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The ACA (Affordable Care Act), which was ratified in March 2010, proposed for the creation of an exchange in every state in the United States. ObamaCare exchanges, also known as ObamaCare health insurance exchanges, are online markets or marketplaces for medical insurance. Under this arrangement, Americans can engage their respective state’s marketplace (Affordable Insurance Exchange) to get medical cover from competing privately run medical care providers. These health insurance marketplaces have become important components of the typical discussion regarding healthcare reform and health insurance in the past few years. The practical application of those marketplace exchanges differ significantly from one state to another (Rak & Janis Coffin DO, 2013; Kocher & Adashi, 2011). Even though the U.S. Supreme Court asserted that most parts of ObamaCare were legal, many states persistently resisted the implementation of the new law through, for instance, refusing to act on health insurance exchanges. Given the current trend, as with other aspects of ObamaCare, health insurance exchanges have become yet another arena in the political disagreements over the new healthcare law.
Major Challenges Associated with the ACA Health Insurance Exchanges
The biggest challenge with the health insurance exchanges is with ObamaCare policies, which have weakened the continuing viability of the individual medical insurance market. The United States Federal Government has enforced poorly prepared laws and regulations on all insurance brokers marketing insurance premiums directly to clients. The Government dominates the medical insurance sales plans, which are suitable for membership by clients receiving a Federal Government taxpayer subsidy. The Government additionally has a tight grip on what plans can be marketed and how individual companies can market these plans.
The results of these stringent government policies are apparently clear. Companies selling medical insurance cover premiums are faced with adverse selection situations, with registration in exchange plans inclined towards clients with more than the average medical care expenditure (Sommers & Rosenbaum, 2011). Therefore, companies selling medical insurance premiums on the exchanges are faced with a growing, huge, and persistent financial burden. Given this trend, it is understandable why Trump’s entry into the White House has sparked mass withdrawals of companies from the current program. Many more withdrawals of major insurers from the exchanges are projected in the near future. For medical insurance companies remaining in the health insurance exchanges market, health insurance premiums are projected to increase sharply in the next few years.
The ACA incorporated legal provisions that were meant to ensure the market remained stable both in the short run and in the long run. The ACA has not yet achieved that objective. The provision for risk adjustment transfers money from medical insurance plans with user enrollment that has significantly lower risks to health insurance plans, which have significantly higher risks. This feature is a permanent clause of the ACA. It was meant to be free from budgetary influences.
In addition, the ACA contains two additional provisions – the risk corridor program and a reinsurance scheme –, which were ratified as extra, and transitory, backstops for the medical insurance companies taking part in the health insurance exchanges. This reinsurance program enforces a tax on a majority of medical insurance plans, including plans that are not provided in the medical insurance exchanges. The collected funds are then used by these organizations to subsidize plans for their clients that have a high frequency of claims. The risk corridor program transfers money from medical insurance plans with total claims, which are less that 96% of their projected levels to health insurance plans with medical insurance claims above 104% of their targeted levels.
Whereas these ACA legal provisions have transferred funds towards medical plans with bigger expenses, there have been other immense challenges. In both 2015 and the year before, research indicates there were more health insurance plans with high insurance claims experience as opposed to those plans with significantly lower costs. It therefore meant that in these two years, namely, 2014 and 2015, there were insufficient resources within the risk corridor program owing to the extra expenditure, which surpassed budgetary allocations for high claims as provided for in the ACA. Additionally, the reinsurance plan was meant to collect sufficient tax revenue to pay the service providers. Research has however shown that the collected tax is not enough to meet these legal goals, therefore, bringing about a wave of uncertainty for the companies taking part in the program.
Donald Trump and the ACA
The recently inaugurated President of the United States – Donald J. Trump – campaigned on a pledge to replace and repeal the ACA – a law he openly christened a ‘disaster.’ Estimates conducted by researchers indicated that the ACA has resulted in approximately 20 million individuals who were not previously covered have medical insurance, thus obtaining coverage. In a recent report by the CBO (Congressional Budget Office), estimates for the consequences of repealing the law indicate that without a proper legal framework for transition; about 32 million people will lose their medical insurance coverage. In his first day in White House, President Trump signed an executive order affirming that his government will pursue ‘prompt repeal’ of the cumbersome law. Trump’s executive order additionally mandated the pertinent federal agencies to delay or where possible, waive ObamaCare requirements, which enforce regulatory or economic burdens on the healthcare industry, families, and states. Without a proper replacement plan, repealing the law would result in anxiety and undue uncertainty for medical insurance brokerage firms taking part in the exchange programs. Medical insurance providers cannot continue marketing plans through the ACA marketplaces in the future without a clear framework.
The ACA dubbed ObamaCare was ratified in the year 2010. The law sought an overhaul of the medical industry with an eye to providing medical insurance premiums to every citizen in the country (Jones, Bradley & Oberlander, 2014). To ensure all persons obtained cover, the government imposed hefty fines for those individuals found without medical cover. Privately owned companies were also required to design products open to all people. Consumers were therefore required to get medical cover from competing privately run medical care providers. Part of this new medical law resulted in the ratification of ACA Health insurance exchanges. Despite their successes, the ACA health insurance exchange markets have encountered immense challenges as aforementioned. Part of these challenges relate to costs.
The challenges with the ObamaCare health insurance exchanges are not self-adjusting. To promote participation through competing medical health brokers and stabilizing them, it is paramount that the law is repealed. The U.S. Congress and members from the two opposing sides of the political divide should see the need to effect changes on the new healthcare law, and in particular the ACA exchanges. The bigger and most fundamental parts of the ACA remain controversial owing to the methods applied in its implementation. Given that the political atmosphere was highly charged during the ratification of the ACA, the lawmakers left so much to be desired such that some areas could have been amended even before ratification. Similar political bickering has prevented any further progress on amendments thus making it difficult to have the required public support for effecting changes to new law.
The objective of renewed exertions or effort at reform need not be constrained to strengthening the health insurance exchanges, as they are currently constituted. The main objective should be to develop an operational marketplace and create a balance between governmental and personal responsibility, which can be supported by Congress. The health insurance exchanges do not have the capacity to last indefinitely on their own as currently constituted. It is important to repeal these laws and replace them with more appealing and less stringent measures as alternatives to the ACA.
- Jones, D. K., Bradley, K. W., & Oberlander, J. (2014). Pascal’s Wager: health insurance exchanges, Obamacare, and the Republican dilemma. Journal of Health Politics, Policy and Law, 39(1), 97-137.
- Kocher, R. P., & Adashi, E. Y. (2011). Hospital readmissions and the Affordable Care Act: paying for coordinated quality care. Jama, 306(16), 1794-1795.
- Rak, S., & Janis Coffin DO, F. A. A. F. P. (2013). Affordable care act. The Journal of medical practice management: MPM, 28(5), 317.
- Sommers, B. D., & Rosenbaum, S. (2011). Issues in health reform: how changes in eligibility may move millions back and forth between Medicaid and insurance exchanges. Health Affairs, 30(2), 228-236.