The catastrophic failure of Obamacare's launch is now far in the past. But the public's acquiescence to a law that keeps creating new problems should not be taken as a sign of enthusiastic acceptance, much less as a sign that Obamacare is working.
Obamacare plans debuted with more expensive premiums than before, but not as expensive as some had expected. This allowed the law's supporters to assuage public panic over the debacle of 2013 and 2014. Why were prices still relatively low? It's partly because insurers found other ways to pass costs to consumers — by raising deductibles (the amount customers must pay before the coverage kicks in) and narrowing their supported provider networks. That won't change, and it is an ongoing source of discontent.
But the Obamacare exchange program itself also gave its participating insurers a set of training wheels for the first few years to allow for such aggressive pricing. Two temporary programs help them limit risk: A government-run reinsurance program, and the "risk corridor" provision, which makes insurers that have fewer losses on medical claims than expected subsidize the insurers that lose more than expected.
With these backstops, insurers took big risks, expecting a bailout. But because few insurers made big money on Obamacare plans, the risk corridor program has only collected about one-eighth of what it would take to pay the full bailout that the losers were expecting. This is part of the reason eight health insurance cooperatives have now folded. Their exit from the market will reduce competition and cause premiums to rise.
The general unprofitability of insurers under this system comes as a related warning sign. As some insurers have publicly acknowledged, Obamacare exchanges have attracted a disproportionate number of people who are sicker and older. This not only makes coverage more expensive for others who enter the pool, as the large 2016 rate hikes demonstrate, but it also implies that unless the less-desperate cases among the remaining uninsured start signing up, the system is in for some serious trouble.
And that brings us to Obamacare's sagging enrollments. When Congress passed Obamacare, the Congressional Budget Office was expecting 21 million people signing up for Obamacare exchange plans by the end of 2016 open enrollment. Now, the administration expects to have only about 10 million paying customers by the end of next year — essentially no more than now.
Why the sudden stall? The sickest and oldest customers — the low hanging fruit among the uninsured who were most eager to get insurance — have already signed up. The ones the insurers need most, who are healthier and younger, predominate among those who have not signed up. Although there is more than one reason for this, the main one is that Obamacare plans are not especially affordable and will become worse as insurers adjust prices to match reality.
As for government subsidies for buying insurance, those basically vanish for workers approaching the median income. The affordability problem, in turn, will get worse as the insurers' "training wheels" vanish in 2017 and more insurers drop out of more Obamacare exchange markets.
Next summer, Americans will have a chance to see what the insurance market looks like when those training wheels are removed when insurers announce plans for 2017. And Obamacare's backers, who thought the worst was behind them, will have some more explaining to do.