Before I write this, let me first say that I'm a supporter of the Affordable Care Act. Do I think it needed changes to make it work better for everyone? Absolutely! In fact, if I had written the bill, I may have adjusted and/or eliminated up to half of the provisions in the law. Nevertheless, The ACA laid the foundation from which we could build a sustainable system of health coverage for everyone. However, unfortunately, due to the almost non-existent tax penalties during the first three years, the law began to flirt with the dreaded death spiral, and now without the fear of tax penalties because of President Trump's directive to the IRS to not enforce the personal mandate (now law), I'm afraid the final push over the edge has taken place. Let me explain.
The law always required young and healthy people to enroll to offset the cost of older and less healthy individuals. For example, young men were required to purchase policies that provided maternity and geriatric services, though these services would never be needed. This of course increased their costs, but lowered the costs for women and the elderly. Unfortunately, in many cases this crucial demographic of young and healthy people decided to forego health insurance and instead pay the tax penalty. Without a significant enough threat of a fine, this trend looked to continue.
For those who don't know, the first-year tax penalty under the ACA was essentially no more than $95 payable up to 18 months after the first open enrollment period, so individuals did not actually experience the affects of the penalty until 2015.
The law called for an increase in the penalty to $325, but again, the fine wasn't payable until 2016. Hence, what we've been left with is a market where the old and sick enrolled in coverage at disproportionate levels to the young and healthy, causing premium increases significantly nationally.
2016 was supposed to be the year we began to slowly reverse that trend as the penalty increased to $695 and insurance carriers were better able predict costs. However, the recent election of Donald Trump has essentially signaled to those who were getting coverage only to avoid the fine that the threat of being penalized has disappeared.
I'm presuming that message alone, though the law is still in affect, is enough to dissuade even more young and healthy people from enrolling this year. Couple that with all the previously enrolled people who need ongoing medical care and all the newly ill people who will be signing up this year, and we have what we've tried to desperately avoid. The insurance companies that still remain will more than likely suffer additional loses going forward and can not survive in this new environment where The Tax Penalty is no longer is feared. Hopefully the new administration provides enough of a financial incentive that it makes sense for everyone to enroll in coverage.