What Lies Ahead

Megan McArdle describes a debate she participated in recently on the resolution that "Obamacare is Now Beyond Rescuing." In her article she explains what still lies ahead in the implementation of Obamacare and much of it is not going to be popular once people realize what's happening.

Here's what she wrote:

The law still lacks the political legitimacy to survive in the long term. And in a bid to increase that legitimacy, the administration has set two very dangerous precedents: It has convinced voters that no unpopular provisions should ever be allowed to take effect, and it has asserted an executive right to rewrite the law, which Republicans can just as easily use to unravel this tangled web altogether.

Many of the commentators I’ve read seem to think that the worst is over, as far as unpopular surprises. In fact, the worst is yet to come. Here’s what’s ahead:

• 2014: Small-business policy cancellations. This year, the small-business market is going to get hit with the policy cancellations that roiled the individual market last year. Some firms will get better deals, but others will find that their coverage is being canceled in favor of more expensive policies that don’t cover as many of the doctors or procedures that they want. This is going to be a rolling problem throughout the year.
• Summer 2014: Insurers get a sizable chunk of money from the government to cover any excess losses. When the costs are published, this is going to be wildly unpopular: The administration has spent three years saying that Obamacare was the antidote to abuses by Big, Bad Insurance Companies, and suddenly it’s a mechanism to funnel taxpayer money to them?
• Fall 2014: New premiums are announced.
• 2014 and onward: Medicare reimbursement cuts eat into hospital margins, triggering a lot of lobbying and sad ads about how Beloved Local Hospital may have to close.
• Spring 2015: The Internal Revenue Service starts collecting individual mandate penalties: 1 percent of income in the first year. That’s going to be a nasty shock to folks who thought the penalty was just $95. I, like many other analysts, expect the administration to announce a temporary delay sometime after April 1, 2014.
• Spring 2015: The IRS demands that people whose income was higher than they projected pay back their excess subsidies. This could be thousands of dollars.
• Spring 2015: Cuts to Medicare Advantage, which the administration punted on in 2013, are scheduled to go into effect. This will reduce benefits currently enjoyed by millions of seniors, which is why they didn’t let them go into effect this year.
• Fall 2015: This is when expert Bob Laszewski says insurers will begin exiting the market if the exchange policies aren’t profitable.
• Fall 2017: Companies and unions start learning whether their plans will get hit by the “Cadillac tax,” a stiff excise tax on expensive policies that will hit plans with generous benefits or an older and sicker employee base. Expect a lot of companies and unions to radically decrease benefits and increase cost-sharing as a result.
• January 2018: The temporary risk-adjustment plans, which the administration is relying on to keep insurers in the marketplaces even if their customer pool is older and sicker than projected, run out. Now if insurers take losses, they just lose the money.
• Fall 2018: Buyers find out that subsidy growth is capped for next year’s premiums; instead of simply being pegged to the price of the second-cheapest silver plan, whatever that cost is, their growth is fixed. This will show up in higher premiums for families -- and, potentially, in an adverse-selection death spiral.

Each of these is likely to trigger either public outcry or providers leaving the market (leading to public outcry). Policy analysts can say that this is unfortunate but necessary -- that you can’t make an omelet without breaking eggs. Fair enough, but the administration has been manifestly unwilling to tell the eggs that. Instead, it’s emergency administrative fixes for everyone.

A Pennsylvania news station in western Pennsylvania videoed employees of one small business at a meeting where they were informed about the changes to their health coverage as a result of the ACA. It's heartbreaking:

This is the sort of government mistreatment of its citizens out of which electoral revolutions arise. It'll be interesting this November to see just how angry the electorate is.