Despite the best-laid plans of our central planners, Obamacare is unraveling. In 2009, the Obama administration proposed an ambitious bill that aimed to seamlessly expand health insurance for millions of Americans. The uninsurable would be guaranteed access to insurance. The insured would keep the plans they liked. The uninsured would be penalized. Profitable insurers would transfer their gains to unprofitable competitors. Online exchanges — the mechanism to hold these mandates together — would allow customers to choose from a wide range of subsidized insurance policies. Or at least that was the plan.
We are only three years into this bold, persistent experiment, and virtually all of the experts’ forecasts have already been proven wrong. The carefully crafted measures designed to stabilize the markets have faltered. The uninsurable are using coverage that is far more expensive than anticipated. The insured lost the plans they liked and are now confronting skyrocketing premiums and dwindling choices. The uninsured are not signing up, leaving risk pools skewed toward older and sicker customers. Insurers are suffering far greater losses than expected and are rapidly fleeing the exchanges. As I discuss in my new book, Unraveled: Obamacare, Religious Liberty, and Executive Power, these failings are the entirely foreseeable consequences of the law’s fractious birth, illegal implementation, and arrogant central planning. A careful study of Obamacare’s history leads to a bleak forecast of the law’s uncertain future.
President Obama recently lamented the “hyper-partisanship” surrounding health-care reform. The president’s criticism ignores his own role in institutionalizing this gridlock. The Affordable Care Act was approved in 2010 on a straight party-line basis, without a single Republican vote. For a bill of such magnitude, this lack of bipartisanship was unprecedented. All of the landmark social-welfare and civil-rights laws in the 20th century were passed with significant support from both sides of the aisle, often through messy political compromises and bargaining. It was hubristic of the Democrats to think that after enacting a monumental law, without any buy-in from the opposing party, critics would simply come round.
As history played out, Republicans had no problem opposing a law that they had had no part in enacting. Conservatives have stopped at nothing to destroy Obamacare: They staged a two-week government shutdown, brought four Supreme Court cases, and tried more than 50 times in Congress to repeal all or part of it. As the law’s mandates increased cost and decreased choice for millions of Americans, the GOP mantra remained “repeal and replace,” not “restore and repair.”
In response, President Obama arrogated to himself unconstitutional pen-and-phone powers to delay, suspend, and modify the ACA’s onerous mandates. These executive actions, designed to mollify upset customers, had the perverse effect of keeping more people out of the insurance market. Though his actions provided a short-term analgesic to people who had lost coverage or who could not afford new coverage, the modifications further skewed the risk pool toward older and sicker customers. But those executive-induced distortions were only the first hints of the reform’s structural flaws: The central planners vastly overestimated Obamacare’s popularity.
In 2015, the government forecast that 20 million people would sign up on the ACA exchanges in the following year. The number of confirmed enrollees in 2016 was closer to 13 million. Only 10 million will actually pay their bills through September — barely half of the government’s recent forecast. Why are so many people enrolling but not paying their bills? Because the Obama administration, desperate to inflate enrollment numbers, created more than 30 “special enrollment” periods that allowed customers to sign up whenever they wanted. Many of the tardy enrollees were not required to show proof of financial hardship.
Unsurprisingly, these Johnny-come-latelies use expensive health care and then drop their policy. That gap leaves the insurance companies — and ultimately the taxpayers — footing the bill. Blue Cross Blue Shield explained that “individuals enrolled through special enrollment periods are utilizing up to 55 percent more services than their open enrollment counterparts.” United Healthcare reported that more than 20 percent of its customers signed up during a special enrollment period and that this group used 20 percent more health care than those who enrolled during the regular enrollment period.
As a result of these shortfalls, insurers in 41 states lost money. In 2014 and 2015, Blue Cross Blue Shield of North Carolina lost a combined $400 million. United Healthcare lost nearly $1 billion in two years. “We continue to have serious concerns about the sustainability of the public exchanges,” explained Mark Bertolini, the CEO of Aetna. He pointed out that the risk pool was older and sicker than planners had expected. As more insurers drop out, there is less competition, and premiums go even higher. Economist Herbert Stein’s rule applies forcefully to the ACA: “If something cannot go on forever, it will stop.”
