Obamacare: Destined to flop?


Get Covered America volunteers Cynae Derose (C) and Jalisa Hinkle (R) talk with Shirese Davis about the Affordable Care Act while canvassing a Chicago neighborhood, September 7, 2013.

Article Highlights

  • Obamcare will be neither a complete success nor a total failure.

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  • Obamacare exchanges won't help 85% of Americans with employer-provided insurance.

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  • Bureaucracy and frustration ahead for those applying for Obamacare exchanges.

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The rollout of the Affordable Care Act (ACA) thus far has been characterized by missed milestones, a lack of clarity, and partisan squabbling. But does this inauspicious beginning mean that the law will fail in its goal to make health care more available to and affordable for all Americans, or will the ship right itself before it sinks? The American public is concerned with three major aspects of the law: the access to coverage, the affordability of coverage, and how the changes will benefit them. On all three counts, the ACA will fail to live up to the promises made by the Obama administration. Despite that, the law will have a profound impact on the US insurance market.

Key points in this Outlook:

  • Right out of the gate, the Affordable Care Act (ACA) has already hit several roadblocks, including a delay in implementation of its key provision, the employer mandate.   
  • Individuals face a number of unknowns regarding the ACA, including ease and affordability of obtaining coverage through exchanges and the effect it will have on their employer plans. 
  • The ACA will be neither an unqualified success nor a total failure, but it will change the face of the US insurance market and add to the country’s fiscal burden. 


Late on July 2, the Obama administration dropped a bombshell. Despite frequent claims that the Affordable Care Act (ACA) is on track, the administration had to admit that it is delaying implementation of a major provision of the health law—the employer mandate.

The idea behind the mandate is to keep large employers from dropping their health insurance plans and sending their workers to the exchanges for heavily subsidized coverage. Any business with 50 or more full-time employees that fails to comply is subject to thousands of dollars in fines, money that otherwise could have been used to raise wages or hire more people.

The administration knew any delay would cause political trouble. Republicans would claim Obamacare is a failure, Democrats’ confidence in the law would be undermined, and unfavorable opinions about the reform would worsen.

Will Obamacare be a train wreck? Is the president’s signature achievement doomed to failure? Or is this just another minor bump in the road that will smooth out in the coming years? How the administration does on three critical questions will determine whether the American public views the ACA as a success or a failure.

If I Don't Have Coverage, Can I Get It?

One-stop shopping. An easy online process without the barriers and complexity that characterize the insurance market today. That is the image of health reform the president has laid out, but that is not what the health insurance exchanges will be able to deliver—not on October 1, when they begin to sell insurance, and not any time in the foreseeable future.

Purchasing health insurance can be a frustrating experience for people trying to buy coverage on their own. Benefits, cost-sharing requirements (including deductibles and copayments), access to specific doctors and other health care providers, and premiums all vary, making comparisons difficult. The ACA establishes exchanges that are supposed to help people purchase insurance.

Providing a buyer’s service, like Expedia for travel, is not a new idea. eHealthInsurance has more than a decade’s worth of experience helping people find health insurance that fits their needs and their pocketbooks.[1]

"No one should be surprised when widespread problems are reported during the first few weeks of exchange operation."

But the ACA exchanges are supposed to do more than simply sell a product to consumers. Despite the administration’s preferred description of the exchanges as “marketplaces,” these organizations also have unprecedented regulatory authority. They enforce the new federal insurance regulations, have the power to restrict what may be sold to consumers, decide whether an individual is allowed to purchase exchange coverage, and determine whether that person is eligible for Medicaid or the new federal exchange subsidy.

As a result, applying for insurance through the exchanges will require applicants to provide far more personal information than they expect. Consumers may be shocked to find that they must tell the exchanges their family’s income, employment, and citizenship status and even whether a family member is incarcerated.

The original 21-page application for health insurance released in March was roundly criticized for being more tedious than IRS tax forms.[2] A five-page form is now available, but only for single adults who are not eligible for employer coverage. All others must answer the same questions as before (reduced from 21 pages to 12 with a smaller typeface).[3]

That is only the start of the process of purchasing insurance on the exchanges. A separate application will be necessary for any specific health plan since there is no room on the current form for that information. If you are eligible for Medicaid, you will have to answer more questions about income, assets, other benefits that you receive, housing costs, child care expenses, and medical expenses. The full application process will test the patience of most applicants.

