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June 2012
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LOOMING ACA bad news may hit at election time

Today we enter the second half of 2014 and with that we find round two of the impact of Obamacare close upon us. It's not likely to be pretty for a couple of reasons.

One is that insurance premium increases for those buying mandatory coverage through the Obamacare exchanges look to be heading up double digits.

The second is that businesses will begin preparing in earnest for the business mandate, which was deferred in 2014 by an (probably illegal) executive order from the president. Implementation of the business mandate is likely to produce lost jobs as smaller companies look to get under the 50-employee mark that brings them under the rules and penalties of the Affordable Care Act. Larger businesses will begin making reductions in part-time hours to assure part-time workers receive less than the average 30 hours per week that compels companies to offer them health insurance under the ACA.

CNBC's website recently carried a story from the Fiscal Times arguing that Obamacare has already served as a major drag on the economy. The article, entitled "Obamacare will suck the life out of the economy", argues that Obamacare, not the harsh winter, is a big reason why Gross Domestic Product fell a stunning 2.9 percent in the first quarter of 2014. The article points out that the GDP decline marks the worst first quarter read on the economy in 32 years, and there have been many other harsh winters over that period of time.

The article says that spending on health care actually declined in the first quarter, hurting GDP. Beyond that the article points to the impact of the taxes, fees and mandates of Obamacare compliance as a drag on individuals, business expansion and the economy.

Looking forward, things stand to get worse. An article in the Wall Street Journal last week reported that the disproportionate number of seriously ill people buying insurance on the exchanges has taken many insurers by surprise and is putting pressure on premiums for 2015. The article says that in the first quarter 27 percent of Obamacare enrollees who used health services had significant health issues such as diabetes, cancer or heart problems. That compares with 16 percent in the pre-Obamacare private insurance market during the same period of 2013. It's also double the rate of those who kept their policies in 2014 under grandfathering provisions created in the storm over Obama's "If you like your insurance you can keep it" promise.

The WSJ says the fact healthier people will be able to remain in their grandfathered policies in 2015 will further exacerbate the problem of high numbers of seriously ill people in the exchange policies. It's a factor driving a proposed 14.3 percent average premium increase by CoOportunity Health on policies it provides in Iowa, according to the WSJ. Worse, the newspaper reports CareFirst BlueCross BlueShield is now seeking an average 25 percent rate increase for its plans in the Maryland exchange.

None of this sets up well for the Democrats in the fall elections. President Obama, having just been slapped down 9-0 by the U.S. Supreme Court for abuse of executive power and facing a lawsuit on such grounds from members of Congress, is unlikely to attempt to further delay the business mandate. That means a toxic storm of double-digit premium increases, small-business layoffs and broadly reduced part-time hours is likely to be hitting home right at election time. In addition to the individual impact, it is all likely to create a greater drag on GDP and the economy.

Democrats passed Obamacare without a single Republican vote. They own it completely. And this fall they'll likely rue the day they all signed off on it.

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