The Affordable Care Act (ACA) passed in 2010. Provisions for mandatory acceptance despite pre-existing conditions and limits on the portion of premiums that insurers may spend on “other than health care” were effective early. A token few price adjustments for medical services were imposed, reflecting lobbying prowess more than meaningful cost cutting. But the big event was to happen in 2014 when individuals would obtain coverage from their employer or buy it from health insurance exchanges – government managed health insurance markets. Fines were established to coerce individuals into buying coverage and force employers into offering coverage. Low income families were to get generous subsidies to keep insurance costs below 9.5% of their income.
The individual mandate to buy insurance survived a challenge at the Supreme Court, a rare ACA success. Without an effective individual mandate, younger healthier people would avoid buying average-priced health insurance, thereby escaping the big cross-subsidy that government needs them to provide to the older and sicker health insurance buyers.
In mid-February 2013, 17 states had opted to set up their own state health insurance exchanges, 26 states had decided against setting up their own and the rest were undecided. The exchange is where the health insurance premiums become visible to other insurers, employers, employees, individuals and governments. States without an exchange will default to using the federal exchange.
On July 3, 2013 the administration announced that it would delay the employer mandate by one year, until after the 2014 mid-term election. That allows employers another year to adjust workflows to accommodate fewer full-time and more part-time employees and to avoid ACA fines. Employees still face the individual mandate, but without coercion on their employer to offer them coverage.
Revenues from fines to the federal government will be forgone for a year. Also delayed will be employers contracting with insurance companies for employee plans. As a result, prices on the exchange will reflect the unfavorable mix of a smaller and probably sicker headcount of insured people. Premium costs were already expected to double or triple in some cases and this unfavorable mix may help that happen. Employees would have been able to fulfill their obligation by buying subsidized insurance on the exchange if all their workplace options were “unaffordable” (i.e. more than 9.5% of their income). But if there are no workplace options offered, more employees may be seeking federal subsidies for exchange coverage.
No doubt there will be a voter backlash if the individual mandate is enforced while waiving the employer mandate for a year. If a like waiver is granted, the persisting cost challenges inherent in ACA could motivate Congress to pass annual waivers of the individual and employer mandates – as easily as they pass continuing resolutions for the budget. Then the ACA becomes a thought experiment.
Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research