The administration is mobilizing an army of people to help consumers through the paperwork gauntlet. Navigators, certified application counselors, insurance agents and brokers, community organizations, hospitals and other health care providers, local businesses, and other consumer outreach programs are gearing up for a massive enrollment campaign beginning this fall.

This could backfire on the very people who are supposed to be helped. With so many official and unofficial helpers, it will be difficult to know whose advice to trust. The navigators, considered by the Department of Health and Human Services (HHS) to have a “vital role in helping consumers,” will have only 20 hours of training on the mechanics of applying for insurance, with little or no emphasis on the different policies that are available.[4] Many applicants are likely to enroll this fall in insurance plans they do not understand, only to find out in January when the coverage begins that they made an expensive mistake.

In addition, sensitive personal information is at risk of being compromised, with no assurance that HHS can prevent this. Social Security numbers, details of employment, and other personally identifiable information must be reported on the exchange application. Many applicants, unaware of the potential for fraud, will give that information to the person helping them complete the form.

No one should be surprised when widespread problems are reported during the first few weeks of exchange operation. Oregon announced that its online insurance exchange will not be made available to the public until at least the middle of October, giving the state more time to iron out problems.[5] California has warned that its online enrollment process could be delayed.[6] Other states are likely to follow suit when it becomes clear that computer systems are not ready for prime time.

The federal government, which will run exchanges in 34 states, faces similar problems. HHS has admitted that it is behind in testing its data systems, and the Government Accountability Office warned that exchanges may not be ready in all states by October.[7]

The administration has also relaxed other ACA requirements as technical problems mount. In a July 5 regulation, HHS gave the 16 states setting up their own exchanges an additional year to implement procedures to verify an applicant’s income and employer health insurance status.[8] The data “hub” that is supposed to give states the necessary personal information from eight federal agencies (including the Internal Revenue Service and Homeland Security) will not be ready in time. HHS’s recent one-week delay in signing contracts with health plans to be sold on the federal exchanges shows that the implementation process will extend well beyond October 1.

Regardless of who runs the exchanges, they will all have problems getting up and running. Establishing an insurance exchange is “highly complex . . . [and] unprecedented and it’s not going to be smooth,” according to Kevin Counihan, chief executive of Connecticut’s health exchange, who helped implement Massachusetts’s health reform. “This is a two- to three-year implementation we’re doing in 10 months. I wish I had a year.”[9]

The bottom line: individuals will be able to purchase insurance through the exchanges if they are persistent. Those who can wait a while are likely to have an easier time. But given the complicated rules and conditions that must be met to buy on the exchanges, this will never be a simple process.

I Can Buy It, but Can I Afford It?

The public relations battle over the cost of health insurance in the exchanges is in full roar. State insurance commissioners and health insurance exchange boards, eager to prove to taxpayers that they are doing their jobs, have announced that they will save consumers plenty of money—or at least not cost them too much more. Then, critics of the ACA dig into the rate filings and find unconscionable increases in premiums.

Neither side in this debate over premiums can address affordability from the only perspective that matters—the consumer’s. Premiums might be lower than experts expect, but will they be lower than the people who are supposed to buy the insurance expect? Even if premiums are affordable as determined by consumers and not by some arbitrary government standard, will the insurance be attractive enough to purchase?

The claims and counterclaims over exchange premiums in New York State illustrate the problem. On July 17, 2013, New York Governor Andrew Cuomo announced that premiums offered on the exchange in 2014 would be 53 percent lower than premiums currently available on the individual market.[10] Elisabeth Benjamin, an official with the advocacy group Community Service Society of New York, said, “Health insurance coverage has suddenly become affordable in New York.”[11]

Don’t be so sure. New York has the most heavily regulated insurance market in the country. In 1993, the state adopted guaranteed issue (which prevents insurers from turning down anyone because of preexisting conditions) and pure community rating (which requires that everyone purchasing insurance on the open market pay exactly the same premium, whether they are young or old, healthy or sick). Mandated benefits were expanded, and cost-reducing practices were limited.

