Is Winter Coming for the ACA?

The Affordable Care Act has been through a lot since it first became law. It survived a disastrous launch plagued by technical difficulties. It limped on despite a Supreme Court ruling striking down its mandatory Medicaid expansion. And it outlived the existential challenges brought against it at the Court—twice. The administration has massaged various mandates and regulations that would have hurt its popularity, and put a lid on widespread discontent by delaying their implementation. The determined Republican opposition has not led to its defeat, or even to any substantial changes, at least not yet. And all of this was despite the fact that the law has arguably had adverse electoral consequences for Democrats.

Throughout it all, supporters have been confident that the ACA was here to stay—and that it was working. The debate was settled, and continuing to point out shortcomings and potential points of failure was either the product of petulant whining by sore losers or the delusional of ravings of those completely disconnected from reality.But evidence has all along been mounting that the ACA, whatever good it may have done (and it has done some good!), has not and cannot fix the most pressing health care policy problem of our time: our health care system is too expensive and is becoming increasingly unsustainable. Evidence of this has been piling up for a while, and the situation has gotten only more acute recently.The latest shoe to drop: America’s biggest health insurer, UnitedHealth Group, has suffered major losses in the ACA marketplace and may withdraw from the exchanges altogether. WSJ :

UnitedHealth Group’s chief executive, Stephen J. Hemsley, said it made the move, which included a downgrade of its earnings projections for 2015, amid reduced growth expectations, the expected shutdowns of the majority of the health law’s nonprofit cooperative insurers, and signs that its own enrollees continue to increase their use of medical services, raising costs.

As a result, UnitedHealth said it is pulling back on marketing its exchange products, as open enrollment is currently under way for plans that will take effect in 2016. And the insurer said it is “evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.” UnitedHealth had previously expanded its exchange offerings to 11 new states for 2016, and said in October it had around 550,000 people enrolled.

What seems to have caught everyone by surprise is just how much demand there is for health care, and just how many medical services enrollees consume. That trend accounts in part for the collapse of many of the ACA’s co-ops, and it is apparently a major factor in this story, too. This pesky fact cannot be easily fudged, and it presents a lethal threat to the whole exchange mechanism. If UnitedHealth and other insurers do in fact choose to leave, the law could be in real trouble.

Moreover, at the same time as consumers are becoming too expensive for insurers to handle, many Americans are themselves finding that unacceptably large chunks of their own budgets are being eaten up by health care spending. Deductibles have been rising alongside the increased medical consumption that is putting the hurt on insurers. And it’s all happening in the context of a medical system that remains inefficient and opaque. This is one of the poorer outcomes imaginable.We’ve offered some ideas about shifts and policies that could help improve things, but nobody seems to know what a complete solution would look like. One thing is clear, however: The authors of the ACA chose to address coverage rather than underlying cost issues, and that decision is slowly but surely coming back to haunt them. The growing recognition of the gap between what the law promised—affordable care—and the reality confronting consumers could lead to repeated political challenges in years to come.