WASHINGTON — As the new health-insurance law kicks in, so does the law of unintended consequences.
In the wake of the rollout, contend opponents of President Barack Obama’s health-care reforms, many will discover that the Affordable Care Act (ACA) not only has made their insurance options more expensive, but has also introduced financial uncertainty and disincentives to marrying and having families.
The rollout of the ACA, also called "Obamacare" by the law’s friends and foes alike, had a rocky start on Oct. 1, when the federal and state health-insurance exchanges opened for enrollment. Despite intense interest in the new online exchanges, relatively few people have actually participated in the open enrollment period that lasts until March 31, 2014. The Associated Press reported that, three weeks later, just 467,000 applications had been filed, roughly split between the state and federal exchanges. But, as of press time, the White House had not released any figures on how many Americans have successfully enrolled in a new health plan.
Healthcare.gov, the portal for the federal exchange that covers 36 states, had received 19 million hits, according to the Department of Health and Human Services (HHS), as of press time; the site also kept crashing on visitors and needed to be fixed.
The law allows a projected pool of 35 million uninsured Americans to have a fresh opportunity to obtain health coverage, either by enrolling in private health insurance through the exchanges or the newly expanded Medicaid program (although not all states have expanded Medicaid).
The law will certainly help individuals with pre-existing conditions to buy health insurance without facing far higher costs due to their conditions. What remains to be seen, however, is whether the law will deliver on its promise to provide affordable health insurance to the vast majority of Americans.
Kaiser Health News reports that insurance companies are sending out hundreds of thousands of letters informing individuals who buy their own coverage that their health policies are being canceled because they do not have all the "essential health benefits" mandated by the ACA. Many now have the choice of continuing the same amount of coverage at a higher premium or trying to shop around for alternatives on the exchanges. Approximately 14 million people buy their own health policies instead of purchasing them through their employers.
Other reports have indicated that many individuals have experienced "sticker shock" when looking at their options on the exchanges.
"For most people with large families, this is going to be a very difficult thing to afford," Jeremy Nichols, an Alabama small business owner with six children, told a local WAFF television reporter. Nichols said his premiums rose close to 300% above the $463 per month he had previously been paying, because the insurance company informed him that his existing policy was not ACA-compliant. In order to keep the same Blue Cross Blue Shield plan, Nichols was informed he would have to pay a $1,212.47 monthly premium after Dec. 31.
"For the vast majority of people, Obamacare is going to make health insurance less affordable," said Michael Cannon, director of health-policy studies for the Cato Institute, a free-market think tank. "There are requirements for people to purchase more health insurance than they need and requirements they may find morally objectionable."
The state and federal health exchanges feature four main types of plans, ranging from "Bronze" to "Platinum." A fifth plan called "Catastrophic" is available to individuals 30 years old and under who meet certain requirements. In general, plans on the lower end of the spectrum ("Bronze," "Silver") have lower premiums but higher deductibles. Plans on the higher end ("Gold," "Platinum") have higher premiums but lower deductibles. Consumers’ share of their own health-care costs would be 40% for the "Bronze" plan, 30% for the "Silver" plan, 20% for the "Gold" plan and 10% for the "Platinum" plan. A Manhattan Institute analysis of HHS data, comparing the five cheapest existing plans available with the five cheapest plans available on the exchange, showed younger men may see their insurance rates rise on average 97% to 99%, and younger women may see an average 55% to 62% rate increase.
Scott Griswold, a Catholic independent insurance agent for 22 years in South Carolina, told the Register that the ACA is not financially friendly for many families. Griswold pointed out that his family’s high-deductible plan caps their out-of-pocket expenses at $10,000. But those types of plans are no longer available to consumers because they do not fit the bill for the ACA.
"In my family, if the worst happened, the most I would have to pay is $10,000 per year," he said.
Under the ACA, out-of-pocket expenses (including deductible, co-pay and co-insurance costs) are capped at $6,350 for individuals and $12,700 for families in 2014. The rates will thereafter increase with the cost of medical inflation.
But Griswold added that insurance companies will be taking stock in a year about how much money they are paying for health insurance. Since the out-of-pocket costs are capped, any shortfall will be potentially made up through premium increases.
"So after that year, people could see a real jump in their premiums," he said.
Federal subsidies in the form of tax credits are available for incomes up to 400% of the federal poverty level (FPL). That would be $45,960 for an individual, $62,040 for a couple, $94,200 for a family of four and $158,520 for a family of eight. Once a person has exceeded that threshold, however, he or she loses the subsidy and must pay the full premium. Those who apply for "Silver" plans with incomes that do not exceed 250% of the FPL are eligible for further cost-sharing reductions.
Because married couples are treated as one taxable unit, their combined income puts them at a disadvantage to unmarried couples applying for health-insurance subsidies. A number of reports using the Kaiser Family Foundation’s "Health Reform Subsidy Calculator" show that unmarried couples could end up saving thousands of dollars over their married counterparts.
According to an analysis by Hans Bader, a senior attorney for the Competitive Enterprise Institute, a 40-year-old couple with children, where the husband makes $70,000 per year full time and his wife makes $23,000 per year, could save $7,200 by getting a legal divorce but continuing to live together — a cost-saving option not available for faithful Catholics and others who wish to be married.
Similarly, Bader notes that a 60-year-old couple with no children at home and making $62,041 a year could save $11,000 per year by getting a divorce. Cannon explained that the ACA creates enormous obstacles for young people trying to earn a living wage, get married and raise a family. The problem, said Cannon, is that the premiums function as a "tax-and-transfer scheme," placing higher premiums on young people, who typically have debt and must borrow to start their adult lives. It takes those earnings and reduces the premiums for the old, who generally are more established and have savings, and those with expensive medical conditions.
Cannon said that the law’s calculation for subsided benefits could discourage employees from taking on another part-time job, getting a raise or getting a better job, because their increased earnings could also substantially reduce their subsidies.
He said, "They could make thousands more per year, but they could lose thousands as well."
Griswold said he has been speaking to some small businesses with less than 50 full-time employees that are considering dropping health coverage as a cost-saving measure and sending their employees to the exchange.
"I think you’re going to see a lot of small-group policies go by the wayside in favor of employers saying, ‘We’re going to give you $300 to $400 toward health insurance instead,’" he added.
Although the law requires employers with more than 50 full-time workers to extend health coverage to full-time employees, it also redefines "full time" to mean 30 hours a week, as opposed to the traditional 40 hours a week, as a way to expand coverage.
The Obama administration defended this regulation, explaining that the law was designed to expand the number of Americans receiving health insurance.
But many companies and small businesses are reported to have cut back employee hours to part time (less than 30 hours a week) as a cost-saving measure.
The result, according to some analysts, is that many people will have to work at least two part-time jobs — and juggle those schedules — in order to earn the wages they had before the law took effect.
Cannon said, "It’s going to be much harder for [young people] to climb the economic ladder."
Next: Part II: Moral Dilemmas
Families Face With Obamacare.