As a consequence, premiums soared, insurers dropped out of the individual market, and people who had been able to buy their own insurance could no longer afford it. According to one estimate, 96 percent of the individual health insurance market vanished within five years.[12] By 2009, the average cost of individual coverage in New York was $6,630 per year—nearly $1,500 higher than in neighboring Massachusetts, and more than $3,600 greater than the national average.[13]

With that record, even partial insurance reform would be able to reduce premiums. But that does not guarantee affordable coverage. An individual buying insurance next year in New York can expect to pay from $3,800 to $8,300 per year for a silver (midlevel) plan covering about 70 percent of the cost of health care for an average person.[14]

Low-income persons will receive a subsidy that substantially reduces their cost of coverage. State regulators said that an individual with an annual income of $17,000 will pay about $55 a month, or $660 a year, for silver coverage. A person with a $20,000 income will pay $85 a month, or $1,020 for the year.[15]

The ACA advocates and online premium calculators that back them up overlook an important fact: a more expensive plan will cost you more, whether or not you receive an exchange subsidy. With a fixed subsidy that does not change depending on the cost of the health plan, consumers become cost-conscious comparison shoppers. Health plans trying to attract customers have an incentive to offer better coverage at lower cost, promoting efficiency throughout the health system. This sound idea invariably draws hostile fire whenever Republicans (who call it “premium support”) propose it for Medicare.

Under Obamacare, the exchange subsidy is tied to the silver plan offering the second-lowest premium. In New York State, that plan is New York Fidelis, with a monthly premium of $349.14. (This example should not be taken as a criticism or endorsement of any specific health plan.)

A consumer—let’s call him Bill Johnson—has an income of $17,000 and will pay $55 a month for that plan, with the remaining $294.14 paid by the exchange subsidy. But that plan is likely to have a restricted network of doctors and hospitals that are willing to give New York Fidelis bigger discounts for the prospect of seeing more patients. If the network does not include his personal physician, Mr. Johnson might prefer a more expensive plan.

American Progressive Life and Health Insurance Company offers a silver plan whose premium falls squarely in the middle of the pack—$466.81 a month. If Mr. Johnson chooses that plan, he will pay the subsidized premium of $55 plus the difference between the two unsubsidized premiums. That comes to $172.67 a month, or $2,072 for the year—not the $660 promised by state officials. For most people with low incomes, higher-cost plans that offer better access will be out of reach financially, despite the exchange subsidy.

The decision to buy insurance, and the choice of plan, can be made only by the consumer. An individual with more health needs is more likely to purchase insurance than someone who is young and healthy. A more expensive plan that meets the consumer’s needs is a better buy than a cheap plan that does not. The price alone is not enough information to make a good decision.

"85 percent of Americans already have health insurance, most through their employers. Few of them will be eligible for lower premiums or larger subsidies in the exchanges."

Similarly, knowing how much the price increases from this year to next—the so-called rate shock—stirs the passions of commentators, but it is overrated as a factor influencing insurance purchases. Most people who will consider buying coverage on the exchanges are uninsured, and the price they will pay is more important than the price they might have paid if they had previously purchased insurance. Real rate shock will set in when prospective purchasers find out that even with a subsidy, exchange plans will not be free.

Will the uninsured, particularly those who are young and healthy, decide that buying health insurance makes sense for them? Timothy Jost, a leading ACA advocate, says adverse selection—the disproportionate enrollment of high-cost, high-risk individuals—is the greatest threat facing the exchanges.[16] Adverse selection drives up the cost of benefits, which increases the premiums that must be charged and discourages enrollment by not only the young and healthy but also anyone who is not eligible for an exchange subsidy and must pay the full premium.

That is why the law mandates everyone to buy insurance or face a penalty. But the penalty is far less than the cost of insurance, even with the subsidy. Next year, scofflaws are liable for a penalty of $95 or 1 percent of their income. For Mr. Johnson, who makes $17,000, the penalty is $170, or just over three months of subsidized insurance premiums for the low-cost plan. The $490 he would save by skipping coverage for a year will cover a month’s car payment with change left over.

Buying health insurance on a wait-and-see basis will be a good strategy for many people. Insurers cannot turn you down if you skip a year, and your premiums cannot be increased. The exchange subsidy is tied to your income, not whether you followed the rules. And there is a good chance that the Internal Revenue Service will not be able to collect the penalty, since it is limited to taking the money out of your tax refund.[17] Half of American households do not even file federal income tax returns and are not subject to the penalty, and the rest can adjust their withholding to avoid the penalty.[18]  

Even with an exchange subsidy, health insurance will not be worth the money for many young people. They are likely to discount the possibility of a serious accident or an unexpected diagnosis, and for all but an unfortunate few, the risk is worth taking. Those who decide to check their insurance options are likely to be discouraged by the cumbersome and intrusive application process the exchanges require.

