A 10-Year Prediction for the Affordable Care Act

Our research indicates that within 10 years, the number of uninsured Americans may increase by 10 percent.

The Affordable Care Act cannot be broken down into sound bites. This holds true for both its most ardent supporters and its most fervent opponents. The law is simply too complex to be labeled either a total failure or a smashing success.

But that doesn't mean it isn't trending in one of those two directions. Across the country, individuals and families are beginning to learn whether their insurance premiums will change for 2015 — early estimates indicate an overall national increase of 7.5 percent, according to a PricewaterhouseCoopers analysis. That's what is expected despite the early promise that the ACA would lower overall premiums by as much as $2,500 per family.

These hikes, which add to those experienced by many consumers last year, are likely just the tip of the iceberg. In recent months, I have worked with Dr. Stephen Parente, a professor of Health Finance at the University of Minnesota, to assess how the Affordable Care Act will affect Americans' access to health care over the next decade.

Our findings don't bode well for the law's long-term success.

We estimate that within 10 years, the number of uninsured Americans may increase by 10 percent. At the same time, premiums will rise faster than federal subsidies. The latter problem will be most severe when insurers release their 2017 rate increases in the summer and fall of 2016 — perhaps the most awkward timing for the law's supporters.

We reached this conclusion using the 2014 enrollment numbers, which the Health and Human Services Department announced in April. We analyzed them using a consumer simulation model funded in part by HHS. The model uses the regulatory requirements mandated by the ACA to estimate the cause-and-effect relationship between health care plan pricing and consumers' buying habits.

The law will play out in two phases. The first will take place between now and 2016. During that time, the price of health care plans will increase. We already saw this happen last year and will likely see the same again this summer and fall. Another event will also likely repeat itself. This is one the law's opponents may prefer to ignore. The number of uninsured will decrease as people sign up for Medicaid or the Affordable Care Act's health exchanges.

But this trend will come to a sudden end in 2017. That year, health insurance companies will lose their ability to artificially depress health care costs using taxpayer money. (Two ACA provisions, both of which expire in 2017, currently let insurers tap federal taxpayer funds for various reasons.)

This will send shock waves through the health care world.

We estimate that average annual costs for the cheapest individual plans — the "bronze" plans — may increase by 96 percent, from roughly $2,100 to nearly $4,200. Bronze family plans prices, meanwhile, may increase by nearly 50 percent. The average plan in this category could come close to $13,000 a year in total premiums. Almost every plan will see a price increase of some kind.

Consumers will learn these unpleasant truths in the fall of 2016 when they attempt to extend their policies.

No matter where you live, the effects will ripple across the entire industry. The dramatically higher prices will almost surely drive some consumers out of the exchanges. But they won't have many places to turn. Many — perhaps most — won't be eligible for Medicaid, while others won't have jobs that offer replacement health insurance. People in this position will thus choose between health insurance they can't afford and becoming uninsured. Not even the IRS penalty will convince everyone to bite the bullet.

In 2017, we estimate that the number of uninsured Americans may increase by nearly 20 percent, undoing the gains of the previous two years. In subsequent years, that number may continue to grow — some years by 1 percent, other years by a bit more. Within a decade, some 40 million Americans will once again lack health insurance.

Although our study does not calculate the demographic breakdown of the uninsured, it is reasonable to conclude that African-Americans and Hispanics will be hit the hardest by the Affordable Care Act's failure to extend insurance coverage. Both groups historically have higher uninsured rates than the wider populace. A June Gallup Poll found that 17.6 percent of African-Americans and 37 percent of Hispanics were, at that time, uninsured. As health care costs continue to rise, they will likely be disproportionately affected and pushed out of the health insurance market.

This stands in stark contrast to the Affordable Care Act's stated purpose to increase health insurance coverage while making it more affordable. Despite its authors' best intentions, the law — as it currently stands — will accomplish neither of these goals.

By the end of the decade, America's health care crisis could be worse than it was before the law was passed. Washington is doing the American people a disservice by letting us find this out the hard way.

Michael Ramlet is an adjunct faculty member at the University of Minnesota and a principal at Paragon Insights, a research firm specializing in public policy and political analysis.