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Obamacare still faces these big challenges

Rick Newman
·Senior Columnist

The Affordable Care Act “is here to stay,” as President Obama said following the Supreme Court decision in King v. Burwell that upheld the law in full. The justices could have ruled that federal subisidies—integral to the functioning of the law—were invalid in 34 states that rely on the federal healthcare exchange rather than running one of their own. Instead, the court ratified the status quo, which means nothing changes.

But the controversial law still faces a bumpy future. Here are five challenges the ACA will face during the next several years:

Healthcare costs are still too high. As many enrollees are discovering, the “Affordable” Care Act is somewhat misnamed. Healthcare costs continue to rise faster than wages or overall inflation, putting a financial burden even on people who have healthcare. A recent study by the Commonwealth Fund found that 23% of Americans who have healthcare coverage are “underinsured,” meaning their out-of-pocket spending on healthcare is more than 10% of their income in a given year. Deductibles and other out-of-pocket costs have been rising because consumers and businesses have been opting for plans with lower premiums—which usually require the patient to bear more of the cost before 100% coverage kicks in. The irony is that insurance has gotten more affordable, but actual healthcare hasn’t.

The ACA includes several long-term provisions meant to explore ways to lower costs, but they may not be nearly enough to offset other trends pushing costs up, such as the retirement of the baby boomers and the development of expensive new drugs. If Congress ever gets serious about improving the ACA rather that faux-repealing it, cost will be the thing to focus on.

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Repeal of the medical-device tax. This tax helps raise about $3 billion per year to contribute to subsidies and other aspects of the ACA. But Republicans and Democrats both favor its repeal, and even Obama has said he’d consider it. Losing the revenue produced by this tax wouldn’t threaten the ACA, but it might lead to corresponding cutbacks in benefits or efforts to come up with the money some other way.

The individual mandate penalty gets tougher. The penalty for not having healthcare coverage in 2015 will double from last year’s levels for a typical individual, and it will go up another 25% in 2016. Several million Americans will be able to claim an exemption, but many won’t, and the rising price of failing to comply with the individual mandate could provoke fresh unhappiness with the law, which is already unpopular.

The “Cadillac tax” could force benefit cutbacks. This tax, due to take effect in 2018, would force companies to pay extra for generous health plans with annual premiums well above the norm. Some companies might agree to pay the tax -- which would be on health plans that cost more than $10,200 for an individual -- because the generous health plans are a way to reward employees. But many others are likely to prune their health plans to make sure they fall below the tax threshold. Workers affected by such cutbacks would still have good insurance, but with fewer perks and more out-of-pocket expenditures.

More legal challenges. Obamacare has now survived two high-profile Supreme Court cases that could have wrecked its viability, but didn’t. Yet other legal challenges remain. There are still at least four important cases working through the courts that challenge various aspects of Obamacare. None seems likely to threaten the entire law, but they could force changes in the way contraceptives are covered, along with other more technical issues.

What if Republicans win the White House in 2016? The ultimate challenge to Obamacare would be a new Republican president backed by a Republican-controlled Congress, which is plausible because the 2016 presidential race seems competitive, so far, and Republicans are likely to retain both houses of Congress in 2016. It’s not clear if Republicans would completely overturn Obamacare even if they could, since it would dump nearly 20 million Americans who are now covered back into the pool of uninsured. But they’d certainly change it in substantial ways. No Supreme Court required.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.