The Obamacare Plot Twist

Thanks to health reform, insurance premiums are plummeting in New York. That's some desperately needed good news for the bill's supporters.

For months, we've been told that the impending implementation of the Affordable Care Act (aka Obamacare) will lead to soaring healthcare costs and more expensive premiums. That narrative has taken hold, even for those who otherwise support the suite of reforms. And that's why the recent front-page article in the New York Times, reporting that premiums in New York State may actually fall 50 percent or more, came as such a surprise.

Only a few weeks prior, the Wall Street Journal announced that "Healthy consumers could see insurance rates double or even triple when they look for individual coverage under the federal health law later this year." Their analysis did acknowledge that ailing individuals could see rates fall, but the driving point was one that has been made ad infinitum by critics of the reforms: costs will soar.

So entrenched is that view that the Republican-controlled House of Representatives continues its quixotic quest to repeal the bill, and voted this week for the 38th and 39th times to repeal parts of the bill, including the "employer mandate" that the Obama administration has already decided to delay.Paul Ryan said about the latest vote: "This law needlessly raises healthcare costs. And this law will cause millions of people to lose the health insurance that they have, that they want to keep."

The debate distills to this: Can a bill that depends on an uneasy blend of free-market incentives and government regulation succeed in providing universal access to healthcare at a reasonable cost? The premise of the act in the first place was that a system of healthcare exchanges would encourage competition and keep prices moderate even as the pool of insured people expanded.

But that assumes that states implement it in good faith. The staunch opposition of Republicans has meant that many states with little regulation of insurance companies or healthcare are delaying or actively resisting many aspects of the bill. What's clear is that opposing the bill is a good strategy if you want the reforms to fail. The success of the legislation depends on the cooperation of state governments, insurance companies and federal regulators. That is hardly unusual, but the complexity of the reforms make it all the more imperative.

Yet the divergences over the bill and its consequences mask a rather severe rift between federal actions, state conviction and popular opinion. Despite laws passing at the federal level, the reality is that the United States remains a federal system that requires vast efforts of compliance by states and by individuals. One of the great gripes of state-level politicians is that Washington is forever passing "unfunded mandates" and assorted vague and complex laws, and then leaving it to states to pay for and figure out the implementation. The Affordable Care Act is Exhibit A for these tensions.

Yet for the American system to work, some level of compliance and trust are essential. That is true for paying taxes, and it's true for healthcare reform. There is no way the government could actively force every single person to pay taxes without creating a coercive police state. And healthcare reform will not work unless multiple segments of society work jointly and cooperatively. Even the vaunted aspects of the bill that encourage competition require some level of cooperation. Various insurance companies and state agencies have to hash out the details of the proposed exchanges for the currently uninsured and provide alternatives for those currently insured under different plans.

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Zachary Karabell is Head of Global Strategy at Envestnet, a financial services firm, and author of The Leading Indicators: A Short History of the Numbers that Rule Our World. More

At River Twice Research, Karabell analyzes economic and political trends. He is also a senior advisor for Business for Social Responsibility. Previously, he was executive vice president, head of marketing and chief economist at Fred Alger Management, a New York-based investment firm, and president of Fred Alger and Company, as well as portfolio manager of the China-U.S. Growth Fund, which won a five-star designation from Morningstar. He was also executive vice president of Alger's Spectra Funds, which launched the $30 million Spectra Green Fund based on the idea that profit and sustainability are linked. Educated at Columbia, Oxford, and Harvard, where he received his Ph.D., he is the author of several books, including Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It (2009), The Last Campaign: How Harry Truman Won the 1948 Election, which won the Chicago Tribune Heartland Award, and Peace Be Upon You: The Story of Muslim, Christian, and Jewish Coexistence (2007), which examined the forgotten legacy of peace among the three faiths. In 2003, the World Economic Forum designated Karabell a "Global Leader for Tomorrow." He sits on the board of the World Policy Institute and the New America Foundation and is a member of the Council on Foreign Relations. He is a regular commentator on national news programs, such as CNBC and CNN, and has written for The Wall Street Journal, Newsweek, Time, The Washington Post, The New Republic, The Los Angeles Times, The New York Times, and Foreign Affairs.

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