ObamaCare survived the Supreme Court and the 2012 election largely intact, but its future is still uncertain.
Even as Washington prepares to launch a new health care entitlement, analysts have warned that the individual mandate, premium subsidies and coverage guarantees may not hold together as structured.
The problem is simple: Because of cost constraints built into the law, premium payments for many individuals and families are projected to grow much faster than income. Before long, out-of-pocket coverage costs would dwarf the mandate tax penalty capped at 2.5% of income.
Here's the puzzle: Why would healthy people pay a big and growing chunk of their income, if they can get away with paying a sliver and still get the same coverage at a fixed price when they need it
Warnings haven't only come from the right, but from the Congressional Budget Office. The nonpartisan scorekeeper warned that ObamaCare's gradual shifting of the burden of coverage costs to enrollees "may be difficult to sustain.
CBO director Doug Elmendorf threw out the possibility that Congress would find it necessary "to adjust the subsidy schedule.
A related warning came from the liberal Center on Budget and Policy Priorities: Don't cut ObamaCare's premium subsidies or a growing number of healthy families will opt out, raising costs for those left in the exchanges and putting the legislation's survival in jeopardy.
Less Support Over Time In fact, a poorly understood cost-constraint added to the law at the last minute might do just that — cut subsidies to mid-career individuals earning more than 300% of the poverty level and families earning at least 375% (about $86,438 for a family of four in 2012) starting in 2019, an IBD analysis found.
In ensuing years, the poverty thresholds at which subsidies could decline outright — not just in real terms — would move steadily lower.
By 2022, even assuming relatively contained premium increases of 4.5% a year, the lowest-cost bronze plan — with a hefty deductible — would cost 10% of income for a mid-career individual earning 300% of the poverty level. That's four times the cost of the mandate tax.
By comparison, the mandate penalty in Massachusetts is set at 50% of low-cost coverage, so there really is no good evidence to show how people would respond.
Guaranteed Problem After all, the risk of going uninsured would be limited because ObamaCare guarantees coverage without a punitive rate regardless of pre-existing conditions.
Back in 2010, Paul Van de Water of the Center on Budget and Policy Priorities raised the concern that "a growing number of families in relatively good health would likely choose to pay a relatively small penalty for going without coverage rather than pay a much larger and ever-increasing share of their income to obtain coverage.
That, in turn, would raise premiums for remaining beneficiaries because the overall health of the insurance pool would deteriorate, "encouraging even more people to drop coverage.
At the time, Van de Water was worried about deficit-cutting ideas that would scale back premium subsidies for those on the higher end of the income-eligibility scale. Yet, it has since emerged that Democrats inserted such a provision into ObamaCare during reconciliation. Before CBO clarified how the cost-curb would work in 2011, experts thought that subsidies would continue to grow at the rate of inflation.
Those cuts would begin in 2019 if exchange subsidies top 0.5% of GDP in 2018. CBO projections continue to show that costs will exceed that trigger — by about 25% in the wake of the Supreme Court ruling that may see more people shift to the exchanges from Medicaid.
Premium sticker shock could hit before that. Starting in 2016, premium payments would begin to grow in line with health costs and faster than income.
Even when ObamaCare launches in 2014, an estimated 40% of uninsured would be exempt from the mandate because a low-cost plan would exceed 8% of income. Exemptions would even apply to families of four with income from $100,000 to $150,000, Massachusetts Institute of Technology Professor Jonathan Gruber found.
While it's notoriously hard to see very far into the future of health care, ObamaCare will get out of the gate as a patchwork job with more than its share of question marks and weak links.