Friday, June 26, 2015
Thanksgiving is less than...
If he or she is still ranting about Obamacare by then, you can explain it in very simple language from Chief Justice John Roberts's majority opinion yesterday.
I had read somewhere that Roberts was a great writer so I looked up his opinion on King vs. Burwell and actually read it. (And, no, I don't have a life.) So, here, lightly edited, is the text which explains the ACA very clearly -- even to your crazy aunt or uncle.
The Patient Protection and Affordable Care Act grew out of a long history of failed health insurance reform. In the 1990s, several states began experimenting with ways to expand people's access to coverage. One common approach was to impose a pair of insurance market regulations -- a "guaranteed issue" requirement, which barred insurers from denying coverage to any person because of his health, and a "community rating" requirement, which barred insurers from charging a person higher premiums for the same reason. Together, those requirements were designed to ensure that anyone who wanted to buy health insurance could do so.
The guaranteed issue and community rating requirements achieved that goal, but they had an unintended consequence: They encouraged people to wait until they got sick to buy insurance. Why buy insurance coverage when you are healthy, if you can buy the same coverage for the same price when you become ill? This consequence -- known as "adverse selection" -- led to a second: Insurers were forced to increase premiums to account for the fact that, more and more, it was the sick rather than the healthy who were buying insurance. And that consequence fed back into the first: As the cost of insurance rose, even more people waited until they became ill to buy it.
This led to an economic "death spiral." As premiums rose higher and higher, and the number of people buying insurance sank lower and lower, insurers began to leave the market entirely. As a result, the number of people without insurance increased dramatically.
This cycle happened repeatedly during the 1990s. For example, in 1993, the state of Washington reformed its individual insurance market by adopting the guaranteed issue and community rating requirements. Over the next three years, premiums rose by 78 percent and the number of people enrolled fell by 25 percent. By 1999, 17 of the state's 19 private insurers had left the market, and the remaining two had announced their intention to do so.
For another example, also in 1993, New York adopted the guaranteed issue and community rating requirements. Over the next few years, some major insurers in the individual market raised premiums by roughly 40 percent. By 1996, these reforms had "effectively eliminated the commercial individual indemnity market in New York with the largest individual health insurer exiting the market."
In 1996, Massachusetts adopted the guaranteed issue and community rating requirements and experienced similar results. But in 2006, Massachusetts added two more reforms: The commonwealth required individuals to buy insurance or pay a penalty, and it gave tax credits to certain individuals to ensure that they could afford the insurance they were required to buy. The combination of these three reforms -- insurance market regulations, a coverage mandate, and tax credits -- reduced the uninsured rate in Massachusetts to 2.6 percent, by far the lowest in the nation.
The Affordable Care Act adopts a version of the three key reforms that made the Massachusetts system successful. First, the Act adopts the guaranteed issue and community rating requirements. The Act provides that "each health insurance issuer that offers health insurance coverage in the individual . . . market in a state must accept every . . . individual in the state that applies for such coverage." The Act also bars insurers from charging higher premiums on the basis of a person's health.
Second, the Act generally requires individuals to maintain health insurance coverage or make a payment to the IRS. Congress recognized that, without an incentive, "many individuals would wait to purchase health insurance until they needed care." So Congress adopted a coverage requirement to "minimize this adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums." In Congress's view, that coverage requirement was "essential to creating effective health insurance markets." Congress also provided an exemption from the coverage requirement for anyone who has to spend more than eight percent of his income on health insurance.
Third, the Act seeks to make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 percent and 400 percent of the federal poverty line. Individuals who meet the Act's requirements may purchase insurance with the tax credits, which are provided in advance directly to the individual's insurer.
These three reforms are closely intertwined. As noted, Congress found that the guaranteed issue and community rating requirements would not work without the coverage requirement. And the coverage requirement would not work without the tax credits. The reason is that, without the tax credits, the cost of buying insurance would exceed eight percent of income for a large number of individuals, which would exempt them from the coverage requirement. Given the relationship between these three reforms, the Act provided that they should take effect on the same day -- January 1, 2014.
* I can't believe I just skipped over the entire high school football season!