The Obama administration has announced that starting this year, it will clamp down on special enrollment periods, but it might be too late. Many insurers are already pulling out of the destabilized, unprofitable marketplaces. In 2017, Aetna, Humana, and United Healthcare will exit many of their previous health-care markets. As a result, only one insurer will offer policies in Alabama, Alaska, Oklahoma, South Carolina, and Wyoming, and in rural counties in Arizona, Florida, Mississippi, Missouri, Nevada, North Carolina, Tennessee, Utah, and West Virginia. In Alaska, the lone insurer threatened to leave after regulators rejected its proposed rate hike; to prevent its marketplace from unraveling, the state government created a special $55 million bailout fund to keep Blue Cross Blue Shield from exiting. Calamity was averted, temporarily at least.
In at least one area, Pinal County, Ariz., there will be zero plans available to purchase. Because of Obamacare, people there lost the plans they liked, were forced to buy expensive plans for two years, and are now stuck with no choices on the exchange. Arizona will probably work out some compromise with Blue Cross Blue Shield, as did Alaska, but these failures are merely the canary in the coal mine. It will get worse.
In 2017, two programs designed to spread the wealth, as the president might put it, from profitable insurers to the unprofitable ones will wind down. “Reinsurance” reimburses insurers that enroll sicker customers. “Risk corridors” limit how much insurers can lose and gain in the marketplaces. Both of these temporary redistributive measures — crafted to cushion the ACA during its infancy — will go away.
The Affordable Care Act, a regulatory leviathan forged from empathy and hubris, tragically suffers from what economist F. A. Hayek described as the “fatal conceit.” Central planners such as Jonathan Gruber vastly overestimated their ability to tinker with the free market to achieve an optimal balance of low premiums, high-quality care, and expanded coverage. Only three and a half years after the launch of the exchanges in January 2013, the planners’ arrogance is obvious. True to form, President Obama has called for further government intervention to cut through the morass created by his own administration. Writing in the Journal of the American Medical Association, the president recently voiced his support for a “public plan to compete alongside private insurers.” Hillary Clinton has also endorsed the public option, “to reduce costs and broaden the choices of insurance coverage for every American.”
Further centralization of our health-care system will only accelerate the shrinkage of private insurance markets. Seth Chandler, a law professor at the University of Houston, compared the public option to a “Trojan horse for a single-payer system that has windows so you can actually see the troops inside.” The government plan will simply underprice and undercut any private insurers that remain in the marketplace. The Affordable Care Act, billed as a hybrid of free-market and government approaches to health-care reform, didn’t even make it past year four. The ACA’s intricate planning — designed to ensure the viability of the health-insurance markets — has already proven unsustainable. With economic calamities on the horizon, the public option is now part of the game plan to bail out Obamacare.
The next president will face a stark political reality: Half the country hates Obamacare and wants no part of it; the other half thinks that Obamacare didn’t go far enough and now wants single-payer coverage. Efforts to reform the law will have to consider that roughly 14 million people now rely on Obamacare’s expanded Medicaid coverage and about 10 million people have purchased subsidized insurance on the ACA exchanges. These facts make the “repeal and replace” mantra almost impossible to fulfill. But we should not lose sight of the tens of millions of Americans who were harmed by the ACA: those whose plans were canceled or who saw premiums increase, deductibles skyrocket, networks shrink, or their choice of policies decline to one.
I am not sanguine about the opportunity for reform. The haughty decision to transform almost 20 percent of the American economy without any bipartisan buy-in, with the expectation that the law’s opponents would simply fall in line, has poisoned the well for future health-care reform. The ACA will no doubt muddle along for the next few years, until premiums grow so high that the consensus builds for a public option. But we should not be confident that this centralization will work any better than the last one. The same planners who assured us that the ACA could operate without a public option cannot be trusted to reform our health-care markets with a public option. Soon enough, Obamacare will unravel and collapse under its own weight. At that point, we will be on the road to single-payer.
– Mr. Blackman teaches constitutional law at the Houston College of Law.