Obamacare’s defenders were quick to blame the change on meddling by the Trump administration. But the real culprit is the law’s faulty design.
Since the first exchange plans went into effect in 2014, Obamacare has consistently delivered higher premiums and deductibles for average Americans who don’t get coverage from their employers. As a result, millions of people have fled the Obamacare exchanges over the past few years. Today, only people who receive government subsidies can afford exchange plans.
Currently, Americans who make less than 400% of the federal poverty level but do not qualify for Medicaid are eligible for subsidies for Obamacare plans. These subsidies are often quite generous. For example, a family of four with $50,000 in annual income could get a $15,855 plan for just $3,250 — or $271 per month.
Just under half of Americans are eligible for these subsidies. The rest are out of luck, and face monthly premiums routinely exceeding $1,000.
As a result, many people are deciding not to shop for coverage on Obamacare’s exchanges. Between 2016 and 2018, unsubsidized enrollment plummeted by 2.5 million — a 40% decline from around 6.2 million to 3.7 million. Eighty-seven percent of people with exchange coverage received subsidies in 2019.
The cost of exchange coverage has soared because of Obamacare’s many rules, mandates and regulations. For instance, Obamacare requires every plan sold on the exchanges to cover a list of 10 “essential health benefits,” from pediatric vision care to substance abuse treatment. Such comprehensive coverage is expensive. It’s also unappealing to many people, particularly young folks for whom these benefits seem far from “essential.”
Obamacare also forces insurers to charge everyone of a certain age the same rate, regardless of their health status or history. On top of that, it prevents insurers from charging older enrollees more than three times as much as younger enrollees.
Mandates in the Affordable Care Act have resulted in higher costs for insurers, which they’ve passed on to enrollees in the form of higher premiums, Pipes writes. (Photo: Shawn Fury, VA Eastern Colorado Health Care System)
These mandates have raised costs for insurers, which they’ve passed on to enrollees in the form of higher premiums. In 2017, average exchange premiums rose 21%. Not surprisingly, exchange enrollment fell by 10 percent that same year. Americans who didn’t qualify for subsidies accounted for roughly 85% of this decrease.
An additional 1.2 million unsubsidized patients exited the exchanges in 2018, when premiums rose by 26%.
Some states saw particularly alarming coverage drops. From 2016 to 2018, unsubsidized exchange enrollment in Arizona, Iowa, Georgia, Nebraska, Oklahoma and Tennessee plummeted by over 70%.
That trend is almost certain to continue as marketplace premiums keep rising. Next year, exchange premiums for Vermont’s Blue Cross Blue Shield patients will jump 12%, on average. In New York, average premiums will increase by about 7%; New Mexico’s plans could be 13% more expensive.
Fortunately, there’s at least one option still available to those who can’t afford the plans for sale on Obamacare’s exchanges — short-term, limited duration insurance. These policies are exempt from Obamacare’s mandates. Insurers don’t have to cover every essential health benefit and can price plans based on a beneficiary’s medical risk.
As a result, short-term plans are far more affordable. One analysis found that premiums for the cheapest short-term plans are 80% lower than those for the least expensive Obamacare plans.
And thanks to a recent rule change by the Trump administration, Americans can purchase short-term plans that last up to 364 days. Insurers can also renew those policies for up to three years. Previously, short-term plans only lasted three months and couldn’t be renewed.
As the next open enrollment period approaches, it’s clearer than ever that Obamacare has failed. The law’s mandates were supposed to help every American get insurance. Instead, they’ve made it impossible for almost anyone to purchase coverage without a government subsidy. So much for the “Affordable” Care Act.
Sally C. Pipes is president, CEO and Thomas W. Smith fellow in health care policy at the Pacific Research Institute. Her latest book is “The False Promise of Single-Payer Health Care” (Encounter). Follow her on Twitter @sallypipes.