Years Of Obamacare Problems Are Still On The Way

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Given Obamacare architect Jonathan Gruber’s candid comments, a whole load of information about Obamacare is now coming out — years too late for the public to weigh in on it.

Americans clearly aren’t happy about it: approval of the health-care law has dropped to an all-time low of just 37 percent.

It’s not surprising — a lot of things haven’t gone as promised. You were supposed to be able to keep your plan; that was a lie. Health insurance costs were supposed to fall — but premiums are rising. Obamacare was written to redistribute income for a select few — as this chart from the Brookings Institution makes clear:

Potential Effects of the Affordable Care Act on Income Inequality, The Brookings Institution

Potential Effects of the Affordable Care Act on Income Inequality, The Brookings Institution

But those problems are just the beginning. Obamacare’s been active for less than a year — there are a number of provisions in the health law that haven’t been activated yet. See a full timeline of the law here, courtesy of the right-leaning think tank American Action Forum.

Individual Mandate

The individual mandate’s been in action since Jan. 2014, but fewer people than expected have actually felt its sting. The mandate requires everyone the administration thinks can afford insurance to buy it or pay a penalty — which is growing.

This year, that “tax” was $95 for a single adult, or 1 percent of income — whichever is greater. But next year, it spikes to $325 per adult (two percent of income); in 2016, it’ll reach its peak at a massive $695, or 2.5 percent of income.

Plus, the administration issued an extra hardship exemption in 2014 that lowered the number of people who actually had to pay the penalty: the latest hardship is if a person’s policy was canceled by Obamacare itself. But there’s no guarantee that will stick around — more people could fall prey to the penalty in the future.

Employer Mandate

This one was supposed to hit in 2014, but the Obama administration decided to delay it.

On Jan. 1, 2015, employers with over 100 employees will be partially subjected to the mandate: they’ll have to provide coverage for 70 percent of employees by 2015 (95 percent of employees by 2016). Businesses with between 50 and 99 employees will have until January 2016 to provide health insurance to their employees; if they don’t, they’ll face fines of $2,000-$3,000 per worker.

The mandate incentivizes businesses with close to 50 employees to stop hiring or start firing to avoid the mandate’s penalties. AAF reports that adding a 50th employee now costs a firm $40,000 in extra costs due to Obamacare alone.

And Obamacare also introduces new costs on health insurance itself — especially for large employers. Obamacare requires employer health plans to cover a new batch of services, whether workers want them or not; mandates that fully-grown adults up to age 26 can remain on their parents’ plans; includes preventive services and at least 20 types of contraceptives — all major cost hikes for employers that are passed onto workers.

Risk Corridors and Reinsurance 

Obamacare has three risk-mitigation provisions: risk corridors, reinsurance and risk adjustment. The first two are temporary, slated to run out in 2016.

The programs are supposed to serve as a financial buffer, encouraging insurers to participate in the new Obamacare exchanges. The risk corridor program redistributes funds collected by the federal government amongst exchange insurers — although the administration has opened the door to doling out taxpayers funding to companies suffering losses on exchanges.

University of Minnesota economist Stephen Parente has predicted that when the programs’ stint is through, health insurance premiums will rise drastically — hitting lowest-cost plans hardest. He published a study earlier this year predicting that some bronze plan premiums will double by 2024.

As a result of the growing costs, Parente’s model predicts that the number of uninsured Americans will actually go back up, reaching 40.5 million by 2024.

Canceled Plans 

While millions have had individual health plans outlawed by Obamacare regulations, there are millions more still on the docket. The administration, in a panic about the backlash against Obama’s false promise that Americans could keep their health plans, issued several extensions that kept non-compliant plans in action until 2017.

It’s up to states to decide whether to allow the plans to continue. According to America’s Health Insurance Plans, 13 states and Washington, D.C. have already rejected the extension. Three more states’ extensions will end in January; 29 states will let insurers continue offering plans until 2017.

Some insurers have already ended the plans of their own accord. The cancellations were intended to push previously-insured Americans into Obamacare exchanges, to keep risk pools healthy. This has prompted many companies already offering exchange options to end their noncompliant plans, even if their states haven’t.

That said, cancellations are far from over. Expect millions more by 2017.

Cadillac Tax 

Perhaps the most duplicitous Obamacare provision was put off the longest. Gruber said this one was “a very clever, you know, basic exploitation of the lack of economic understanding of the American voter.”

Employers don’t pay taxes on employee health coverage — not the case in the individual insurance market. So in many cases, instead of giving workers a taxed raise, businesses give employees better health benefits — tax-free.

Gruber calls this “regressive, inefficient, and expensive.” Because losing the tax altogether was “politically impossible,” they came up with the Cadillac tax: a 40 percent excise tax on plans which cost over $10,200 for individuals and $27,000 for families. The measure is supposed to target “overinsurance”; it’s a covert way to get rid of employer-based coverage altogether.

In 2018, the Cadillac tax will start hitting employers — at the cost of $32 billion from 2018 to 2019, according to the Joint Committee on Taxation. It’ll convince many businesses to cut the quality of coverage they provide their workers.

But it’ll get worse. Gruber says the delayed onset is key — it allowed Obamacare’s authors to tie the Cadillac tax to the Consumer Price Index. The CPI doesn’t rise as fast as inflation — meaning that while the dollar-threshold for the Cadillac tax will grow, it’ll grow more slowly than the cost of health insurance.

That means that eventually, all employer plans will get caught in the Cadillac tax. According to Gruber, it “essentially amounts over the next 20 years to basically getting rid of the exclusion for employer-provided health insurance.” And that takes away much of the incentive employers have for offering it in the first place.

AAF explains that this also helped cut the CBO score of Obamacare’s total cost — helping it get passed in the first place.

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