The individual mandate will cause some people to buy exchange coverage who otherwise would not have, but not because of the penalty. The mandate is an attempt to establish a new social norm that remaining uninsured is unacceptable. The massive media campaign that is soon to be unleashed will try to break through the defenses of reluctant consumers. Backing up the message is a wad of cash, courtesy of the taxpayer.

USA Today surveyed the 19 states running their own insurance exchanges and reported that “at least 8.5 million” people were expected to use the exchanges by the end of March.[19] That exceeds the administration’s target of 7 million people, but the state exchange boards have strong incentives to exaggerate their own performance. HHS Secretary Kathleen Sebelius offered a more realistic prediction, saying, “I’m optimistic we’ll have millions of people sign up.” Whatever the final count is, the administration will declare the ACA a success.

What's in It for Me?

The ACA is remarkable for remaining consistently unpopular with the public. The latest NBC News–Wall Street Journal poll, taken in early September, shows that 44 percent of those polled think the new law is a bad idea, compared with 31 percent who support it.[20] That is the worst showing for the president’s program since it was enacted. According to the survey, only 12 percent of respondents think the law is having a positive impact on them and their families.[21]

The problem is not that the public does not know how good the ACA will be. The problem, if you can call it a problem, is that 85 percent of Americans already have health insurance, most through their employers. Few of them will be eligible for lower premiums or larger subsidies in the exchanges. Offering the status quo—if you like your coverage, you can keep it—will not make the majority of the public fall in love with one of the most complex pieces of legislation in modern times.

"Individuals in need of health coverage will experience delays and frustration from a bureaucracy-laden application process."

Especially if that promise cannot be kept. The coverage that workers have today will soon be a thing of the past. Employers have already begun to change their health plans and restructure their workforces to avoid some of the higher health costs arising from the ACA. As a result, workers will pay more for less generous employer coverage.

The prospect of new taxes and higher costs has caused many employers to take a second look at the way they manage their employee benefits. The “Cadillac tax” in the ACA penalizes employer health plans whose total premiums exceed $10,200 for individuals or $27,500 for families. Although that tax does not start until 2018, firms are beginning to take steps to lower the cost of their plans.

Beginning in January, the United Parcel Service will exclude from its health plan 15,000 working spouses who are eligible for coverage at their own jobs.[22] This action lowers UPS’s benefit costs and reduces the average insurance premium that determines whether the plan is liable for the Cadillac tax. Families affected by this exclusion will pay more to maintain the same level of health coverage for the excluded spouse.

Towers Watson, a benefits consulting firm, found more evidence that the ACA is causing employers to rethink their health benefit plans. In a survey of midsize and large employers, they found that nearly 40 percent of firms are changing their employee health plans for 2014.[23] Even more employers will adopt new strategies to cut costs in 2015 and 2016 to avoid having to pay the Cadillac tax.

The ACA imposes other new taxes, including a surtax on investment income for high-income households and increased Medicare payroll taxes for high earners.[24] Several of the new taxes will increase health insurance costs for those who already have coverage. The most significant ones are taxes on health insurers, pharmaceutical manufacturers, and medical device makers, which together will add $100 billion to health care costs over the next decade. Most of that higher cost will be passed on to consumers in the form of higher premiums and out-of-pocket spending.

Higher taxes will drive up insurance costs, but expanding health insurance coverage is likely to have an even greater impact on those costs. The ACA could eventually provide as many as 20 million people with heavily subsidized insurance.[25] Those newly insured people will demand more health services once most of their costs are paid for. The supply of services will not be able to keep pace because of the time and investment needed to train more health professionals and build new health facilities. Consequently, prices will rise, and patients will find that wait times for appointments for nonemergency care will increase.

Everyone who currently has insurance will pay more as a direct consequence of health reform. Health-sector taxes will rise and demand for services will increase, driving up prices. Employer plans will become more restrictive in attempt to control costs, beneficiaries will pay more out of pocket for their health care, and premiums will rise. But some employees will lose even more.

