Americans Experience Personally ObamaCare’s Broken Promises

Republicans and Democrats sparred during a hearing on Tuesday before the House Budget Committee on “The Failures of Obamacare: Harmful Effects and Broken Promises” (testimonies and video are here), showing the division between Democrats who continue to defend the law and Republicans who heard clearly the call of the electorate to repeal and replace it.

Rep. Diane Black, R-TN, led the hearing attended by virtually all of the committee’s members. She was named interim chair after Rep. Tom Price was nominated to be HHS Secretary in the Trump administration.  Like Dr. Price, an orthopedic surgeon, Rep. Black also has real world medical experience after working for 40 years as nurse in Tennessee.

She called the hearing to make it very clear ObamaCare has failed to come close to delivering on its lofty promises.  “Premiums in our state [of Tennessee] are rising by an average of 63 percent, and three-fourths of our counties only have one coverage option to choose from on the Obamacare exchange,” she said.  Clearly, replace cannot be built on the wreckage of ObamaCare.

The democrats on the committee hammered hard on the notion that Republicans don’t have a plan to replace ObamaCare and focused on the millions of people who would lose coverage when as much of the law is repealed as can be done through congressional processes.  There are, in fact, a number of plans, with many similarities among them.

The Replace part of repeal and replace will be a major issue on the agenda for the Republican retreat this week in Philadelphia, where they will be joined by President Trump on Thursday, as the new Congress and White House shape their legislative agenda for the year.

But first, Congress must finish the work Members have begun on repeal. I focused in my testimony on the impact of the health overhaul law on American families, small businesses, and young people.  In summary:

While millions of people have received health coverage through the Affordable Care Act, many millions more have felt personal harm.  Republican leaders have provided assurances that repeal and replace measures will protect the people who are receiving coverage now under the health law.  And considerable effort also is being devoted to building a bridge to new coverage that will protect others from the damage that it has done and is doing to their pocketbooks and their access to medical coverage and care.

The costs of health insurance are crippling many families’ finances, including forcing them to work extra jobs.  An Uber driver who lives in Maryland told me last week that he is working this second job so he can pay for health insurance. The premium for the policy for himself, his wife, and one child is $1,200 a month.  He must spend hours away from them every week to meet his obligation to provide coverage. While many millions are covered, millions more are pleading for relief.

The impact on young people. One of the ways that the Affordable Care Act tried to help young people was by allowing them to stay on their parents’ policies until age 26.  But this provision is not free.  “We find evidence that employees who were most affected by the mandate, namely employees at large firms, saw wage reductions of approximately $1,200 per year,” according to Gopi Shah Goda and Jay Bhattacharya of Stanford and Monica Farid of Harvard.

As this new wave of young adults was added to their parent’s existing job-based policies, the cost of coverage inevitably climbed.  Companies responded by scaling back cash wages as a share of overall compensation. The study found that the costs of the 26-year-old mandate weren’t “only borne by parents of eligible children or parents more generally.” The costs were spread to each worker—not just the dependents’ parents.

The ACA makes a direct hit on young people in two important ways:  First, young people purchasing individual policies must pay much more than their expected use of services. That’s because of the law’s required 3:1 age rating band that increases their premiums by 75% while reducing premium costs for 64-year-olds by only 13%.

Not surprisingly, a disproportionate number of the young, healthy people are simply opting out.

Second, the ACA’s employer mandate makes it more costly for employers to hire younger, entry-level workers, diminishing their job opportunities and making it much harder for them to get that first real job. Lightening this regulatory burden could help many young people struggling to find their first real job.

The impact on families.  On an NPR’s “Morning Edition” broadcast late last year, a self-employed consultant in Portland, Ore., said he won’t be buying health insurance for 2017 because his premium had shot up to $930 a month. “I’ve got clients saying, ‘The prices are nuts and I won’t pay it, I’ll pay the penalty,’” according to one broker.

Enrollment in the exchanges has been far below expectations. The Congressional Budget Office originally estimated that 21 million people would be enrolled in exchange coverage by 2016. As of June 2016, only 10.5 million were.

With premium prices rising by an average of 25% in the exchanges, with networks narrowing and cost-sharing widening, too many people are saying the insurance is just not a good deal.

In one-third of all U.S. counties, coverage is take-it-or-leave it since they have a “choice” of only one or two plans. Thirty-three states have fewer insurers offering coverage on the exchanges in 2017 than in 2016. This is certainly not the competitive market that creators of the ACA envisioned.

According to a report in USA Today:  Loralea Grey, whose husband is self employed, says they are living a “middle-class nightmare” because of the law. They grew used to the necessary sacrifices to afford the premiums and out-of-pocket costs for their “catastrophic” insurance before the ACA, she says. This year they were facing a premium increase of nearly 40% with a $7,000 deductible per family member. They’ve decided they can’t scrimp anymore to afford plans through the ACA exchange.

“How is this possible or allowable?,” she asks. “When I contacted the Oregon insurance commissioner, I received a response back telling me I should feel free to shop around; as if I wasn’t smart enough to have already done that?”

