On March 23, 2010, the Obama-led government passed a federal statute that was expected to make drastic changes to the United States healthcare system. A first since the introduction of Medicare and Medicaid in 1963. The act was called The Patient Protection and Affordable Care Act (PPACA), also known as Affordable Care Act (ACA) and more famously known as Obamacare. The objective of the act was to transform the healthcare system in the United States, by increasing the distribution of health insurance and making it affordable to all. Hospitals and private physicians too were offered a revamp, with more advanced facilities using the latest technology coupled with better financing.
Obamacare’s focus was to offer quality and affordable insurance by reducing the cost of healthcare, and ordered insurers partnering with Obamacare to accept all applicants regardless of their pre-existing condition or sex. Though the act was met with objection from opposing parties, several states, the labor union and business organization, it did have a significant impact on healthcare in the United States. According to the CDC report, the number of people without insurance dropped nearly half - from 16% of the American population to 8.9% as of June 2016. Another significant report stated that because of Obamacare, an additional 23 million people in the United States as of now have health insurance. Out of the 23 million people, 12 million people are covered by individual exchanges, with 10 million of the 12 million receiving health care subsidies.
Despite the significance it has caused for healthcare in United States, the initial projection of the act failed to cover all areas and predict their outcome, and as of today, Obamacare has hit a wall - but isn’t knocked out. The plan drafted by Obamacare has failed to be profitable for some of the biggest insurance companies in the United States, forcing them to pull out from Obamacare. The result has been an increase in the health insurance premiums and subsidies, leaving almost everyone in a dire situation - a sour taste on the palates of the American people. Let’s take a look into why Obamacare has hit a dead end and is now scrupulously and desperately looking for a way out to revive itself.
The hike in premiums and subsidies in Obamacare became a topic of discussion last month, such that, some even speculated that it will be the sole reason why the Democrats would fail to win the elections. The Democrats did lose the elections, but it wasn’t because of Obamacare. At this juncture, one might think that Obamacare might just dissolve in the near future, but considering 20 million Americans depend on it for their health care - including the youth still on their parent’s insurance plans, people on individual exchanges, and the poor who are subscribed to Medicaid - it isn’t that probable. Coming back to the big question, why has Obamacare increased its premiums and subsidies?
The prime reason behind the increase in premiums and subsidies is because a huge chunk of people that are subscribed to Obamacare are sicker than insurance companies presumed. Insurance companies linked to Obamacare initially priced their premiums too low. Subsequently, the price to treat chronic diseases, and illnesses like diabetes and hepatitis for example, are costing insurers more than the premiums, leading to enormous losses. UnitedHealthcare (UNH), United States’s biggest insurer, claims that they have lost $1 billion in Obamacare, while Aetna (AET) pulled out of Obamacare because they lost $430 million. The prime reason behind these losses is that there isn’t enough healthy Americans subscribing to Obamacare to form a balance in the insurance plan.
As a result, premiums for the benchmark plan on subsidies has risen by 22%. In cities such as Arizona, the premium has increased by 116% to $422 a month, whereas in cities like Oklahoma and Tennessee the premiums have skyrocketed by 69% and 63% to $424 a month and $385 a month respectively. While the rise in premiums might set people off from subscribing to Obamacare, the biggest threat Obamacare currently faces is having to deal with the fact that big insurers ave lost faith in Obamacare and have pulled out or are going to in the near future. Aetna has already stopped offering policies under Obamacare in 11 states, whereas UnitedHealthcare - the biggest health insurer in the United States - is all set to drift away from Obamacare next year, sighting losses. Insurers are pointing out the fact that Obamacare needs to improve its risk-management program and to revise their formula by striking a balance by ensuring that healthy Americans fund federal payments to insure the sick. They also pointed that the flaw about Obamacare is that people are signing up only when they are sick, and this situation is boosting the losses of the insurers.
Experts believe that the only way Obamacare can see light through this dark phase is if they increase the amount of insurers by drawing in the Americans that are currently uninsured. Of course, the healthier the subscribers, the better. Now, Obamacare is focused on getting the young, healthy youth to subscribe. The Administration’s officials of Obamacare are using online portals such YouTube, Facebook, Twitch, Twitter and Instagram, in a bid to lure youngsters into the program and raise awareness on the need for healthcare. In addition, they are reaching out to the people who have paid the penalty for not being insured and those who qualify for subsidies but are not part of Obamacare. The number of people having insurance plans apart from Obamacare is 2.5 million and getting them on board just might stabilize the ship.