The Affordable Care Act One Year Later

This time last year there seemed to be a new catastrophe or scandal every day related to the roll-out of the Affordable Care Act, a.k.a. ObamaCare:  many predicted the federal website would never be up and running by the looming deadline, the cost kept escalating, private contractors publically blamed bumbling bureaucrats and vice versa. Meanwhile, individuals who attempted to sign up ran into technical problems, and there were horror stories about people being told they would be dropped by their current insurance provider despite the fact the president had assured them this would not happen.   Confusion was everywhere.  Ultimately, key players got fired or resigned in disgrace.

So, where do we stand today, one year later?

That’s what the non-profit Transamerica Center for Health Studies (TCHS) wanted to know.

The Young and Resistant

The “Affordable” in the name of this massive federal insurance program refers to two things: holding down the cost of medical care at the consumer level and at the same time making sure that the premiums collected offset the benefits private insurance providers have to pay so that they can remain in business.

To this end, a key component of the math that went into designing the ACA was that in order to offset higher heath care spending by the elderly, there had to be a critical mass of younger, heathier participants, individuals who would pay more in premiums than they would actually use in benefits.

According to TCHS Executive Director Hector De La Torre, the government “did not hit its target of 35% of Americans under age 35.”  Instead, only 28% of those who signed up for insurance fall into this category.

Insurers Step Up to the Plate

The good news is that the free market bailed out the government.  More private insurance companies than expected have signed up to offer policies through the so-called “healthcare exchanges”- state marketplaces where individuals can compare coverage and prices.  This additional competition in some states “kept premiums down,” according to De La Torre, who adds that consumers report they are “mostly satisfied” with the options and quality of healthcare they have access to.  Still a lot of people are not buying into this program.

When asked why they have not signed up for health insurance, insufficient income is cited by just three percent of those surveyed- even though they could probably get coverage for free due to the government subsidy that’s available.  One-in-five said they oppose government-mandated insurance on principle.  However, nearly 60% did the math and decided that the insurance is not worth it.  For them, paying their health costs out-of-pocket as well as the penalty for not signing up is less expensive than paying monthly premiums.   Presumably, a significant number of these individuals could afford to pay for health insurance and have simply made a rational decision not to sign up.  Unfortunately, these are precisely the consumers the ACA needs in order to hold down costs.

The graphic below illustrates that there are those who remain uninsured tend to fall into distinct categories centered on income, education level, age and ethnic background.

A looming problem is that those who received a government subsidy to help cover the cost of their monthly premiums could be in for a rude awakening.  Literally hundreds of thousands of people have failed to provide the income documentation needed to justify the subsidy they received.

There’s No Doctor for this Pain

According to De La Torre, the government provides either an upfront offset to your monthly premium or a reduction in your federal tax bill.  He warns that “there could be a clawback” if you received the monthly subsidy.   “It’s incumbent on the individual [who received a request for additional information] to submit the paperwork.”   If, instead, your subsidy is coming in the form of a lower federal tax bill, you’re going to be out of luck. (1)

There’s another way you could take a financial hit. Under the ACA, you must be “continuously insured” for at least 9 months of the year.  Otherwise, you will be charged a tax penalty when you file your 2014 income tax return.   The penalty is $95/person or 1% of your income, whichever is higher.  Thus, if your income is $50,000/year, your penalty would amount to $500.

The two requirements are independent of each other.  “If you make premium payments all year but don’t submit documentation, you’ll be fine in terms of the tax penalty, but not the subsidy clawback,” explains De La Torre.

Businesses are Adapting

The TCHS survey also looked at how the ACA is impacting employers.   One third of businesses cited the additional cost of mandatory health insurance is their main concern.  This is especially true among those who operate small firms.

Many are still adapting and deciding how they will respond to new mandates that roll out. The most significant one is that starting in 2015 employers with more than 100 employees will have to provide health insurance to their workers or face a federal penalty.  According to De La Torre, while “most” firms of this size say they already provide health insurance to their employees, many still have to decide whether they will cover part-time workers, defined as those who work less than 30 hours/week,  and dependents  such as spouses and children.