in droves.
Then, in October, Arches collapsed as suddenly as it went up.
Now eight months after it was announced that the state’s only nonprofit insurance co-op would be dissolved, Utah hospitals are still waiting on about $33 million in outstanding claims that the Utah Department of Insurance says it likely cannot pay until 2017.
Officials with the insurance department say they are doing the best they can to create a “soft landing” for Arches after the federal government reneged on what was supposed to be a $11 million payment this summer.
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The GOP House blueprint for health reform repeals these taxes. Specifically, the report cites:
- the 3.8 percent bracket in the Medicare payroll and self-employment tax
- the 3.8 percent “net investment income tax” (NIIT) on savings and investment
- the additional 10 percentage point surtax for non-qualified health savings account (HSA) withdrawals
- the “medicine cabinet tax” which denies the use of pre-tax HSA, health reimbursement arrangement (HRA), and flexible spending account (FSA) dollars for the purchase of non-prescription, over-the-counter medicines
- the $2500 cap on medical FSA deferrals
- the “Cadillac plan” tax of 40 percent on high cost health insurance plans
- the “health insurance tax” (HIT)
- the tax penalties associated with the individual and employer mandates
- the medical device excise tax
- the industry tax on pharmaceutical companies
- the “high medical bills tax” which disallows an itemized deduction for medical expenses for millions of middle class families
- a tax on employers helping their retired employees purchase Medicare Part D plans
With time running out for the Obama administration to prove the success of the Affordable Care Act, officials are aggressively targeting a group that could help turn things around: young people.
Federal health officials announced Tuesday they will comb tax records to find 18-34 year-olds who paid the penalty stipulated under President Barack Obama’s health act for not buying health insurance and reach out to them directly with emails to urge them to avoid even higher penalties scheduled for this year. They also plan to heavily advertise the enrollment campaign, including a promotion with trendy ride-sharing service Lyft to offer discounted rides to enrollment events.
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