Happy Anniversary Healthcare.gov

It is hard to believe that the online marketplaces, or exchanges, under the Affordable Care Act (ACA), better known as ObamaCare, are having their one year anniversary this month.  It seems like only yesterday that the federal website, Healthcare.gov, which officially opened on October 1, 2014, crashed almost immediately.   Only six people in the entire country were able to utilize the federal exchange on the first day and sign up for a plan.

Many state online exchanges also had similar problems.  The Maryland Health Connection for example, took a nose dive into software purgatory and never operated correctly, as did Cover Oregon.  Maryland eventually adopted Connecticut’s model and Oregon adopted the federal model.

The costs for these failures were astronomical.  At the state level, Hawaii led the pack.  The federal government gave the Hawaii Health Connector $205,342,270 in grants and the state was only able to sign up 5,774 by March 31, 2014, the official end of open season.  That amounted to approximately $35,000 for each enrollee.  Based on the $5,000 average cost of a premium in 2010 when ObamaCare was signed into law, the federal government could have simply paid the premium for 41,000 people.  The total amount of grants given out to the 15 state-run and the District of Columbia exchanges amounted to $3.87 billion. The federal government could have used that money to pay for a year’s worth of premiums for 773,830 people. 

Just before ObamaCare passed in 2010, the Congressional Budget Office (CBO) estimated the law would cost $944 billion over 10 years and reduce the deficit by $143 billion over 10 years.  But a CBO analysis of ObamaCare four years later in April 2014 found the cost would be approximately $1.8 trillion over 10 years.  The analysis contained an interesting footnote: “CBO and JCT [Joint Committee on Taxation] can no longer determine exactly how the provisions of the ACA that are not related to the expansion of health insurance coverage have affected their projections of direct spending and revenues.”  Roll Call first reported on this disturbing footnote, stating “it’s unclear whether the health care law is still on track to reduce the deficit or whether it may actually end up adding to the federal debt. In fact, the answer to that question has become something of a mystery” because CBO has found it is “no longer possible to assess the overall fiscal impact of the law.”

On top of the ObamaCare “surplus” turning into a deficit,  Americans found out President Obama’s infamous quote, “You can keep your health plan if you like it – period” was not true.  It was named the lie of the year in December 2013 by Politifact.  Furthermore, according to a poll released on September 29, 2014 by Rasmussen, ObamaCare still remains extremely unpopular.  Only 42 percent of likely U.S. voters have a favorable view of the healthcare law and 52 percent view it unfavorably.  Rasmussen states these numbers include 19 percent with a very favorable opinion and twice as many with a very unfavorable opinion.

The problems and glitches the government-created plan has produced are almost too numerous to list, but the following list includes some of the big ones (in no particular order):