The ACA’s employer mandate requires midsize and large firms to offer coverage to all of their employees or pay thousands of dollars in penalties.[26] An employer with 50 or more employees who does not offer insurance that meets federal standards will pay $2,000 per full-time employee, excluding the first 30 employees. A company with 50 employees would pay $60,000 in fines; one with 100 employees would pay $140,000. An employer who offers coverage would be subject to a fine of $3,000 for every employee who opts instead for subsidized coverage through the exchange.

Although the 40-hour workweek remains the norm in most industries, the ACA says that a full-time employee is someone who works 30 or more hours a week. This was meant to ensure that most workers in larger firms would be covered by their employer’s plan.

Employers can minimize the amount of the fine by reducing work hours below 30 and cutting back on hiring to remain under 50 employees. Perversely, the brunt of those changes will be borne by the low-wage workers who were supposed to have been helped by the mandate. Rather than making it possible for those workers to be covered by what is often a generous health plan, the mandate will result in lost wages and send more people into the exchanges for insurance.

The administration’s recent decision to delay the employer mandate by a year does not change the incentive that some firms have to cut back on their workforces. In fact, it gives firms more time to map out a strategy to avoid the steep penalty that will be levied if even one of the company’s employees receives an exchange subsidy.

The penalty is a real threat for many companies. Even with the employer paying a substantial part of the premium, low-income workers often cannot afford to buy into a company plan. ADP Research Institute’s 2012 survey of companies with more than 1,000 workers found that 73 percent of workers earning $15,000 to $20,000 a year declined their employer’s health coverage, compared with 20 percent or less for workers earning at least $35,000.[27] Many of these workers would be eligible for heavily subsidized insurance through the exchange, which triggers the employer penalty.

There is growing evidence that employers, including Darden Restaurants, Regal Entertainment Group, and even the Virginia state government, are shifting to part-time workers and shorter hours where they can. The White House insists these situations are merely anecdotes, but some of the biggest supporters of health reform are beginning to worry. Joseph Hansen, president of the United Food and Commercial Workers Union, which has 1.2 million members, says the problem is real: “Wait a year. You’ll see tremendous impact as workers have their hours reduced and their incomes reduced.”[28]

Most people who have health insurance through their work will be hard-pressed to identify how the ACA will help them. The ACA lets parents include their young adult children up to age 26 in their employer’s plan, but few households have taken advantage of this option. Also, the majority of workers have plans with annual limits on coverage, but the typical limit is at least $2 million. Likely, few workers are fully aware that their insurance coverage is limited. Many discount the financial risk such limits impose, thinking that they are unlikely to incur millions of dollars in health costs—and most of them are correct.

That leaves the president with an intractable political problem. His signature legislation provides a subsidy for at most 20 million people to buy health insurance. That subsidy and other regulatory requirements increase the cost of insurance for 170 million people who already have coverage through their employers. As a result, their coverage will become less generous and their access to providers will be reduced. Some will even be forced to work shorter hours and take home less pay because of the ACA. That is not a winning formula for any politician. But the president has shown he does not need strong public support to initiate unprecedented changes in the health sector. The success or failure of his reform depends on what happens next.

Success or Failure?

Coming out of the box in October, the Affordable Care Act will look shaky. The first test of the insurance exchanges will occur when individuals attempt to apply for coverage, and problems are inevitable.

Individuals in need of health coverage will experience delays and frustration from a bureaucracy-laden application process. Many will be uncertain how to choose a plan that is best for them. Insurance terms (such as deductible, coinsurance, and covered benefit) are unfamiliar to many. The new classification system that sorts plans into tiers (labeled bronze, silver, gold, and platinum) according to “actuarial value” will complicate what is already a confusing situation.[29]

Is a gold plan (which covers 80 percent of the average person’s health cost) with a $2,000 deductible better than a silver plan (covering 70 percent of cost) with a $1,000 deductible? Should I pay more to keep my doctor or have access to the nearest hospital? These are the kinds of questions that most people will have, and the navigators and other people who try to help with the enrollment process will not have answers—or should not, since these are matters of personal preference rather than objective fact.

Computer glitches are unavoidable and are likely to persist for months. Several states have already said they may not accept online applications at first while they work some of the bugs out. Call centers set up to answer consumers’ questions might not be able to keep up with demand, and call center workers will themselves be learning how best to do their jobs in the early weeks.

