Analysis: 3 'Obamacare' Myths

With the main parts of the Affordable Care Act, or "Obamacare," going into effect on Tuesday, there has been much misinformation about the new law. Here are three common myths you may have heard.

Myth #1: Congress is Exempt

The origins of this myth has to do with a part of the law inserted by Sen. Chuck Grassley (R-Iowa). While the law was making its way through Congress, Grassley inserted an amendment saying that all members of Congress and their staff would have to get their insurance through the new health care exchanges. Rather than being embarrassed by making the argument that they themselves should not get their health insurance on the exchanges, Democrats simply went along with the amendment.

The law did not clarify, though, what that would mean for the contributions the federal government already makes for the health insurance of members of Congress and their staff. This was important, in particular, for low-level staffers. Many of those staffers are essentially making near poverty level wages, when the high cost of living in Washington, D.C., is considered. Without the contributions, many of those staffers would be unable to purchase health insurance, and their salaries are too high to qualify for the exchange subsidies.

As usual, a government agency, in this case the Office of Personnel and Management, was left with the task of clarifying where the law was vague. OPM ruled that the federal government's contributions could be used to purchase insurance on the exchanges, a ruling that the non-partisan Congressional Research Service agreed with. This led some Republicans and some reporters to claim that the Obama administration "exempted" Congress from the ACA.

The notion that Congress is exempt from the ACA is absurd on many fronts. The OPM rule simply means that the federal government will continue to make the same contributions it was already making. Even if members of Congress did not need to get their health care insurance from the exchanges, it would not mean they were "exempt" from the law. The ACA covers all aspects of health insurance, not just the exchanges. So, even if you get your health insurance from your employer, instead of the exchanges, your insurance is still regulated by the ACA. There are only a few groups that have an exemption under the law (see here and here), and Congress is not one of them.

The Grassley amendment was an odd part of the law to begin with. The health care exchanges were created for those who are not getting health insurance from their employer, and are not eligible for Medicaid or Medicare. Since members of Congress and their staff have health insurance from their employer (the federal government), the exchanges were not really designed for them.

Myth #2: It Will Lower the Debt

When passage of the ACA was being debated, the Congressional Budget Office released a report saying that the law would reduce deficits by $138 billion over 10 years. Republicans claimed that estimate was wrong because it double counted Medicare savings - savings were used both to lower the deficits and pay for the ACA.

An independent actuary hired by the Department of Health and Human Services in 2011 confirmed that the Republican argument was correct - the same money cannot be used to both lower deficits and pay for new spending. In essence, what the actuary was saying is that one dollar does not equal two dollars - an important finding with applications beyond the ACA.

Additionally, the Obama administration has made multiple changes to the law that has removed some of the cost saving measures in the law. In 2011, for instance, HHS announced it was eliminating the CLASS Act, a long term care program, from the law because it was unworkable. In the CBO estimate, $86 billion of the $132 billion in savings was supposed to come from the CLASS Act. To this day, Obama continues to cite the CBO's $132 billion savings, even though his administration already eliminated $86 billion of that amount.

In 2012, economist Charles Blahous, a public trustee to the Social Security and Medicare trust funds, estimated that, after accounting for the double counting of Medicare savings and eliminating the CLASS Act, the ACA will add between $340 billion to $530 billion to the national debt over 10 years.

Myth #3: If You Like Your Health Insurance, You Can Keep It

"If you like your health insurance, you can keep it," Obama has often said in defense of the ACA. While the law does not technically mandate that any person or employer drop their current coverage, some employers have already announced they are changing or eliminating their health insurance plans as a result of the law. Plus, some individuals may have to change their health insurance provider because of premium rate increases that will come as a result of the law.

At its convention earlier this month, the AFL-CIO, a labor union that initially supported the law, called for repeal of or major modifications to the ACA. The reason is that many labor union members are expected to see major changes to their current health insurance. In some cases, they say, employers will drop their coverage altogether and they will have to get their insurance on the new health care exchanges.

The AFL-CIO, along with other labor unions, are asking Obama to issue an executive order that would give them the same subsidies as they would get on the exchanges to pay for their current health insurance plans. If Obama gives in to their demands, it will further drive up the cost of the ACA (see Myth #2).

Others who will lose their current health insurance as a result of the ACA are: part-time employees for Trader Joe's, and spouses of employees at UPS and the University of Virginia.

Others may lose their current health insurance simply because they are no longer able to afford it. By one estimate, premiums will increase, on average, 99 percent for men and 62 percent for women. The variation, though, is also quite large. Some will see their rates go lower while others will see their rates increase significantly. The highest projected increase is for male North Carolinians, who are expected to see their premiums quadruple on average, if they want to keep their current insurance.