The Trump administration has decided to challenge the constitutionality of the Affordable Care Act (Obamacare) in court. Some Republicans in Congress and even some in the administration resisted this decision. Critics assume that if there is no Obamacare, we would revert to the pre-Obamacare health system. If so, how bad would that be?
Lets take a look.
More private insurance. The most important goal of Obamacare was to increase the number of people with private health insurance, primarily through individual and employer mandates and generous subsidies in health insurance exchanges.
Yet, the day Barack Obama left office, the percentage of people with private coverage was only slightly higher than the day he was elected (67.5% in 2016 versus 67.2% in 2008). The economy was coming out of a deep recession during those years and ordinarily the number of people with private coverage would have risen in lockstep with the growth of the civilian labor force.
We have been spending more than $100 billion a year on private insurance subsidies, with little to show for it.
Better insurance. Although the Obamacare individual mandate is gone, people who are sick still need health insurance. Under Obamacare, people who must purchase insurance on their own have seen (1) their premiums double, (2) their deductibles double and triple and (3) their access to care increasingly restricted to an ever-narrower network of providers.
All three problems arise for the same reason: under current law, insurance plans have perverse incentivesto attract the healthy and avoid the sick. The way insurance companies hold down costs is by paying rock-bottom fees for medical services and engaging only those providers who will accept those low fees.
The race to the bottom in the individual insurance market is producing plans that are little betterperhaps even worsethan Medicaid with a high deductible.
Portable insurance. Prior to Obamacare, some employers used Health Reimbursement Arrangements (HRAs) to give employees tax-free funds with which they could buy their own insurance. Individually owned insurance has the virtue of traveling with the worker from job to job and in and out of the labor market.
Under the Obama administration, however, employers who did this could be fined as much as $100 per employee per day, or $36,500 per employee per yearthe largest fine in all of Obamacare.