The federal government has been less forthcoming about the challenges it faces in setting up insurance exchanges in 34 states across the country. The Department of Health and Human Services recently delayed signing contracts with insurers who wish to participate in the federal exchanges.[30] That gives both health plans and HHS more time to resolve technical issues but less time to test whether the fixes they adopt actually work.

Learning by doing is the only way such a complicated policy change can be implemented. No amount of training and preliminary testing will reveal all of the problems that will be encountered when the system goes live. Individuals who feel less urgency to buy insurance can delay enrolling until later in the open enrollment period, which runs from October through March. Those most in need will serve as the guinea pigs in this social experiment.

The inevitable operational problems in the first few months will provide little insight into how well the reform is performing. A more telling indicator is the number of exchange enrollees whose insurance is canceled; we will start to see evidence of this in March or April for the earliest enrollees, whose coverage starts January 1. People who voluntarily cancel their coverage or lose it because they have not paid their monthly premiums are either dissatisfied with their plan or find that the monthly payments are unaffordable. Dissatisfaction could be the result of poor access to health care providers and services or higher costs than the enrollee anticipated. Such individuals might enroll in another plan, or they might decide to remain uninsured.

"The ACA will not be the success its supporters want it to be. It will also not be the disaster its opponents think it will be."

Insurance cancellations can have serious consequences for health care providers. An HHS ruling leaves providers with unpaid bills if insurers cancel the subsidized coverage for low-income individuals.[31] Even though the individual receives a 90-day grace period during which providers are required to continue providing medical services, the insurer can later refuse to pay claims arising after the first month.

Enrollees who fail to pay premiums face only minor consequences. They have no obligation if they cannot afford to pay missed premiums or their medical claims. They are subject to the tax penalty for being uninsured, but that is prorated for the number of months they go without coverage. Their insurance premiums cannot be increased, and they face no barrier to enrolling in another health plan.

Someone will be stuck with the bills, and no one wants to pay. The ACA was supposed to largely eliminate uncompensated care, but it will not. Millions of people will remain uninsured even under optimistic projections, and loopholes will allow some to avoid expensive payments. In this game of financial musical chairs, the doctor and the hospital are left without seats.

Numerous problems, including some that could have a substantial impact on the implementation of the ACA, have been identified and await resolution. A host of other problems are certain to be discovered over the next year. Some arise from a poorly constructed law; others, from poorly thought-out changes promulgated by subsequent regulations and administrative actions.

Under less-contentious political circumstances, a House–Senate conference committee would have addressed many of those problems before the final vote in Congress. That did not happen because of the surprise election of Scott Brown to replace the late Sen. Ted Kennedy, giving Republicans 41 Senate seats. Democratic leaders feared that Senate Republicans could filibuster a conference report and prevent enactment.

The legacy of that decision is gridlock on Capitol Hill. Small technical issues remain unresolved that, under other circumstances, would have been addressed through an uncontroversial corrections bill. Larger issues that could have been the subject of public debate remain outstanding.

The administration has not let political gridlock get in the way of shaping the law to fit political needs and business realities, using regulations and informal guidance to make changes that, in normal times, Congress would have been acted on. Deadlines have been changed when the administration needed more time to get the results it wants. The mandate on employers to offer coverage was delayed in response to opposition from the business community, even though the ACA does not allow for such an action.

It now appears that the administration wants to extend to union members insurance subsidies that were intended to help the uninsured buy coverage.[32] Those workers already have employer-sponsored insurance subsidized through the tax system. Such a proposal would prompt a bitter political fight if it were introduced in Congress, something the White House can avoid by implementing the policy through regulation.

Except in the unlikely event that Republicans gain a sizable Senate majority in the 2014 midterm election, this aggressive regulatory process controlled by the executive branch will continue to play out for the next three years. That will solidify the federal government’s dominant role in the health sector, which, thanks to the ACA, now extends well beyond Medicare and Medicaid.

That does not mean everything will go smoothly. Perhaps the biggest danger to the president’s agenda comes from the overzealous actions of its strongest supporters. Premium rates that have been approved thus far in several major states are substantially below the levels that health plans requested. In many cases, those rates will rise sharply in future years. Insurers have an incentive to underprice their products initially to attract market share, and they are well aware of the prevailing political climate that demands low premium increases in the exchanges. But at some point they have to make a profit or drop out of the market.

