Will Premium Increases Related to Obamacare Sway Voters?

As candidates in both parties focus on the general election campaign, some Republicans wonder if large premium increases related to the Affordable Care Act could be an “October surprise” that helps propel them to victory in November. The causes of the approaching premium increases vary, but some are rooted in a 2013 Obama administration proposal.

In reporting on premium increases by one Iowa insurer, the Des Moines Register noted that individuals who bought new plans that complied with Affordable Care Act regulations could face premium increases of 38% to 43% next year. “Another 90,000 Wellmark customers who hold older individual insurance plans are expected to face smaller increases, which will be announced in June,” the paper said.

The disparity stems from a policy proposal in late 2013, when Healthcare.gov was not functioning, millions had received insurance cancellation notices, and President Barack Obama was being heavily criticized for pledging, “If you like your health-care plan you can keep it.” The administration allowed states to extend existing plans for one year.

Some states chose not to take this option. Those that implemented it did so for varying lengths of time. After extending the policy twice, the administration said this year that these temporary extensions would expire by the end of 2017.

States that implemented extensions created an actuarial problem for their health-care exchanges, the market where individuals not insured through their employer can buy their own plans. Enrollees seeking the enhanced benefits provided by Obamacare-compliant plans were the most likely to use them, while many people with little need for additional benefits preferred the status quo. In Iowa the problem is particularly acute: 90,000 residents have pre-Obamacare coverage, significantly more than the 55,000 who had signed up on the exchange as of February. By keeping these people, who tend to be healthier than those with ACA plans, out of the exchanges, the “fix” created another problem, laying the groundwork for the larger premium increases for next year.

The issue is more pronounced in Iowa, but other states are affected. This isn’t the only component of Obamacare that could exacerbate premium spikes. One popular feature is that parents can cover their children up to age 26. At the same time, however, this policy point discourages those young people from buying a plan of their own. Enrollment among these “young invincibles” remains well below expectations three years into the exchanges. Data from 2014 had suggested that those young people enrolling in plans were incurring high medical costs—which could also contribute to a trend of premium spikes.

For every action, there is an equal and opposite reaction. Political solutions from years past may materialize in the form of rate hikes this fall–and could generate a distinct reaction among voters on Election Day.

This post was originally published at the Wall Street Journal Think Tank blog.

How Would Hillary Clinton Pay for Her Obamacare “Fix?”

In a recent interview with the Des Moines Register, Hillary Clinton outlined several elements of Obamacare that she said she would seek to change as president. Her proposals illustrate how the fiscal impact of the law could increase significantly from what was expected when the legislation passed in March 2010.

Among the things Mrs. Clinton cited was “how to fix the family glitch.” In short, if an individual qualifies for “affordable” health insurance through an employer, that person’s family will not qualify for federal insurance subsidies–even if the employer does not offer family coverage or if family coverage is unaffordable for the household.

Supporters of the health-care law may call this a “glitch,” but it is far from an unintended consequence. This provision has worked exactly how Congress wrote it into the Affordable Care Act. As I noted in an earlier Think Tank post, the Joint Committee on Taxation outlined the specifics behind this policy in a footnote on Page 33 of a 157-page summary of the law released the week of its passage. While some congressional Democrats have attempted to argue since then that the provision, as codified by the Internal Revenue Service, was “simply incongruent” with the text, or a “wrong interpretation of the law,” the legislative history indicates otherwise. The provision may have harsh consequences for affected families, but its inclusion was deliberate.

When Congress considered the legislation in 2010, the bill needed to adhere to President Barack Obama’s September 2009 pledge that it would “cost around $900 billion over 10 years.” But to keep the total cost of insurance subsidies—the “gross cost of coverage provisions” in Table 4 here—under $1 trillion, lawmakers made numerous tough choices. For instance, Congress delayed the start of subsidized insurance from January 2013 to January 2014. Congress increased Medicaid payment rates to improve access—but let that increase expire after two years. To pay for higher levels of upfront spending on insurance subsidies, Congress included provisions that slow their growth after 2019—a back-dated reckoning that future Congresses, and families, will have to contend with. And Congress passed—whether lawmakers knew it or not—the “family glitch” provision.

As I wrote in January, undoing all these fiscal constraints will cost money. Mrs. Clinton and other supporters of the law have wish lists of enhanced benefits, but proposals to pay for this new spending have been scarce. Moreover, to the extent that skeptics have likened Obamacare to a subprime mortgage—with “teaser” provisions passed in 2010 and a balloon payment still to come—the long lists of additional spending proposals, with few instances of budgetary restraint, will reinforce those comparisons.

This post was originally published at the Wall Street Journal Think Tank blog.