It has become a welfare program for health insurers and people who should have the means to purchase insurance on their own.
It has become a welfare program for health insurers and people who should have the means to purchase insurance on their own.
D emocrats just unveiled legislation that would make permanent the generous pandemic-era subsidies for health insurance sold through Obamacare’s exchanges.
Illinois representative Lauren Underwood (D.), the bill’s lead sponsor in the House of Representatives, said that extending the subsidies beyond their scheduled expiration at the end of next year would mean the “difference between families having coverage and going without it.”
That’s almost certainly an exaggeration. Policy-makers have been making erroneous predictions about Obamacare since it became law 14 years ago. This time will be no different. A new study from the Paragon Health Institute gives us an idea of how hard it has been to make such predictions.
In 2013, the Congressional Budget Office projected that the number of people with health insurance would increase by 25 million by 2021. In reality, 19 million additional Americans gained health coverage by 2021. More than 17 million of them were newly eligible for Medicaid under Obamacare’s expansion of the program. Federal spending on the exchanges led to a total increase of just 1.6 million in the number of Americans with private insurance relative to the 2009 baseline, Paragon’s research found. These meager coverage gains came at great cost. In 2021, taxpayers shelled out nearly $36,800 in subsidies per additional private-insurance enrollee. That’s more than three times what the CBO projected.
The tab for subsidies has surged because Democrats have made the subsidies more generous and handed them to more people than Obamacare originally envisioned. In 2014, those who made more than 400 percent of the federal poverty level — a healthy six-figure income for a family of four — were ineligible for subsidized premiums. In 2021, as part of the American Rescue Plan Act, Democrats made premium subsidies more generous for everyone making less than that — and for those making more, they capped premium payments at 8.5 percent of their income. These expanded subsidies were supposed to expire in 2022. But Congress extended them through 2025 as part of the Inflation Reduction Act.
Now, with expiration on the horizon again, Democrats insist that people won’t be able to afford their exchange plans unless the inflated subsidies are renewed. A recent analysis from the consulting firm Oliver Wyman suggests that 1.7 million people with chronic medical conditions would be forced to drop Obamacare coverage if the enhanced subsidies expire. But that analysis rests on some questionable assumptions. Oliver Wyman estimates that roughly 40 percent of Obamacare enrollees — about 8.3 million people — have at least one chronic condition. That’s high. The Centers for Medicare and Medicaid Services estimates that only 21.8 percent of ACA enrollees have a chronic condition — about 4.7 million people.
Many ACA enrollees are likely on the lower end of the income scale. Roughly three-quarters of new exchange enrollees between 2021 and 2024 earned between 100 percent and 200 percent of the federal poverty level, or between $15,060 and $30,120 for an individual, according to research from Paragon. We might think that these low-income folks benefit most from the enhanced subsidies and would have the most to lose should these subsidies expire. But that’s not the case. The average enrollee with an income less than 400 percent of the federal poverty level is saving $33 to $45 on his monthly premiums thanks to the enhanced subsidies. It’s a stretch to assume that hundreds of thousands of enrollees would leave their plans if premiums went up by less than $45 per month. Even if such an exodus were likely, there are plenty of other Obamacare plans with cheaper or even no-cost premiums for low-income folks to choose from.
Those in higher tax brackets have much more to gain from making the enhanced subsidies permanent. The subsidies save the average person who makes four to six times the federal poverty level $213 a month on his insurance. There’s one other group that would benefit if the expanded subsidies became permanent: insurers. They’d be looking at a windfall of some $335 billion in taxpayer dollars over the next ten years.
Obamacare has become a welfare program for health insurers and people who should have the means to purchase insurance on their own. When Democrats issue dire predictions about what will happen if it shrinks, take their claims with a grain of salt.