Better Off Before Obamacare?

Before the law, which Trump has said he would repeal, health insurance was cheaper for a few, but outright unattainable for many.

Nathan Chute / Reuters

Throughout his campaign, President-Elect Donald Trump repeatedly vowed to repeal and replace Obamacare, which he called “a disaster.”

That was music to his supporters’ ears. Repealing Obamacare is Republican voters’ biggest priority for the Trump administration, according to a recent Politico/Morning Consult poll. People who are unhappy with the Affordable Care Act overwhelmingly voted for Trump, and now 74 percent of Republicans want it gone.

The frustration with the health law is understandable; many people are struggling to afford medical care even if they have insurance. The problem is, it’s not clear Americans would have been better off had Obamacare never been passed.

First, some people might be confused about what, exactly, they’re angry at. When we talk about “Obamacare,” we’re talking primarily about the 12.7 million people who are buying individual insurance coverage through state marketplaces or Roughly 60 million people voted for Trump last week, so they can’t all be on Obamacare exchange plans. More than half of all non-elderly Americans still get insurance through work, and premiums on employer-based plans are actually growing more slowly than average. (About a third of Americans are either on Medicare or Medicaid, and the rest are uninsured. Only about 4 percent are on the exchanges.)

Before Obamacare, insurance premiums on the individual market were rising by about 10 percent a year. But, it’s important to note, the cost of any given person’s health plan purchased this way depended on how sick they were. Insurance companies could charge people more if they had cancer, for example, or deny them coverage entirely. Insurers were partly able to keep costs down just by keeping sick people off their plans. Under Obamacare, insurers can’t do that anymore.

In 2014, right after most of the Affordable Care Act sprang into action, a middle-of-the-road plan—the “second-lowest cost silver-level” plan—was between 10 and 21 percent cheaper than a similar plan was before the ACA in 2013. So concluded an analysis published in Health Affairs in July by the economists Loren Adler and Paul Ginsburg, two health-care experts at the Brookings Institution.

Since then, the price of individual-market plans has climbed higher. Health-care prices go up all the time, no matter what. We all wish they didn’t; they do anyway. But in the years since the ACA was implemented, individual-market premiums haven’t been rising as fast as they were before, according to Jonathan Gruber, an economist at the Massachusetts Institute of Technology.

They went up by “35 to 40 percent in the three years before ACA,” Gruber told me. “If you look at the three years since ACA, it’s still below that, including this year.”

Premiums Before and After Obamacare
A chart from Adler and Ginsburg’s analysis, showing that without the ACA, 2017 premiums would be 30 to 50 percent higher. (Brookings Institute / Health Affairs)

The “including this year” part is important. News of soaring Obamacare premiums—they went up 22 percent this year—was everywhere right before the election. But according to Adler and Ginsburg’s projections, premiums are still lower this year than they would have been without the ACA, given how premiums were rising before the law. “People are getting more for less under the ACA,” they wrote.

Not everyone agrees with this analysis. Some conservative health wonks, such as the Hudson Institute’s Jeffrey Anderson, have disputed Ginsburg and Adler’s paper, arguing premiums are higher now than they would have been without Obamacare and pointing to yet another Brookings study supposedly proving that point. (Adler responded that the two studies use different sets of data. “Both studies are well done and valuable, just all of our analyses have their inevitable shortcomings,” he said.)

Either way, it’s clear that Obamacare is too expensive for some people, especially if they’re not qualified for the subsidies for low- and middle-income people who purchase insurance on the exchanges. People are now spending larger shares of their income on health care than before Obamacare, but that’s not because of the law—it’s because health-care costs are growing faster than incomes.

The vast majority of Obamacare enrollees—some 85 percent—receive federal subsidies that bring down the cost of their premiums. But those who don’t might indeed be facing unaffordable premiums. Hillary Clinton’s health-care proposal would have made those subsidies more generous. When Trump’s proposal was initially released, it wasn’t clear if it would involve subsidies. But his campaign later told me that “those now receiving ‘premium support’ would be given subsidies or other forms of support to purchase health insurance in the private market through Health Savings Accounts.” Still, it’s not clear whether Trump’s subsidies would be more widespread or more generous than what’s currently on offer.

In an email, Ginsburg points out that, without subsidies, most Obamacare enrollees’ premiums are in fact higher than they would have been, “but that is more than evened out, on net, by the lower premiums that sicker people now face.”

Okay, so if you are one of the less than two million Americans who are not insured by an employer or the government, and are too wealthy for the subsidies, and are extremely healthy, you might be paying more for health insurance under Obamacare. (That is, unless and until you one day get sick.)

However, even Anderson concedes the higher premiums are the result of some of the consumer protections baked into Obamacare. As he wrote:

The Congressional Budget Office offers some useful language to help explain why: “Many of the [Patient Protection and Affordable Care Act] regulations tend to increase average premiums, particularly in the nongroup market. For example, when they sell those policies, insurers must now accept all applicants during specified open-enrollment periods, may not vary people's premiums on the basis of their health, may vary premiums by age only to a limited extent, and may not restrict coverage of enrollees' preexisting health conditions. Insurers must also cover specified categories of health-care services, and they generally must pay at least 60 percent of the costs of those covered services, on average.”

Indeed, Obamacare did a lot besides make everyone buy insurance, such as:

  • Free birth control
  • No charging women more for insurance
  • No risk of having your insurance plan cancelled because you got sick
  • Young adults can stay on their parents’ plan until they’re 26
  • No risk of paying more, or being denied insurance, because of a pre-existing condition.

Trump has now said he wants to keep these last two elements of the law, which are very popular. (Here’s a good Steven Pearlstein piece explaining why this will be tough to do while still repealing Obamacare.)

In fact, maybe we’re arguing about the wrong things. While much of the debate over the merits of Obamacare has focused on whether individual-market premiums are higher or lower than they would have been, perhaps the biggest difference the law has made is allowing people to buy insurance who wouldn't have been able to otherwise.

As Charles Gaba, a blogger who tracks health-care numbers, described on his website,

For instance, let's take someone with cancer... Without the ACA, they'd be utterly screwed and would very likely go bankrupt trying to pay the full price for treatment, or die without it, or the first followed by the second. To them, it isn't a question of "I was paying $X, now I'm paying 25% more than $X"; it's a question of “before, I would've died; now I hopefully won't.”

Before 2014, the individual market for insurance was often nasty, brutish, and short, as John McDonough, a Harvard public-health professor who helped write the Affordable Care Act, reminded me via email. Sick people and old people paid through the nose for coverage, if they could get it at all, and, he added, about 130 million people faced lifetime or annual limits on their health coverage. Many insurance plans didn’t cover basic services, like mental-health care, which is now mandatory.

“So comparing an individual policy in 2008 versus today is like comparing a pineapple to an iPad,” McDonough wrote. “Two very different products.”

Now that Republicans have a good chance of repealing Obamacare, we’re about to see just what kind of pineapple we get.