The ACA will not be the success its supporters want it to be. It will also not be the disaster its opponents think it will be. But it will cause permanent changes—some good, some bad—in the way health insurance is purchased in this country, and it will add to the growing fiscal burden that threatens to damage the health of the economy.

An expanded version of this article appeared in the American magazine (www.american.com) on September 16–19, 2013.


1. Vip Patel, “Perspective: Raising Awareness of Consumers’ Options in the Individual Health Insurance Market,” Health Affairs, October 23, 2002, http://content.healthaffairs.org/content/early/2002/10/23/hlthaff.w2.367.full.pdf+html?sid=cd53e37f-8bad-4ba4-916b-bd06396d0372.
2. Kaiser Health News, Application for Health Insurance, January 16, 2013 draft, http://capsules.kaiserhealthnews.org/wp-content/uploads/2013/03/508_CMS-10440_Appendix_C_ FA_Paper_Application.pdf; Jen Wieczner, “It’s Easier to Apply for Green Card Than Obamacare,” Market Watch (Wall Street Journal), April 4, 2013, www.marketwatch.com/story/its-easier-to-apply-for-green-card-than-obamacare-2013-04-04.
3. For the first form, see Centers for Medicare and Medicaid Services, Application for Health Coverage, www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/marketplace-app-no-financial-assistance.pdf. For the second form, see Centers for Medicare and Medicaid Services, Application for Health Coverage and Help Paying Costs, www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/marketplace-app-standard.pdf.
4. Center for Consumer Information and Insurance Oversight, “In-Person Assistance in the Health Insurance Marketplace,” www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/assistance.html.
5. Sharon Begley, “Oregon Delays Wide Access to Obama-care Insurance Exchange,” Reuters, August 9, 2013, www.reuters.com/article/2013/08/09/usa-healthcare-oregon-idUSL1N0GA1CW20130809.
6. Anna Wilde Mathews, “California Health Exchange Might Face Online-Enrollment Delay,” Wall Street Journal, August 22, 2013, http://online.wsj.com/article/SB10001424127887323665504579029120705444480.html.
7. Government Accountability Office, Patient Protection and Affordable Care Act: Status of Federal and State Efforts to Establish Health Insurance Exchanges for Small Businesses, June 19, 2013, www.gao.gov/assets/660/655285.pdf.
8. David Morgan, “CORRECTED-U.S. Relaxes Health Law Income, Insurance Status Rule for Exchanges,” Reuters, July 8, 2013, www.reuters.com/article/2013/07/08/usa-healthcare-obamacare-idUSL1N0FD0DH20130708.
9. Sarah Kliff, “‘I Wish We Had One More Year’: States Are Struggling to Launch Obamacare on Time,” WonkBlog (Washington Post), July 4, 2013, www.washingtonpost.com/blogs/wonkblog/wp/2013/07/04/in-connecticut-a-struggle-to-launch-obamacare/.
10. Andrew M. Cuomo, “Governor Cuomo Announces Approval of 2014 Health Insurance Plan Rates for New York Health Benefit Exchange,” press release, July 17, 2013, www.governor.ny.gov/press/07172013-health-benefit-exchange.
11. Roni Caryn Rabin and Reed Abelson, “Health Plan Cost for New Yorkers Set to Fall 50%,” New York Times, July 16, 2013, www.nytimes.com/2013/07/17/health/health-plan-cost-for-new-yorkers-set-to-fall-50.html.
12. Stephen T. Parente and Tarren Bragdon, Healthier Choice: An Examination of Market-Based Reforms for New York’s Uninsured, Manhattan Institute Medical Progress Report, no. 10, September 2009, www.manhattan-institute.org/pdf/mpr_10.pdf.
13. America’s Health Insurance Plans, Center for Policy and Research, A Comprehensive Survey of Premiums, Availability, and Benefits, October 2009, http://ahip.org/Individual-Health-Insurance-Survey-2009/.
14. Department of Financial Services, State of New York, “Approved Monthly Premium Rates—Individual Standard Plans,” www.dfs.ny.gov/about/press2013/pr1307171_health_rates_2014.pdf (accessed September 3, 2013).
