The government shutdown is over, but the purported reason for shutting down the government, the high cost of the health insurance under the Affordable Care Act, has not been addressed. Because the ACA is a complicated, politically charged beast, we should not expect Congress to address this issue in a meaningful manner.Â
The ACA made several important changes to the health care system.
Insurance companies could no longer deny coverage for pre-existing conditions. This is significant because many people were unable to obtain coverage for serious medical conditions. Undoubtedly this increased premium costs in the short run, but prevented people from going bankrupt because of health problems.
Individuals were required to have insurance coverage. This is the so-called individual mandate where people who did not obtain health insurance coverage were subjected to a tax exceeding the cost of obtaining insurance coverage.
Without an individual mandate, insurance companies cannot be expected to provide affordable coverage without imposing restrictions on pre-existing conditions.
State-run insurance exchanges created a marketplace where insurance companies could sell coverage on a competitive basis. Residents of states having more robust exchanges typically enjoy more competitive pricing.
Some of the ACA’s most important features, including the individual mandate and creating health insurance marketplaces for individual and small business health insurance purchases were originally proposed by the Heritage Foundation in 1989.
Yet today, the Republicans oppose the individual mandate and claim that the state-run exchanges are inefficient and should be replaced. Some Republicans favor a national exchange.
The individual mandate is extremely controversial but essential.
Many people — particularly the young and healthy — don’t want to be forced to purchase health insurance. But if they are eliminated from the insurance risk pools, the remaining participants would generally be older people and those with health conditions.
Consequently, premiums would increase substantially for those purchasing ACA insurance because of the demographics of the smaller risk pools.
In 2012, the Supreme Court ruled that the individual mandate was constitutional. But in 2017, as an end run around the Supreme Court, Congress reduced the penalty tax rate to zero.
This effectively ended the individual mandate.
At that time, I wrote a Signal column predicting that ACA premiums would inevitably rise as a result.
Because of the 2017 tax law changes, many Americans dropped their insurance or purchased cheaper insurance not meeting the ACA coverage standards.
When the pandemic swept across America, a significant number of those Americans faced substantial medical bills, which they could not pay.
In response, Congress put a band-aid on the problem by enacting subsidies so those people could afford to be insured under the ACA.
Those subsidies were hastily enacted, and in retrospect, were probably too generous.
Those subsidies expire at the end of this year and were not extended by the One Big Beautiful Bill Act.
Consequently, about 25 million Americans will lose their subsidies and many of them will be unable to afford ACA coverage. Ostensibly, this is why the Democrats caused the shutdown by not voting for the continuing resolution that increased the national debt limit.
Extending the ACA subsidies costs the federal government about $35 billion annually and fails to address the ongoing problem of not having an effective individual mandate, which is a principal long-term driver of increased ACA health care premiums.
Congress can choose to continue the subsidies, which must be paid for through tax increases or additional borrowings, but doing so fails to address the underlying causes of increasing premiums.
President Donald Trump has proposed giving money so that people can afford to purchase health insurance. The problem with his proposal is that, without mandating insurance standards such as those included in the ACA, many Americans will purchase substandard policies with limited coverage for many medical expenses.
Other countries, most notably the Netherlands, have successfully adopted health care systems similar to the ACA, but operate them more as a regulated utility, ensuring that patients, doctors and nurses are treated fairly.
Those other countries have more effectively constrained costs, largely because they instituted the following policies:
• Implementing a strong individual mandate, ensuring that everyone participates.
• Centralizing health care into a single national system that allows for greater purchasing power when negotiating prices from providers and pharmaceutical companies.
• Discouraging, or even banning, the use of high levels of hydrogenated fats and fructose-derived sugars that increase obesity and diabetes, which, in turn, significantly escalates health care costs.
Although politically challenging, if Congress adopted these three pillars of health care, America could manage its health care costs more effectively within the existing ACA framework.
Jim de Bree is a Valencia resident.
