After years of struggling with losses, insurers participating in Obamacare were generally profitable in 2018. Though this is positive news for supporters of the law, the relative stability of Obamacare is actually bad news for liberals hoping to move toward a socialized health insurance model under the banner “Medicare for all.”
For several years following its 2014 debut, the story of Obamacare was one of insurers losing billions of dollars because they couldn’t raise premiums fast enough to cover the relatively high costs of Obamacare’s pool of customers. This represented a potentially existential threat to Obamacare, which depends on insurer participation to make its government-run market viable.
But something funny happened in 2018. Insurers hiked premiums by 34% going into the year expecting lots of instability, only to find out that in the face of Democratic cries about President Trump’s “sabotage,” the Obamacare market was actually functional. According to a new analysis from the Kaiser Family Foundation, profits flowed in for most insurers, and now they’re expected to fork over $800 million in rebates to customers because Obamacare caps how much they can claim in profits after paying out medical claims.
This news, especially if it continues in subsequent years, has significant ramifications for the healthcare policy debate in America.
As Obamacare seemingly headed toward implosion, it bolstered the arguments of critics of the law, such as myself, who have been calling for repealing the law in its entirety and taking a new market-based approach. This was a practical argument about basic functionality rather than an ideological argument about the drawbacks of government interference. The absence of an easily observable collapse will certainly make the law even more entrenched than it already was after the botched Republican repeal effort in 2017.
At the same time, however, Obamacare’s struggles emboldened those who had been criticizing Obamacare from the Left. Many liberals had argued that it had been a mistake to create a system that still allowed the health coverage of millions of Americans to be dependent on the business decisions of for-profit health insurers. After all, if insurers had suddenly decided to abandon Obamacare en masse, Obamacare would not be able to insure individuals, even those who qualified for full subsidies.
So, while a collapsing Obamacare fueled repeal efforts on the Right, it also contributed to the rise in popularity of single-payer proposals on the Left.
In a world in which insurers are profitable and enthusiastically participating in Obamacare, advocates of plans to socialize health insurance are deprived of an easy indictment of the status quo. A world in which individuals qualifying for subsidies can purchase insurance on an exchange is less susceptible to the argument that government must step in and take over everybody’s insurance coverage. After it took years to finally get Obamacare to a place at which it has some semblance of stability after massively disrupting the U.S. healthcare system, it will be that much more difficult to convince the public that there needs to be a significantly more massive disruption.
If insurers remain profitable, I imagine the consensus among Democrats will move back toward building on Obamacare, perhaps by boosting subsidies, or adding some optional government-run plan that could be pitched as an added “backstop” to private insurers.