The USA Today report continues: In North Carolina, the cheapest option with a “decent network” of doctors and hospitals for Jim Harrison’s 61-year-old wife would cost $1,421 a month with a $7,150 deductible. (He is on Medicare.) Because he is retired and that isn’t affordable, the family got a hardship exemption from the mandate to have insurance.

“So against our better judgment, she is going to go without health insurance next year … but we put all of our retirement assets at risk should something catastrophic happen,” he says, “I never thought we would be in this situation.”

Hundreds of thousands of people who purchased ObamaCare plans and paid their premiums STILL have lost their coverage.  More than 800,000 people who were enrolled in ACA Co-op health plans in 18 states lost their plans and were forced to find other coverage. American taxpayers spent $2.4 billion to finance these start-up, non-profit health plans, all but five of which have failed.

And the taxes!  The law contains nearly two dozen taxes totaling more than $1 trillion, many of which are passed along to middle-income consumers in the form of higher premiums.

Some of the ACA taxes were delayed for two years as Congress saw the impact they were having on rising premiums. The Health Insurance Tax in particular is a direct sales tax on health insurance that increases the premiums people pay.  The HIT was delayed for only one year, and it starts impacting small businesses as early as Feb. 1 of this year as they begin to renew their coverage.  It will be fully integrated into rates shortly after as insurers start solidifying 2018 rate filings. Economist Doug Holtz-Eakin concluded this one tax will raise premiums for small businesses and households by nearly $5,000 per family over a decade.

The ACA has failed Americans who were promised more choices of more affordable coverage in the exchanges, but those outside the exchanges have felt the impact as well after being hit with these taxes.

Former President Obama promised that the average American family would see its insurance premiums fall by $2,500 a year, yet average annual family premiums in the employer-sponsored market have soared by roughly $4,300 and now total more than $18,000 annually.

Impact on small businesses.  Health insurance costs for small firms have risen 56% in the last decade. Worker wage increases have suffered as a result.  Too much of the money that employees could have seen as wage increases has been consumed by rising health insurance costs instead.

The SHOP exchanges and small business tax credits were supposed to help small businesses.   But the tax credits were so complicated and the path to obtaining them so narrow that they drew very limited interest and participation.  The SHOP exchanges also failed to provide a broader range of affordable and attractive choices of insurance for small businesses.

The federal government has not collected data on the impact of the ACA on the “opportunity cost” of small business growth, but small business owners definitely see the impact.  Here is a report from The Daily Signal about Scott Womack, owner of about a dozen IHOP restaurants in Indiana and Ohio by Rob Bluey: 

“The IHOP in Terre Haute is located on South 3rd Street, just a few minutes from the Interstate 70 interchange and a short drive from the Holiday Inn where we had stayed the night before. As we sat in the back of the bustling restaurant waiting for Womack to arrive, we ordered french toast, omelets and other IHOP specialties.

“At the time, Womack employed about 1,000 people at his 12 restaurants. When the Affordable Care Act became law on March 23, 2010, he had big plans for his franchise. He had purchased a development agreement in 2006 that would expand the company to 14 new IHOP locations in Ohio…

“’Let me state this bluntly,’ Womack told lawmakers [in earlier testimony before Congress], ‘this law will cost my company more money than we make.’

The cost of Obamacare’s mandates—Womack estimated it would be $7,000 to provide health care coverage for each full-time employee—left him with few options: cut costs, eliminate staff, reduce hours or convert workers to part-time status.

Four years later, facing the prospect of Obamacare’s employer mandate on Jan. 1, 2015, Womack opted to sell his 16 IHOP restaurants last year to Romulus Restaurant Group.

Impact on vulnerable Americans.  Mercatus Center economist Brian Blase concludes that 70% of new Medicaid enrollees in 2014 were eligible for the program under pre-ACA rules.  While there are many unintended consequences of the law, perhaps the most tragic is how it is harming some of the most vulnerable on Medicaid.

Charles Blahous of Mercatus concludes that the primary effect of the Medicaid coverage expansion “was to require the most sympathetic and vulnerable Medicaid population (lowest-income enrollees, pregnant women, children, etc.) to face more competition for health services from a marginally less vulnerable population (childless adults of somewhat higher income).”

A Louisiana Medicaid recipient told The New York Times:

“My Medicaid card is useless for me right now.  It’s a useless piece of plastic.  I can’t find an orthopedic surgeon or a pain management doctor who will accept Medicaid.”

The next chapter in health reform 

President Trump’s executive order of January 20 directed all federal agencies “to minimize the unwarranted economic and regulatory burdens” of the Affordable Care Act.

While administrative actions will be able to postpone or lighten the burden of the regulations in place, only Congress can actually change the underlying law, not only to provide relief from the existing rules but also to provide new opportunities to give people the option of more affordable coverage and more choices of coverage.

Read the full report at Galen, Grace Marie Turner’s testimony to congress. . .

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– Ronald Reagan