How will the 2016 election impact Obamacare?

One of the more pressing questions presently floating around the political news channels. A recent U.S. News article unpacks the potential fate of Obamacare in the case of a Trump or Clinton victory. In this blog, I’d like to add some considerations to the ACA’s funding arrangement, and how the financial structure of Obamacare will significantly impact the prospect of a full or partial repeal.

How Does a Democratic Victory Impact Obamacare?

In short, should Hilary Clinton win the executive ticket in 2016, don’t expect much change. A Republican run Senate and House, will continue to do their best to undermine and reduce the potency of the regulation.

However, should Legislative power shift to the Democrats under a Clinton presidency, sources report that “Obamacare may be expanded to try to get those still uninsured on board.” Since 2010, insurance companies have experienced an increase in revenue due to increased enrollments, but have not reported a correlative increase in profitability. Many of their newly-insured clients have come from an unhealthier pool of the population, meaning increased payouts and higher premiums.

To curb the ensuing result of rapidly inflating healthcare costs, a democratic house may push to expand the reach of Obamacare in order to attract healthier people to the pool to reduce the risk of the ever-expanding pool of insured.

How Does a Republican Victory Impact Obamacare?

Donald Trump may have stated, as any Republican politician would, that he wants to repeal Obamacare. That being said, the political ramifications of withdrawing affordable health coverage from millions of Americans would be problematic to say the least. At best, Trump and a Republican Legislature may be able to reduce the impact of some of the more unfavorable mandates within the ACA, like the Cadillac Tax or Play or Pay employer shared-responsibility mandate.

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However, to do so would mean undercutting the primary funding mechanism of the ACA all together. You can’t have subsidized coverage without revenue to fund those subsidies. The primary funding mechanism for Obamacare subsidies is the associated penalties of the individual and employer mandates and Cadillac Tax (see 2017 CBO report). Reduce the funding means reducing the subsidies, and we are right back where we started with unaffordable healthcare. The internal funding mechanism of the ACA makes it very sticky.

Regardless of who wins, both parties, along with insurance companies, will be tasked with determining how to structure incentives and new plan offerings to entice younger and healthier people to the marketplace exchange. Sad to say, but the solution to rising healthcare costs is the same as it has always been—there needs to be a large enough healthy population enrolled to spread-load the risk, share the cost, and yes, subsidize those members who carry a higher claims-risk.

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