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After One Year, Obamacare’s Biggest Achievement: Hiding Its Cost


In a speech yesterday at Northwestern University, President Obama declared that the Affordable Care Act is “working pretty well in the real world”—a claim he couldn’t have made this time last year. Now, armed with surveys of the uninsured rate and CBO reports, his administration can take credit for “good, affordable healthcare”—but only by citing choice data and dwelling on those parts of the law that disguise its defects as virtues.

Still, that’s a big improvement from where the administration was last October. It’s been a year this week since the launch of, the health insurance exchange website through which millions of Americans were supposed to purchase subsidized coverage under Obamacare. To the delight of the law’s critics and the chagrin of its champions, the site promptly crashed on October 1 last year, the day it launched. It took months to get it up and running.

At around the same time, insurers began canceling plans that didn’t comply with the new law’s new rules. We may never know how many people lost their coverage, but it was most likely in the millions, perhaps as many as six million. In response to this unwelcome news, the administration unilaterally announced last November that it would not enforce the provisions of the law responsible for the cancelled plans, and entreated state health insurance commissioners to do the same while urging insurers to continue offering plans that had been, strictly speaking, made illegal by Obamacare.

As autumn became winter, Obamacare became increasingly unpopular. By January, 50 percent of Americans viewed the law unfavorably, only 34 percent viewed it favorably—a share that hasn’t changed much and now stands at 47 and 35 percent, respectively. Despite eventual fixes to the website, higher-than-expected enrollment on the exchanges, and unwavering support from its defenders in the press, Obamacare remains unpopular.

So Much for Improving Health Care

At least part of the reason is that many Americans have discovered Obamacare coverage isn’t all that great. As new enrollees sought out medical care with their ACA-subsidized health insurance this year, they discovered the network of doctors and hospitals on those plans was woefully narrow. Insurers excluded many of the nation’s top cancer centers from exchange networks in an effort to keep premiums down. Patients across the country complained—and continue to complain—about inadequate access to physicians and hospitals, and some have been hit with huge medical bills after insurers refused to pay for care outside their narrow networks.

The Obama administration has long argued that coverage on the individual market prior to the ACA was “substandard”—deductibles were too high, pre-existing conditions shut sick people out of the market, and if you did get sick there was no guarantee your insurer would pay your medical bills. Obamacare was going to change all that through mandates, regulations, and subsidies. Although the law has indeed ameliorated some of these pre-ACA problems, it has also created many new ones. One recent study found that pre-ACA plans on the individual market—plans no longer allowed under the ACA—were superior to Obamacare exchange plans; many of them offered more choices of doctors and hospitals, and many had lower premiums, deductibles, and out-of-pocket maximums than even the cheapest exchange plans.

The news, however, is not all dire. As Ezra Klein noted last week, “costs are lower than expected, enrollment is higher than expected, the number of insurers participating in the exchanges is increasing, and more states are joining the Medicaid expansion.” All of that is true. It is also true that Obamacare is a large and unwieldy law. On any given day you can find evidence that the law is either improving or harming the U.S. healthcare system, the economy, and the lives of individual Americans. Much of it depends on how you interpret the data gathered over the past year, and whether you think it reflects cost trends that will endure over the long-term.

A Dark Cloud Attached to the Silver Lining

For Obamacare champions like The New Republic’s Jonathan Cohn, the matter is settled: “[I]f you focus on the big picture, the available evidence suggests that the Affordable Care Act is working pretty much as its designers envisioned it would.” Cohn points to surveys showing a drop in the uninsured rate, which he attributes to the ACA even though there is good reason to think larger economic factors, like recovery from the recession, are responsible. Cohn and Klein both highlight a recent announcement from the Department of Health and Human Services that the number of insurers participating in the exchanges will increase by 25 percent next year, which, together with news that average premiums for the benchmark exchange plans will decline slightly, they took as a sign that the exchanges are fostering competition in a genuine market, as the law’s architects claimed they would.

Alas, there is more to the story than this sunny news. As the editors of The Wall Street Journal patiently explained this week, the slightly lower premiums and higher number of insurers are the logical result of a system that’s easy to game. Here’s what the Obamacare optimists leave out: insurance companies offering coverage through the exchanges are temporarily protected from significant financial losses thanks to Obamacare’s reinsurance and risk corridor programs, which means new entrants to the exchanges have nothing to lose by underpricing their plans and hoping for the best. Because the second cheapest “silver” tier plans are used as a benchmark to determine subsidies, and because in year one these low-cost benchmark plans sold far better than any others, insurers have an incentive to undercut competitors and grab the benchmark slot for year two.

In a normal market, new entrants would naturally try to undercut existing plans to be competitive. At first glance that seems like what’s happening. After all, in an analysis of 2015 exchange rates in 16 major cities, 12 insurers that had benchmark plans in 2014 have either been undercut by new entrants or raised their rates (and in some cases, both). But this isn’t a normal market, and what’s happening isn’t healthy competition. New insurers are most likely underpricing their plans, knowing that the reinsurance and risk corridor programs will shield them from losses until, 2017 after which the programs expire and we get to find out how much these plans really cost.

That is not the kind of analysis you’re likely to hear from ACA boosters like Cohn and Klein and their compatriots in the media, much less the Obama administration, who are content to quote surveys and HHS data as sufficient evidence that the law is a success, or that at least it’s working as it’s designers thought it would.

But on the anniversary of Obamacare, it’s far more accurate to say that the law has been successful so far according to the one metric that really matters to the Left: hiding its true cost from the American taxpayer.