Why the Affordable Care Act is in Real Trouble This Time
Sunday, Nov 17, 2024 9:11 am ET
4min read As we stand on the precipice of a new political era, the Affordable Care Act (ACA), often referred to as Obamacare, faces a daunting challenge. The law, which has provided health insurance to millions of Americans, is now at risk of unraveling due to a combination of expiring subsidies, potential Republican changes, and legal challenges. Let's dive into the reasons why the ACA is in real trouble this time.
First, let's address the elephant in the room: the expiration of Biden-era enhanced ACA subsidies. These subsidies, which cut premium payments nearly in half for millions of Americans and doubled enrollment, are set to expire at the end of 2025. Without Congress acting to extend them, net premium payments will increase by an average of 79%, more than doubling in some states. This could lead to a sharp drop in ACA Marketplace enrollment, from 22.8 million in 2025 to 18.9 million in 2026, and as low as 15.4 million by 2030. The Congressional Budget Office estimates that the cost to permanently extend the enhanced subsidies would be $335 billion over 10 years, making it a contentious issue in the upcoming lame-duck session.
Now, let's consider the broader fate of the ACA, which hinges on House control. If Republicans maintain control, changes to the ACA could be "massive," according to House Speaker Mike Johnson. While ACA repeal was not a winning issue in 2017, Republicans could attempt to offset tax cuts by significantly reducing ACA subsidies and making massive funding cuts and changes to how Medicaid is financed. This would be similar to the 2017 "repeal and replace" push that would have left most protections for people with preexisting conditions in place but nonetheless would have left tens of millions without affordable health coverage due to budget cuts. As was the case in 2017, changes to ACA and Medicaid funding could be done through budget reconciliation, without concern of the filibuster.
Even if Democrats manage to secure the House, Trump could take several executive actions to weaken the ACA. His administration could grant state waivers to allow red states more flexibility, such as by changing Marketplace rules or tightening Medicaid eligibility through work requirements or other restrictions. Trump's administration could use executive authority to adjust ACA regulations, for example by loosening requirements for non-ACA-compliant plans that discriminate against people with pre-existing conditions, as he did in his first term. Trump may again defund ACA marketing and outreach, which had a downward effect on signups. In response to concerns about fraud, the Trump administration could add verification requirements that make it harder for people to sign up for ACA plans. And his administration can decide whether to join legal challenges to the ACA or decline to defend the law in court.
In conclusion, the ACA faces a perfect storm of challenges, from expiring subsidies to potential Republican changes and legal challenges. As an investor, it's crucial to monitor these developments and consider the potential impacts on the health care sector. The ACA's future will have significant implications for health insurance companies, hospitals, and pharmaceutical manufacturers. Stay informed and adapt your investment strategy accordingly to navigate this uncertain landscape.
First, let's address the elephant in the room: the expiration of Biden-era enhanced ACA subsidies. These subsidies, which cut premium payments nearly in half for millions of Americans and doubled enrollment, are set to expire at the end of 2025. Without Congress acting to extend them, net premium payments will increase by an average of 79%, more than doubling in some states. This could lead to a sharp drop in ACA Marketplace enrollment, from 22.8 million in 2025 to 18.9 million in 2026, and as low as 15.4 million by 2030. The Congressional Budget Office estimates that the cost to permanently extend the enhanced subsidies would be $335 billion over 10 years, making it a contentious issue in the upcoming lame-duck session.
Now, let's consider the broader fate of the ACA, which hinges on House control. If Republicans maintain control, changes to the ACA could be "massive," according to House Speaker Mike Johnson. While ACA repeal was not a winning issue in 2017, Republicans could attempt to offset tax cuts by significantly reducing ACA subsidies and making massive funding cuts and changes to how Medicaid is financed. This would be similar to the 2017 "repeal and replace" push that would have left most protections for people with preexisting conditions in place but nonetheless would have left tens of millions without affordable health coverage due to budget cuts. As was the case in 2017, changes to ACA and Medicaid funding could be done through budget reconciliation, without concern of the filibuster.
Even if Democrats manage to secure the House, Trump could take several executive actions to weaken the ACA. His administration could grant state waivers to allow red states more flexibility, such as by changing Marketplace rules or tightening Medicaid eligibility through work requirements or other restrictions. Trump's administration could use executive authority to adjust ACA regulations, for example by loosening requirements for non-ACA-compliant plans that discriminate against people with pre-existing conditions, as he did in his first term. Trump may again defund ACA marketing and outreach, which had a downward effect on signups. In response to concerns about fraud, the Trump administration could add verification requirements that make it harder for people to sign up for ACA plans. And his administration can decide whether to join legal challenges to the ACA or decline to defend the law in court.
In conclusion, the ACA faces a perfect storm of challenges, from expiring subsidies to potential Republican changes and legal challenges. As an investor, it's crucial to monitor these developments and consider the potential impacts on the health care sector. The ACA's future will have significant implications for health insurance companies, hospitals, and pharmaceutical manufacturers. Stay informed and adapt your investment strategy accordingly to navigate this uncertain landscape.
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