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Health Insurance Exchanges

By | Updated July 23, 2014

The fate of Obamacare has been closely tied to the success or failure of the online shopping centers where people were able to sign up for coverage, dubbed Health Benefit Exchanges by the 2010 Affordable Care Act. The idea was to create an Expedia for medical coverage instead of airplane tickets, where insurance companies compete to offer affordable plans, mainly to those who don’t get insurance at work. The big question has always been whether the exchanges would attract enough healthy young people to offset the cost of older or sicker enrollees — even though for months that was put on hold as the government struggled to get the botched federal website to work. The administration hailed the first round as a victory snatched from the jaws of a technical disaster. But the exchanges still face skepticism and court challenges as insurers and the government prepare for their second round.

The Situation

Obamacare supporters were dumbfounded — and its opponents gleeful — over the utter mess revealed when the federal exchange, healthcare.gov, went live on Oct. 1. By Dec. 1, the federal website had substantially improved, although some state-run sites continued to work poorly. By April, President Barack Obama was able to announce that more than 8 million people had signed up for private insurance under the Affordable Care Act — meeting and apparently exceeding the administration’s initial goal, which had seemed unattainable not long before. In addition, as many as 3.4 million are expected to be added to the Medicaid rolls in the 25 states that accepted the federal expansion of the program. In a positive sign, a number of insurers said they planned to expand their offerings through the exchanges for 2015. In July, the exchanges survived another legal challenge when an appellate panel overturned a ruling issued only hours earlier by another court that had said the government could not provide subsidies to people buying insurance through the federal exchange.

The Background

The exchanges are just one part of the law’s approach to bringing coverage to many of the 50 million Americans who lack it, but they are its main tool for reaching those not covered by their employer or a government program. The idea behind the exchanges was simple: bringing together the millions relying on individual policies would lead to larger risk pools, more competition and lower premiums. That depends on enrolling enough healthy people to offset the cost of sicker customers — otherwise costs could rise, especially for young adults. Congress expected each state to create and manage its own exchange, but only 14 (plus Washington, D.C.) agreed to do so. The rest, reflecting hostility to Obamacare or concerns about the technical hurdles, opted to let Washington do all or part of the job.

The Argument

Republicans, whose original goal in the fall budget battle was to defund Obamacare, said the technical mess at the site’s launch vindicated their calls for a delay.  The argument took a new turn when the cancellation notices went out, as Republicans assailed Obama’s credibility, throwing Democrats on the defensive.  Administration officials argued — and hoped — that support for the law would increase as more people experienced its benefits. And in March a Bloomberg National Poll found that 64 percent of respondents wanted to retain the law as it was or with only minor changes. In good news for Republicans, the poll found that the 34 percent in favor of repeal felt more strongly than the law’s supporters and described themselves as more likely to vote in the fall midterm elections. In Florida, a special election to fill a vacant House seat went to the Republican candidate, who had focused on opposition to Obamacare. Even as the parties geared up to carry the fight into the November midterms, determining the success of the system may take a while.  The U.S. Congressional Budget Office estimates that 45 million Americans will be uninsured this year despite the law, a number that will only shrink as far as 31 million by 2024. But the percentage of uninsured nonetheless has fallen since the law was passed, according to a Gallup Poll survey. In the first quarter of 2014, the rate fell to 15.9 percent, its lowest quarterly level since 2008.

The Reference Shelf

  • A Bloomberg Visual Data chart tracks state-by-state enrollment in Obamacare.
  • Read the Affordable Care Act here. The section on exchanges begins on page 55.
  • The U.S. government has a calendar of key dates  while the Kaiser Family Foundation is tracking state progress.
  • compilation of new health law regulations published by the Health and Human Services Department.
  • A book by the former Obama adviser David Blumenthal covers the contentious history of health reform in “The Heart of Power.”
  • PriceWaterhouseCoopers reports on how the insurance industry is affected by the exchanges.
  • Bloomberg Visual Data has a chart with a state-by-state rundown of premiums.
  • Bloomberg News “Prognosis for Obamacare” coverage index.

To contact the writer of this QuickTake:

Alex Nussbaum in New York at anussbaum1@bloomberg.net

 

To contact the editor of this QuickTake:

Jonathan I. Landman at jlandman4@bloomberg.net