15. Rabin and Abelson, “Health Plan Cost for New Yorkers.”
16. Sharon Silow-Carroll et al., “Health Insurance Exchanges: State Roles in Selecting Health Plans and Avoiding Adverse Selection,” Commonwealth Fund States in Action Archive, February/March 2011, www.commonwealthfund.org/Newsletters/States-in-Action/2011/Mar/February-March-2011/Feature/Feature.aspx.
17. Joseph Antos, “The Individual Mandate Won’t Save Obamacare,” Real Clear Markets, April 11, 2012, www.realclearmarkets.com/articles/2012/04/11/the_individual_mandate_wont_save_obamacare_99611.html.
18. Avik Roy, “Regulations for Obamacare’s Individual Mandate—Seven Things You Need to Know,” Forbes, August 28, 2013, www.forbes.com/sites/theapothecary/2013/08/28/ white-house-publishes-final-regulations-for-obamacares-individual-mandate-seven-things-you-need-to-know/.
19. Kelly Kennedy, “States Predict More Insurance Customers,” USA Today, August 20, 2013, www.usatoday.com/story/news/politics/2013/08/19/health-care-law-uninsured-estimates-obama/2671489/.
20. Mark Murray, “Poll: Obamacare Remains Highly Unpopular as Implementation Looms,” NBC News, September 15, 2013, http://firstread.nbcnews.com/_news/2013/09/15/20506193-poll-obamacare-remains-highly-unpopular-as-implementation-looms.
21. NBC News and Wall Street Journal Survey, “Study #13340,” September 5–8, 2013. http://online.wsj.com/public/resources/documents/WSJpoll09132013.pdf.
22. Jay Hancock, “UPS Won’t Insure Spouses of Some Employees,” Kaiser Health News, August 21, 2013, www.kaiserhealthnews.org/Stories/2013/August/21/Insurance-For-Working-Spouses-At-UPS.aspx.
23. Binoli Savani, “Health Care Reform Heightens Employer’s Strategic Plans for Health Care Benefits,” Towers Watson, August 21, 2013, www.towerswatson.com/en/Press/2013/08/Health-Care-Reform-Heightens-Employers-Strategic-Plans-for-Health-Care-Benefits.
24. John Kartch, “Full List of Obamacare Tax Hikes: Listed by Size of Tax Hike,” Americans for Tax Reform, June 29, 2012, www.atr.org/full-list-obamacare-tax-hikes-listed-a7010# ixzz1zTXuZUYl.
25. Congressional Budget Office, “Effects on Health Insurance and the Federal Budget for the Insurance Coverage Provisions in the Affordable Care Act—May 2013 Baseline,” May 14, 2013, www.cbo.gov/publication/44190.
26. Cigna, “Employer Mandate Fact Sheet,” July 2013, www.cigna.com/assets/docs/about-cigna/informed-on-reform/employer-mandate-fact-sheet.pdf.
27. Sara Kliff, “Obamacare Requires Employers to Offer Insurance. What If It’s Too Expensive?” WonkBlog (Washington Post), March 4, 2013, www.washingtonpost.com/blogs/wonkblog/wp/2013/03/04/obamacare-requires-employers-to-offer-insurance-what-if-its-too-expensive/.
28. Lisa Myers and Carroll Ann Mears, “Businesses Claim Obamacare Has Forced Them to Cut Employee Hours,” NBC News Investigations, August 13, 2013, http://investigations.nbcnews.com/_news/2013/08/13/20010062-businesses-claim-obamacare-has-forced-them-to-cut-employee-hours.
29. Henry J. Kaiser Family Foundation, “What the Actuarial Values in the Affordable Care Act Mean,” Focus on Health Reform, April 2011, http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8177.pdf.
30. Jonathan Block, “Insurer Contracts with Federal Exchanges Delayed,” ModernHealthcare.com, August 28, 2013, www.modernhealthcare.com/article/20130828/NEWS/308289968.
31. Christopher Brown, “Commenters Say ACA Grace Period Rule Puts Unfair Burden on Hospitals, Providers,” Bloomberg BNA, August 21, 2013, www.bna.com/commenters-say-aca-n17179876210/.
32. Avik Roy, “White House Considers Awarding Obamacare Subsidies, Intended for the Uninsured, to Labor Unions,” Forbes, August 30, 2013, www.forbes.com/sites/theapothecary/2013/ 08/30/white-house-considers-awarding-obamacare-subsidies-intended-for-the-uninsured-to-labor-unions/.

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