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The Impact of Obamacare

24/04/2014 11:00 BST | Updated 23/06/2014 10:59 BST

President Obama's ambitious project aimed at reforming the US healthcare sector--nicknamed "Obamacare"--recently passed the sign-up deadline. The program seeks to get health insurance to all Americans. Since the sign-up process ended, the Obama Administration has continued to tout the total number of sign-ups. But the more important metric is how many young healthy people have signed-up for insurance. That number appears to be lagging below the Administration's expectations.

If too few healthy people buy insurance, it likely that insurance companies, faced with a pool of insureds that are disproportionately sick, will raise premiums. Companies already are announcing higher premiums for next year. If that trend continues as more companies announce 2015 premiums in the coming months, there could be an outcry similar to when Americans learned they could not keep their old insurance policies.

In the upcoming midterm elections, Republicans will continue to pound away at the failings of Obamacare: the President's false promise that people could keep their plans, the constantly shifting deadlines of questionable constitutionality, and the government report that the labor force is adversely affected. I think Republicans will keep the House during the elections, however, taking the Senate depends on the candidates that emerge from the primaries -- can they capture Independent votes? The initial results are hopeful for Republicans -- the candidates in New Hampshire and Colorado are the types of candidates who can do that.

As for the future of Obamacare, the outcome of a pending court case about whether people who buy insurance through the federal websites are entitled to government subsidies could derail the whole plan. Those subsidies are crucial to getting young people to sign up.

Unless the courts decide otherwise, Obamacare likely is not going away. Even if the Republicans win the presidency and both houses of Congress in 2016, by then tens of millions of people will be receiving insurance subsidies under the program. The program will be embedded in US society. Taking those subsidies away will be like taking away Social Security, the hope is that the parties come together to fix the law.

Longer term, the issue is whether insurance companies continue to participate in the program. For the next few years, the program will "bail out" insurance companies who suffer losses, but those bail outs end in 2017. You have to wonder whether companies will provide health insurance under a law that limits their profits and does not allow them to charge more for pre-existing conditions. If insurance companies exit then the federal government becomes the health insurer of last resort

Thus the jury is still out whether the flagship legislation of the Obama Administration effectively will provide better health care to more Americans, or instead end up a costly and failed experiment in government intervention in the health care sector.

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