The bitter, long-running fight over ObamaCare's individual and employer mandates is all over but the shouting.
The problems plaguing the ObamaCare exchanges as enrollment lags, premiums spike and insurers from Aetna (AET) to UnitedHealth (UNH) head for the exits have reached a critical stage, even as the penalties are about to spike for far too many millions of people who get a bad deal from the law. This year, 8 million people paid the individual mandate penalty — not too far from the 10.6 million who had coverage via the exchanges at the end of June. The status quo won't survive the inevitable political backlash, nor should it. ObamaCare is like a car with a bad muffler: It can keep traveling down the road, even as everyone it passes begs the driver to pull over and get it serviced.
The only prospect for preserving ObamaCare, in something that closely resembles its current form, requires not just a victory for Hillary Clinton but a clean sweep for Democrats. Yet continued GOP control of the House now looks increasingly assured, and Republicans are given a solid chance of retaining the Senate as well.
Even Clinton has conceded that ObamaCare is in serious need of repair. She has proposed increasing premium subsidies; providing an extra $2,500 per-person tax credit to offset medical expenses; and fixing ObamaCare's family glitch that denies subsidies to the spouses of full-time workers who are eligible for coverage from an employer. Those fixes would cost $103 billion in the first year, according to a new analysis from the Commonwealth Fund.
Suffice it to say that there is zero chance that Clinton will get any of those wish-list items from a Republican Congress to help keep ObamaCare — mandates and all — afloat. Clinton's choice, then, will be to deal with Republicans by putting everything on the table — especially the mandates — or to stubbornly cling to ObamaCare's achievements at the expense of 10-plus million people who are getting a raw deal from the law.
Those millions include full-time low-wage workers who are denied ObamaCare exchange subsidies if employer coverage is deemed affordable under ObamaCare, even if it is far from affordable. This year, a $20,000 earner who is eligible for ObamaCare subsidies can get a bronze plan for $359 per year, according to the Kaiser Family Foundation. But someone at the same income level who is offered insurance at the workplace might have to pay as much as $1,600 for bronze-type coverage — about 8% of income — or else face an ObamaCare fine. A couple of million spouses of full-time workers, as Clinton has acknowledged, also get a raw deal from the family glitch.
ObamaCare has been effective in expanding comprehensive coverage for those earning up to about 150% of the poverty level, but the exchanges' results, even in the modest income tier above that near-poor group, are really disheartening. IBD has estimated, using a variety of think-tank and government data, that only about 1 in 4 people from 150% to 250% of the poverty level are getting silver-level ObamaCare exchange coverage. The other 75% either have bronze coverage with $6,000-plus deductibles that leaves them at risk of financial distress if they get sick; have chosen to remain uninsured even though they are eligible for subsidies; or they're uninsured because they work full-time but can't afford employer coverage.
Then there are a few million middle-class individuals who get little or no subsidy from ObamaCare because they earn more than 400% of the poverty level, or earn less but still don't get much help because of a formula that gives little or nothing to relatively young adults earning close to 300% of the poverty level.
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Yet a stubborn embrace of the status quo, as unappealing as that is, may not even be an option for Clinton. That's because by early next year, a federal appeals court is expected to hand down a ruling in the government's appeal of U.S. District Judge Rosemary Collyer's ruling that Obama administration funding of key ObamaCare subsidies violates the House's constitutional power of the purse. Without those cost-sharing subsidies, which dramatically cut deductibles and other out-of-pocket costs for low-income exchange customers who buy silver plans, insurers might have to substantially hike premiums yet again.
The reality is that ObamaCare subsidies — both premium and cost-sharing subsidies — are big enough to give most modest-income people a good enough deal that no individual mandate would be needed to compel them to buy coverage. The key is giving people the flexibility to buy coverage they want and can afford — even if it's not always the comprehensive coverage that Democrats want them to have — with some limitations so that the near-poor don't unnecessarily put themselves on the brink of bankruptcy if they get sick. There are also alternative incentives that would work to keep the middle class from going uninsured. The option of buying the coverage one wants and depositing what's left of the subsidy in a Health Savings Account is one that Republicans support and could actually lead to an increase in coverage among the relatively young and healthy.
Likewise, extending equitable subsidies to low-wage, full-time workers that they can use in the individual market, as Republican policymakers have proposed, could expand the ranks of the insured. That approach would naturally go along with the end of employer mandate penalties that are triggered when a full-time worker buys coverage via the exchanges.
If Clinton takes office next January, when ObamaCare's next enrollment period is falling flat, as it inevitably will, the writing will be on the wall and Clinton will have to dangle the law's controversial mandates to bring Republicans to the table. That means the only way that the mandates will survive is if Republicans are unwilling to deal. That can't be ruled out, but it's not the most likely outcome. To understand why, just recall the outcry when ObamaCare was about to launch, and millions of people started getting notices that their plans were being canceled. GOP policymakers understand that they can't take away the coverage that 10 million people, many relatively old and not in robust health, have come to count on. That's why they crafted a GOP plan to kill ObamaCare softly, vowing that if you like your ObamaCare plan, you can keep it.