• Approximately 5 million people received cancelation notices late in 2013 for the health plans they liked and could afford because the plans did not meet ObamaCare’s mandated 10 essential health benefits, including covering maternity and pediatric care or mental health and substance abuse disorders.  Now post-menopausal women and single men, as well as people who have never had a mental health or substance abuse problem, are paying for services they do not want or need.
• The online marketplace was not fully developed by the October 1, 2013 start date.  In congressional testimony, it was discovered that 40 percent of the website had not even been built before opening day.  Most of this part of the online exchange was the “backend” of the website, the part that was supposed to communicate with the insurance companies on enrollment information and pay them.  It was further revealed the administration knew in March 2013 that there were major problems with the website and it became clear there was no single person in charge to make sure the website worked end to end.
• Prior to opening day, the administration by administrative fiat declared that the federal online exchange for small businesses, entitled the Small Employer Health Option Plan (SHOP) would not be ready in time by the statutory deadline of October1, 2013 and decided to delay implementation until late 2014.
• Approximately three months prior to October 1, the administration decided to delay the employer mandate by one year until January, 2015, completely ignoring the statutory deadline.  It then further delayed the mandate for businesses with 50 to 99 employees until 2016, and larger businesses only have to provide insurance for 70 percent of their employees in 2015.
• Due to the horrendous roll-out of the healthcare exchanges that created difficulties for people to sign-up for health insurance by December 31, 2014, the administration ended up creating a rolling deadline, without congressional approval, for the individual mandate and to help individuals avoid the tax penalty.  First, they changed the deadline to mid-February, then they changed it to March 31, 2014, then to mid-April.  Ironically and thanks to a purely political decision, the Obama administration wrote a technical bulletin declaring previously insured individuals could purchase their non-compliant ObamaCare plan until October 2016.  Since plans usually last a year, this could take a person past the 2016 presidential elections.  The hitch is the state or insurer makes the decision on whether to go along with the decree and ignore what the law says.
• ObamaCare says, “Notwithstanding any other provision of law, after the effective date of this subtitle, the only health plans that the Federal Government may make available to Members of Congress and congressional staff with respect to their service as a Member of Congress or congressional staff shall be health plans that are – (I) created under this Act (or an amendment made by this Act); or (II) offered through an Exchange established under this Act (or an amendment made by this Act). [see section 1312(d)(3)(D)].  Even though Congress had several opportunities to change the law prior to passage, they did not.  With Congressional staff threatening to leave because ObamaCare would require them to pay the full cost of the premium, unless their household income was less than 400 percent of the federal poverty level (FPL), members of Congress, in consultation with the Obama Administration, wrote themselves out of complying with the Act as written.  The White House Office of Personnel Management wrote a regulation that essentially allows a member of Congress to declare his or her office a “small business” so they and their staff could obtain subsidies via the Washington, D.C. SHOP exchange.  Both Senators David Vitter (R-La.) and Ron Johnson (R-Wisc.) have tried to change the ruling, so far without success.
• A May 2014 Federal Register Notice indicates the Obama administration is willing to use taxpayer funds to compensate insurers through the Risk Corridor program if insurers begin to lose money on ObamaCare plans.  According to a report by the House Committee on Oversight and Government Reform released in July 2014, “‘Risk Corridors’ are provisions of ObamaCare designed to transfer money from profitable insurance companies participating in ObamaCare to insurance companies that suffer losses selling ObamaCare-compliant plans on the exchanges.  However, the law provided for a taxpayer-funded bailout if insurance companies systematically lost money on their ObamaCare plans.”  The committee stated, “the total taxpayer bailout expected by insurance companies could approach $1 billion this year.”

ObamaCare and the corresponding online exchanges’ problems are not over and will only grow worse as time goes on.  A lot of ObamaCare’s mandates have been delayed through administrative fiat, but those temporary delays will eventually expire and the true effects of ObamaCare will be experienced by all.

For example, ObamaCare fans like to point out that 8 million people got insurance in the first enrollment period that started last October.  Center for Medicare and Medicaid Services Director, Marilyn Tavenner, testified that as of August 15, 2014, 7.3 million Americans had signed up and eventually paid for an ObamaCare plan.  That 700,000 drop may be only the beginning.  Investor’s Business Daily reported on August 11, 2014 that insurers are expecting further declines in enrollment.  For example, Aetna is expecting a 30 percent decline.  With its high deductibles and costly premiums, even the taxpayer-funded subsidies do not make ObamaCare a good value for many Americans.

What have people who have purchased their own health insurance experienced as a result of ObamaCare?  Simply put, higher costs.  The Manhattan Institute looked at the underlying premium costs before the taxpayer-funded subsidies are considered, and found that on average, the individual-market premiums in all age groups went up by 49 percent in 2014.  In particular, young, healthy men saw the biggest increase.  Citizens Against Government Waste saw similar increases in premiums and much higher deductibles when people provided their insurance costs as part of the group’s “ObamaCare Horror Story” project.

ObamaCare supporters like to highlight that premium hikes found in an ObamaCare exchange are only going up about 8 percent.  But that is because many plans in an ObamaCare exchange are subsidized by taxpayers and insurers have been provided with subsidies as well.  These subsidies encourage them to offer lower cost plans than they otherwise would.  The payments, sometimes called the 3 Rs, are for risk adjustment, reinsurance, and risk corridors.  Only the risk adjustment provision is permanent.  When the other two expire in 2016 and if the majority of people in an ObamaCare exchange are not healthy, the plans will likely charge much higher prices.

