By David Wainer

When the early outlines of President Barack Obama's health plan emerged, health economist Stephen Parente was struck by their resemblance to longstanding Republican proposals. At the time, Parente was an adviser to Sen. John McCain's 2008 presidential campaign.

"When we saw it coming out, we said, 'This is pretty good, but it's actually our design,'" recalls Parente, a professor at the University of Minnesota.

Although the Affordable Care Act was signed into law in 2010, it remains a contentious topic on the campaign trail. With elections less than a month away, Democrats are warning voters that the future of the program hangs in the balance. Former President Donald Trump continues to criticize Obamacare, promising during his debate with Vice President Kamala Harris to unveil "concepts of a new plan" should he regain the presidency.

Regardless of who wins, though, Obamacare is unlikely to be dismantled. A majority of Americans now view the ACA favorably, and more than 45 million people are covered either through its marketplaces or via the law's expansion of Medicaid. The exchanges are growing in popularity in red states like Texas and Florida and have helped bring the country's uninsured rate from 16% when the law was passed, to about 8%.

The ACA has by now become so deeply entrenched in the U.S. healthcare system that repealing it wouldn't only provoke significant political backlash but also disrupt the healthcare industry, jeopardizing billions in revenue for providers and insurers who rely on its framework.

"When you give something to voters, the more it gets embedded into the system, the harder it is to take it away," says Stephen Myrow, managing partner of Beacon Policy Advisors, an independent policy research firm. "And I think Republicans of all stripes don't want egg on their face by trying to repeal Obamacare once again."

But that doesn't mean the debate will end. One of the program's most popular features is its prohibition on denying coverage for pre-existing conditions. However, requiring insurers to charge people the same price regardless of their cost to the system, while offering expanded benefits like maternity care and mental health coverage, has led to increased premiums, particularly for those who are younger and healthier.

To address rising healthcare costs, President Biden temporarily expanded Affordable Care Act subsidies, but they are set to expire in 2025. If Republicans regain control in the coming November elections, they could let them expire, potentially increasing healthcare costs for millions of Americans and leading many to drop their insurance, says Cynthia Cox, director of the Affordable Care Act program at KFF, a nonprofit health research group

Republicans argue that these subsidies distort the insurance market by artificially lowering prices, leading to higher costs to the taxpayer. Their permanent extension would increase the budget deficit by $335 billion over the next decade, according to a Congressional Budget Office projection. In a recent article for National Review, Brian Blase, who served in Trump's White House, contends that the subsidies funnel millions of people into purchasing overpriced insurance products that many don't need, essentially cross-subsidizing those who require extensive medical care. He says that subsidies could be redirected in ways that enhance healthcare freedom and improve coverage for those with serious health issues.

Investors in companies focused on Obamacare are tracking the candidates' every word. As health exchanges and Medicaid have expanded, insurers like Centene, Molina Healthcare, and Oscar Health have experienced significant membership growth. Oscar, which primarily serves the exchanges, has seen its shares rise by more than 200% in the past year, but its gains could be at risk if Trump were to win. Earlier this year, Bank of America downgraded Oscar's stock to neutral, citing uncertainty around the future of exchange subsidies.

For much of the year, Oscar's stock has traded as if it were a direct bet on the elections. When Biden crashed in his debate with Trump in June, Oscar's stock plunged 10% the next day. When Harris was declared by pundits to be the winner following the Sept. 10 debate, Oscar surged 19% the following day and went on to rally for another six consecutive sessions.

Mark Bertolini, chief executive of Oscar Health, says investors may be putting too much emphasis on the election's outcome. He doesn't think any result will be catastrophic for the ACA exchanges. For instance, he points out that in red states like Texas, Ohio and Indiana, the exchanges have become a crucial lifeline for many. That is because these states chose not to expand Medicaid, despite federal funding that covers nearly all the cost of expansion so residents who earn too much to qualify for Medicaid have relied heavily on the subsidized exchanges.

Indeed, if the elections produce a divided government -- currently the most probable scenario -- the expanded subsidies are likely to survive in some form. This is because they are expected to be included in a broader negotiation involving the Trump tax cuts, the provisions of which are also set to expire at the same time.

Regardless of what happens to the subsidies, Bertolini is bullish on the individual coverage market. For example, he says there is bipartisan support for plans that allow employers to provide a tax-free allowance for employees to purchase their own health insurance in the individual market.

Policy wonks on both sides of the political spectrum agree that Obamacare is far from perfect. Perhaps one reason it has endured is that it reflects a compromise between Democrats' desire to expand access to healthcare and Republicans' preference to maintain a role for the private market in determining coverage.

Although it has changed shape more frequently than Play-Doh in a kindergarten, it doesn't look like Obamacare will disappear. The outcome of the elections will determine its next form.

Write to David Wainer at david.wainer@wsj.com

(END) Dow Jones Newswires

October 11, 2024 05:30 ET (09:30 GMT)

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