And now a few words about Obamacare…

So, I’ve sort of been avoiding political topics here on my blog and on Facebook, not because I don’t like politics (some of you know I’m a big time political junky and polling wonk), but I’d rather spend my social media energy on fun stuff like my writing projects and video games and things that wont cause shouting matches among my very diverse friends. I’m going to break from that policy for bit, however, to talk about a topic that is often considered political (though it shouldn’t be)… health insurance… specifically, Obamacare. My timing is not accidental but has nothing to do with the election. November marks the beginning of a new open enrollment period for health insurance on The Affordable Care Act’s insurance marketplace. Hopefully this essay will cut through some of the current political noise and provide some useful information for those actually wondering what Obamacare is and if they should buy insurance through it. I will be speaking from a position of personal experience… my family has had insurance via Obamacare for the last 3 years.

First, a quick primer on what Obamacare is and is not. Obamacare (actually called The Patient Protection and Affordable Care Act) is NOT government run socialized medicine. Medicare is an example of socialized medicine, and some people actually advocate expanding it to all ages, and that would be true European style socialized medicine… but that’s not what Obamacare does, it’s basically just insurance reform, and not terribly radical reform at that.

Before Obamacare, the health insurance market was split into two very different pieces, the employer/group insurance market (where most people get their insurance), and the individual market (basically everyone NOT getting their insurance from their employer). Your Employer provided insurance was undeniably a better deal. It was group rated, meaning everybody pays the same rate for their plan, and the insurance company had to take all comers and not raise rates or kick people off because of their health. The individual market, in comparison, was not group rated. Thus, if you had health problems, you might find yourself priced out of the market or just denied insurance outright (that whole ‘pre-existing condition’ thing).

It’s no accident that employer provided insurance has long been better than the individual market… you can thank government regulation for that, specifically The Employee Retirement Income Security Act of 1974 (and various amendments to it over the years). ERISA regulated various aspects of employer provided benefits, health insurance policies being a primary component. So what Obamacare did was to essentially take a system that was already being applied to the employer provided insurance market and adapt it to the individual market. Now, when you buy insurance as an individual, you pay the same rate as everyone else buying that same policy, and you can’t be turned down for health reasons.

Of course there is a bit more to it than that, and the devil is in the details. To avoid a problem called ‘adverse selection’ in which only sick people buy insurance (driving up prices), the ACA/Obamacare came with a carrot and stick mix of subsidies and penalties… subsidies to help people afford insurance and penalties for those people who failed to purchase it. I’m not here to defend or criticize that… it is what it is… instead let’s focus on what it means to those of us affected by it.

OK, so first off, if you get your insurance (like most Americans) from your employer, you are not directly effected. Your benefits may have changed a bit from previous years (with more stuff now covered), but generally employer plans were already required to do most of the stuff Obamacare mandated. Your costs might have increased over the last few years, but healthcare costs were increasing long before Obamacare, and the rate of growth has actually been lower (on average) since Obamacare went into effect. The people most effected are the people in the individual insurance market. People like my family.

The individual impact of Obamacare on people buying their own insurance varied widely. People who were young and healthy and buying policies with reduced benefits often saw their costs go up. The new ACA regulated policies came with more benefits, but that came with higher cost, and many people were understandably unhappy about it. Other people who previous had very high costs because of health conditions saw their costs drop, and still others who were previously denied could finally buy insurance (this last category includes my family). When you add the insurance premium subsidies into the mix, most individual insurance purchasers saw their costs drop, and millions more people were able to purchase insurance. On balance, a good situation for the self employed and other uninsured / underinsured people like me.

But wait… what about all these claims of run-away costs and death spirals and so on? Isn’t Obamacare crashing and burning? Again, the devil is in the details, and as is often the case during election season, headlines are often more hype than fact. Yes, costs on the Obamacare insurance exchanges are going up next year, and in some cases by a lot, but we are still dealing with early estimates (which are always on the high side as insurance companies open negotiations with state regulators) and the extremes are always worse than the average. As is the case with any large data set, you find some values on either end of the curve (yes, some people will actually see their rates go down), and those markets seeing the largest increases will of course generate the most news. Cost fluctuations in the insurance market are very regional, so a news story about a big cost increase in another state doesn’t really mean anything in relation to YOUR insurance… for that you need to actually check with your insurance provider and comparison shop on your local insurance marketplace.

I could go on here and talk about lack of competition in the insurance market and the role that politics has played in that… about ‘risk corridors’ and why big increases in 2017 are unlikely to repeat in 2018… but the point I really wanted to make is that there is no Obamacare death spiral, at least not on a national scale. Insurance is very localized, and price hikes (as much as they suck for those effected) are also localized, so as long as your personal insurance market has plenty of choices and decent prices, you probably don’t have anything to worry about. Furthermore, the sliding scale of premium subsidies will tend to mitigate the increases for many people, so don’t assume that high increases in your market will automatically price you out of the market. Make your insurance choices based on your personal health and budget situation and don’t worry about the political hype.

OK, so about that personal insurance choice… how does one cut through the noise and get the facts to make that decision? The short answer to that is At that site you can browse the insurance options available, see what they cost, and find out if you qualify for a premium tax credit to reduce the cost. You might be pleasantly surprised and learn that, with the premium subsidy, insurance is much more affordable than you assumed… or you might find that it is still rather expensive and you would rather just pay the tax penalty (though personally I don’t recommend that). Only you can ultimately make that decision (and really, political hype aside, it really is still your choice if and what insurance you buy).

As for the penalty, in 2017 it will be the higher of 2.5% of your income or about $700… unless you are exempt for some reason such as falling below the income threshold or various other reasons. Again can tell you for certain. Don’t let the .gov domain scare you off… yes it’s a government website, but the insurance companies are all private insurance providers… in most cases the same companies providing employer based policies, and you can buy this same insurance directly from those companies if you are not worried about getting a tax credit / premium subsidy.

OK, so that’s my Public Service Announcement blog post regarding Obamacare. I’ll close by saying that I still feel the same about The Affordable Care Act now as I did when it was being debated in Congress… it’s a cumbersome, flawed legislative patchwork that ultimately does more good than harm. My biggest criticism at the time was that it didn’t do enough around cost containment, and we are seeing that play out now. But for all its faults, I think it is worth fixing rather than scrapping. Hopefully our next President and Congress will work together to do that.

UPDATE: So Trump won the election, and consequently it is looking likely that The Affordable Care Act will be repealed.  Details on what, if anything, will replace it are still murky.  Obviously this is creating a lot of anxiety in my family (and millions of others around the country).  I might follow up with another blog post on the topic after I’ve had time absorb the news and think on it.  In the mean time, expect another installment of Devious Origins (it’s overdue).

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