The Patient Protection and Affordable Care Act — also known as Obamacare — has dominated the political conversation for the last five years since the legislation was introduced in 2009. Now, at long last, key parts of it are here, but for how long may depend on factors outside either political party’s control.
Obamacare has many complicated moving parts. Even an attorney specializing in health care legislation would have trouble dissecting all of them. One component involves health care exchanges that just went live.
The exchanges vary slightly from state to state, depending on whether the federal government or state government is in charge. Arkansas chose a hybrid approach with a federal and state partnership. In addition, the state’s exchanges are unique because the Arkansas Private Option Plan uses federal Medicaid expansion dollars to subsidize the purchase of insurance through the exchange rather than a traditional Medicaid expansion program.
The weeds get thick quickly on the details but basically the exchanges are open for individuals who do not have qualifying health insurance offered by their employer. The word qualifying is important since an employer must not only offer health insurance, but the benefits must be structured to include at least the minimum standards required by Obamacare and the cost to employees must not be over a certain percentage of their pay.
The debate over Obamacare remains hot in Washington. The Republican-controlled House is ready to scrap the whole law, but the Democratic-controlled Senate supports it. What’s left is gridlock.
Despite the rhetoric, the debate in Washington will not decide the fate of the program. It will come down whether or not the program works. That will depend on added costs compared to new benefits.
When the law was passed, the president famously promised that Americans who like their health insurance can keep it. While technically true, the question is whether or not they can afford it.
Nothing is free. Added benefits required to be a part of employer-offered health care insurance will have a cost impact in the form of increased premiums. The increase is borne either by the employer or the employee. Either way, someone is paying. The notion that greedy insurance companies could give up huge evil profits is not based in reality.
The other group that will feel the impact is healthy individuals that for whatever reason purchase insurance on their own. The new individual mandate requires everyone to have qualifying health insurance or pay a penalty.
Again, the key word is qualifying. One of the many new requirements for qualifying health insurance is the prohibition against denying coverage based on pre-existing conditions. The only factors that can now be used are age, location, weight, and smoking status. Because of that, a healthy individual will now pay the same premium as an individual of the same age who has had a multitude of costly health issues.
Some insurance companies are offering health insurance that appears to purposefully not qualify under Obamacare by offering lower premiums for healthy people with no pre-existing conditions. Those plans, however, do not meet the mandate requirements and will require policyholders to pay the mandate penalty. In 2014, that is either $95 or 1 percent of an individual’s adjusted gross income, whichever is higher. Many are mistakenly focusing on the $95, when in reality the 1 percent penalty will almost always be higher — in some case much higher.
Of course, that is just the tip of a very large complicated iceberg. In the end, it will boil down to whether the American people feel more of the impact of the cost or the benefits.
The system will only work if two things happen
• First, healthy people decide to go on the exchanges instead of going without insurance or buying cheaper non-qualifying policies and paying the penalty. The exchange pool needs healthy people paying premiums to cover those with more expensive health care costs. Otherwise, the math does not work.
• Second, the plan needs employers to offer qualifying health care insurance and their employees to stay on the employer-provided plans. The employer mandates have been delayed a year so it will be interesting to see how that portion plays out. If employers send employees — particularly those who qualify for subsidized coverage — to the new exchanges, then the exchanges likely will not be able to afford the influx.
Politicians in Washington can and will debate Obamacare ad nauseam, but ultimately continuation of the program will depend on whether the implementation is a success or a train wreck.
Jason Tolbert is an accountant and conservative political blogger. His blog — The Tolbert Report — is linked at ArkansasNews.com. His email is jason@TolbertReport.com.