In fact, the insurers may have something to worry about a bit sooner.  The Obama administration had been making noise that it planned to go ahead and use taxpayer funds for the risk corridors and without congressional approval this fall.  The risk corridors would compensate the insurance companies if they end up with larger costs than expected; i.e., too many sick people utilizing services and not enough healthy people paying into the pool.

A recent opinion from the Government Accountability Office stated the administration cannot provide the funds unless they get a congressional appropriation.  The Congressional Research Service offered a similar opinion in January, 2014.  But according Modern Healthcare, the administration plans to go ahead anyway, ignoring Congress and the law in the process.  Senator Marco Rubio (R-Fla.) has introduced legislation to eliminate the risk corridor provision in its entirety, especially since the administration has indicated it believes the ACA provision provides them a blank check.  Taxpayers can expect this to be a bigger issue in the next few months, particularly if Republicans take the Senate.

Other problems ahead that could affect ObamaCare’s enrollment are several lawsuits winding their way through the courts that challenge whether taxpayer-financed subsidies are allowed in the federally-run exchange.  These cases are Pruitt v. Burwell, Halbig v. Burwell, King v. Burwell, and Indiana v. IRS.  The law clearly states that a subsidy can be offered to taxpayers that purchase health insurance “through an Exchange established by a state.”  At the time the law was written, it was believed that all states would comply and establish an exchange but that did not happen.  A mini-revolution occurred and 36 states refused, forcing the federal government to establish an exchange instead.  The Internal Revenue Service decided to provide subsidies to people that qualified taxpayers that purchase health insurance through the federal exchange, but nowhere in the law is there a provision that gives the IRS such authority.

Michael Cannon of the CATO Institute, along with Jonathan Adler of Case Western Reserve University School of Law, were among the first to challenge the IRS’s decision (Halbig v. Burwell) to offer subsidies in the federal exchange.  Cannon provides a link to the status of this case, as well as the others.  Currently, Halbig v. Burwell plaintiffs got a favorable opinion in the D.C. Circuit Court and the case is waiting for an en banc review.  The Fourth Circuit Court sided with the government in King v. Burwell.  The plaintiffs have appealed the decision to the Supreme Court.  Pruitt v. Burwell plaintiffs got a favorable opinion on September 30, with District Judge White stating, “The court holds that the IRS Rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law, pursuant to 5 U.S.C. §706(2)(A), in excess of statutory jurisdiction, authority, or limitations, or short of statutory right, pursuant to 5 U.S.C. §706(2)(C), or otherwise is an invalid implementation of the ACA, and is hereby vacated.”

And are the problems fixed with Healthcare.gov?  Apparently not.  The Wall Street Journal on October 8 pointed out things seem to be a bit shaky with the new website and there have been questions for weeks on whether it will even work properly for the official November 15  launch date for open season.  The Spanish website already has a major problem and administration “officials also said that HealthCare.gov won’t display premiums for 2015 until the second week of November,” conveniently 11 days after the election.

Finally, will ObamaCare be an issue that voters will consider as they make their selection?  President Obama said in an Oct. 2, 2014 speech before students at Northwestern University that “There’s a reason fewer Republicans you hear them running about Obamacare — because while good, affordable health care might seem like a fanged threat to the freedom of the American people on Fox News — (laughter) — it’s turns out it’s working pretty well in the real world.”

But the only people running away from ObamaCare seem to be Democrats.  According to research released in September 2014 by the Brookings Institution, a center-left think tank in Washington, only 36 percent of Democrats have expressed support for ObamaCare in their primaries, while 74 percent of Republicans expressed opposition to the healthcare law.

A poll released in September by the Independent Women’s Voice only surveyed voters in what are considered congressional swing districts.  It found that ObamaCare will “impact Democratic candidates in all swing states this November” and that “nearly half of voters say ObamaCare will be the most important or very important issue for deciding whom to support for Congress.”  Considering a clear majority of voters in these swing districts strongly disapprove of the healthcare law by 54 percent to 43 percent, with strong opposition at 45 percent compared to strong support at 25 percent, it is no wonder many Democrats are worried.

ObamaCare will certainly have an impact on November 4, 2014 and unfortunately the law will continue to do damage until November 2016 unless there are enough members of Congress to convince the President to agree to make substantial changes to the law.