Why Are Democrats Trying to Destabilize Obamacare?
Democrats are pressing the Supreme Court to quickly decide whether the Affordable Care Act (ACA) is constitutional. Fast-tracking Texas v. U.S. could settle whether the ACA is constitutional before November’s election. Election politics would make it nearly impossible for Congress to swiftly enact legislation if the Court invalidated major portions of the ACA. This attempt to prematurely inject the Supreme Court into the Texas case could disrupt the health insurance market, harming people benefiting most from Obamacare.
Republicans have been fighting the ACA for a decade. In 2017, Republican attempts to replace the ACA with a more market-oriented reform failed despite majorities in both the House and the Senate. In February 2018, the Texas attorney general and other Republican state officials brought suit in an attempt to invalidate the ACA. They argued that repealing the ACA penalty on those who are not insured made both the mandate and the entire law unconstitutional.
In December 2019, the Fifth Circuit Court of Appeals found the individual mandate unconstitutional. The case was remanded back to the district court to decide whether other parts of the ACA are severable from the mandate (and thus constitutional). The Supreme Court declined to intervene in the process, potentially delaying a final decision into 2021. However, the Court may revisit this decision in its February 21 conference to set its spring agenda.
At first glance, getting the Supreme Court to take up the case now might seem reasonable. According to advocates, the failure to expedite the case leaves in place a “cloud of uncertainty,” leaving “millions of Americans unsure“ whether they will be able to keep their health insurance. Why not resolve this problem and take credit in the November election for saving health reform?
This ignores both the facts and the politics surrounding the ACA.
Contrary to dire predictions, the exchange market is performing well despite the elimination of the mandate penalty and other Trump administration policies that steered some consumers away from the ACA exchanges. Enrollment in exchange plans has remained fairly stable at about 11.4 million people in 2018 and 2019. In contrast, enrollment in the unsubsidized off-exchange market has dropped from 7.9 million to 3.9 million enrollees from 2015 to 2018.
Exchange premiums declined by an average of 2 to 3 percent in 2020, in contrast to double-digit increases in earlier years. Healthy people have not fled the exchange market, and exchange enrollees spent fewer days in the hospital in 2019 than in previous years. Following a rocky start in 2014 and 2015, insurers in the exchange market remain profitable.
The law remains in place, at least until the Texas case is settled. People with pre-existing conditions remain protected. Lower-income enrollees in exchange plans continue to benefit from subsidized premiums and reduced out-of-pocket costs. States that expanded Medicaid eligibility continue to cover the expansion population, and federal payments continue to pay 90 percent of the cost.
Premium subsidies are actually more generous than specified by the ACA. When the administration halted payments to insurers to cover reduced cost-sharing for lower-income enrollees, insurers responded by sharply increasing premiums for “silver” plans. Premium subsidies (which are tied to silver premiums) rose, making better exchange coverage more affordable for everyone getting the subsidy.
Only lower-middle class families—who were purposely left out by the Obama administration—face increasingly unaffordable insurance costs. That’s a point Republicans have been making for years, and it has finally become a talking point for Democratic presidential candidates.
Short of a dramatic change in policy, these results should continue.
There is no compelling reason for the Supreme Court to act in the Texas case before full consideration is given by the lower courts. Contrary to the House Democrats’ petition, there is no evidence that the insurance industry is trapped in an “unacceptable limbo.” On the contrary, insurers are doing well in the exchange market, and low-income families are insured thanks primarily to generous federal subsidies.
The ongoing debate about health reform in the Democratic primaries also increases uncertainty about the long-term future of the exchange market. After six years of developing provider networks and marketing insurance products that satisfy ACA requirements and state regulations, insurers have figured it out.
Insurers could adjust to expanded subsidies and new rules on the ACA chassis, which is favored by Biden. They could adjust with difficulty to a public option, favored by Buttigieg. They could even adjust to Medicare for All, favored by Sanders, because the government would still need the technical expertise of insurers to process claims and make payments.
Each of these possibilities represents a business risk (and a potential opportunity) to insurers—but each is disruptive in ways that would not be welcomed by the average American. No one wants to pay higher taxes. No one wants to be forced out of their insurance. It is no coincidence the idea of a public option polls well, since that suggests the possibility that you could keep your current private coverage if you wanted it.
The more voters know about how the Democratic proposals would work, the less attractive they become. Why do Democratic candidates seem determined to undermine Obamacare? Isn’t that the Republican agenda?
Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute.