Obamacare's Biggest Threat

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Source: White House on Flickr.

The Affordable Care Act, better known as Obamacare, has completely transformed the healthcare landscape. Yet, more than a year after the beginning of its first open enrollment period, it's success isn't guaranteed. 

With that in mind, we asked three of our top healthcare analysts for their takes on what is the biggest threat currently facing Obamacare. Here's what they had to say:

Todd Campbell: The Affordable Care Act has survived a number of challenges since its passage in 2010, but one of the biggest threats facing it stems from a recent ruling by a federal judge in Oklahoma that calls into question whether the government can subsidize monthly premiums for people signing up for healthcare insurance through the federal healthcare.gov exchange.

Enrollment snapshot of Healthcare.gov in late March 2014. Source: Healthcare.gov.

In his ruling, Judge White determined that language contained in the Act allows the government to only subsidize costs for members who sign up through the state exchanges. If that ruling is held up in the Supreme Court -- where the case could soon be heading -- it could effectively neuter healthcare.gov.

If so, it may compromise earnings for big insurers like WellPoint , which serves exchange members in 14 states. That's because insurers have priced their plans based on the assumption that subsidies will encourage young, healthy people to sign up. If plans become unaffordable, insurers may be hard pressed to offset the cost of caring for older members who enroll through the exchange. If that happens, Obamacare would need to be significantly rejiggered.

: It certainly depends who you ask, but Obamacare has largely been a success so far, enrolling 8.1 million people, having 7.3 million of those people still paying, and reducing the insured rate down to 13.4%, according to Gallup.

But, the potentially fatal flaw I see with Obamacare is the non-universal expansion of Medicaid across the states. In total, 26 states chose to expand Medicaid enrollment in 2014, with two additional states announcing that they would soon expand and three others considering it. However, that still leaves a lot of heavily populated states, such as Texas, Florida, and North Carolina, which aren't considering Medicaid expansion at this time.

Source: TaxRebate.org.uk via Flickr.

The way Medicaid expansion would work is the federal government would foot the bill for subsidizing lower-income people who previously didn't qualify for Medicare but make up to 138% of the federal poverty level. Beginning in 2016 and running through 2022, though, the federal government would begin scaling back on the percentage of subsidies it would pay, putting the onus on the states to generate the funds to cover lower-income individuals. This move caused about two dozen states to simply stick to the sidelines as they didn't want to be responsible for these potentially higher long-term costs.

The problem, as I see it, is that after 2015 Medicaid enrollment will likely hit a brick wall because of these dissident states. The remaining uninsured that would qualify under the expansion, and which are estimated to total 5.7 million people by 2016, could make it difficult to keep medical care costs down. Because they'll remain uninsured, emergency room visits for the uninsured could result in big write-offs from hospitals and insurers, which, in all likelihood, would be passed along to everyone else through higher health insurance premiums. And if premiums rise too quickly, Obamacare will be deemed a failure.

Keith Speights: The biggest threat for Obamacare just might be expiration of the reinsurance and risk corridor programs at the end of 2016. These programs have insulated health insurers from exposure to significant losses so far. When the cushion goes away, though, premiums could skyrocket. There are two bleak scenarios for Obamacare that could then arise.

First, there is a possibility that the "death spiral" predicted by some could happen. The idea behind this "death spiral" is that as health insurance costs go up exorbitantly, healthier individuals will drop out and leave only sicklier members in the plans. This would drive costs higher for insurers, so they would be forced to raise rates even higher -- ultimately resulting in the collapse of the plan.

The second potential scenario is political. Higher insurance costs could lead to a big decline in already low approval rates for Obamacare. The lack of public support, combined with shifting winds in Washington, could result in a partial or total dismantling of Obamacare.

What are the chances of either of these possibilities occurring? While the "death spiral" scenario seems highly unlikely, the prospect for a collapse of political support for Obamacare if premiums rise significantly isn't far-fetched at all.

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The article Obamacare's Biggest Threat originally appeared on Fool.com.

Todd CampbellSean Williams, and Keith Speights have no position in any stocks mentioned.  The Motley Fool recommends WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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