Yesterday, President Biden commemorated the 11th anniversary of the Affordable Care Act. But Americans who want affordable health insurance have little to celebrate.
In Obamacare's first decade, premiums and deductibles have skyrocketed while provider networks have shrunk. Exchange policies routinely do not cover best-in-class doctors or hospitals. And the law's costs have exploded.
Rather than admit failure, the president is transforming Obamacare into Bidencare, doubling down on the law's structural flaws and injecting even more money into the system.
The cost of a plan through Obamacare's exchanges has been growing for years. Since 2014, the first year the marketplaces were open, average premiums on the federal HealthCare.gov exchange have increased more than 65 percent. Between 2013—the year before the law went into effect—and 2017, the average individual market premium doubled.
These rate hikes were inevitable. Obamacare's many regulations and mandates necessitated higher premiums.
For example, the law requires all plans to cover 10 "essential health benefits," including substance abuse treatment and mental health services, regardless of whether a beneficiary wants or needs them. Each of those mandated benefits adds to the cost of an insurance policy.
Then there's guaranteed issue, which requires insurers to sell plans to anyone regardless of health status or history, and community rating, which forbids insurers from charging older people any more than three times what they charge younger people.
These mandates don't come cheap. A small share of patients accounts for most healthcare costs. Five percent of patients account for about 50 percent of all health expenditures. Claims costs for older Americans are about five times higher than those for young adults, on average.
To protect themselves, insurers initially set premiums high—and have ratcheted them even higher.
As a result, many middle-income households who don't qualify for federal subsidies through the exchanges have dropped out of the individual market. Two and a half million unsubsidized households did so between 2016 and 2018, a 40 percent decrease.
Patients who kept on buying exchange coverage haven't been getting much value for their premium dollar. An analysis from Avalere concluded that nearly 75 percent of exchange plans have narrow provider networks. In more than 50 percent of counties, there are two or fewer insurers offering exchange plans.
Obamacare's defenders point to a decline in the uninsured rate as proof of its success. Just under 11 percent of the population was uninsured in 2019, compared to 16.8 percent in 2013.
But the exchanges aren't responsible for the decrease—Medicaid is. Nearly 12 million newly eligible people enrolled in the government-run insurance program between 2013 and June 2019. Of course, that growth also cost taxpayers billions of dollars—not exactly a victory.
Bidencare doesn't address these structural problems. It just throws more money at them.
The newly enacted American Rescue Plan significantly broadens the number of people eligible for exchange plan subsidies. Before, subsidies weren't available to anyone making more than 400 percent of the federal poverty line—about $106,000 for a family of four. Now, a family making double that can receive government money.
The new law also caps consumers' premiums at no more than 8.5 percent of income for the next two years. It's a safe bet that change will become permanent.
These changes follow an executive order issued by President Biden in January establishing a special enrollment period from February 15 through May 15, wherein people without coverage could sign up. By the end of February, more than 385,000 people had submitted applications for coverage.
On March 23, the administration extended the special enrollment period through August 15.
The relief package also sweetens the deal for the dozen states that have not yet expanded their Medicaid programs to everyone making less than 138 percent of the poverty level. It offers these states an additional 5 percent for their legacy Medicaid programs for two years, in addition to the 90 percent they'd get for their expansion population.
After that 5 percent bonus runs out, states will struggle to cover their share of the expansion population's cost. In the 33 states that have expanded Medicaid, the median state tab is $100 million.
Down the line, that means less money for roads, schools, and other state services.
Thanks to Obamacare, consumers shopping for coverage on the individual insurance market can choose from a limited number of high-cost, low-value health plans.
President Biden wants to "build on" that. Only in government is the prize for abject failure billions more taxpayer dollars.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All, (Encounter 2020). Follow her on Twitter @sallypipes.
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