High taxpayer subsidies keep Obamacare markets stable
Far from failing, Obamacare’s exchanges are stable, the Congressional Budget Office says — but only because, as the markets struggle, taxpayers pay ever-higher subsidies to encourage enrollment.
As premiums go up, so does the amount the government pays to help people buy coverage. That, combined with the mandate requiring Americans to have insurance, should “cause sufficient demand for insurance by enough people” to keep the markets running at a stable clip, the CBO said in a closely watched report last month.
Democrats intent on salvaging Obamacare say that’s good news because the law is working as it should.
But the worse the markets, the more the government will have to do to bolster them — and the more taxpayers will have to fund.
“Absolutely there is a cost shift that’s going on here, and that shift is primarily to the taxpayer,” said Lanhee Chen, a fellow at Stanford University’s Hoover Institution who advised 2012 Republican presidential nominee Mitt Romney on health care.
The actual numbers are startling: The average monthly payment this year is $371, or 28 percent higher than the average payment a year ago.
The American Action Forum, a conservative think tank that crunched government data, estimated that the subsidies rose from $18.6 billion in Obamacare’s first full year in 2014 to $30.4 billion last year.
The forum projects $38.5 billion in spending for 2017, even though enrollment appears to have remained static.
“In broad contours, the Affordable Care Act created a new entitlement and expanded an old one at a time we already projected large deficits,” said forum President Douglas Holtz-Eakin, a former CBO director, referring to the law’s subsidies and vast expansion of Medicaid. “That strikes me as a big issue. And now it turns out it’s more expensive than anticipated.”
Soaring premiums created negative headlines for Democrats during the home stretch of the political campaigns last year and are fueling President Trump’s push to scrap the law with the Republican majority in Congress.
Rate increases also scared off people who want to buy insurance on their own but earn too much to get subsidies, making it harder to achieve the kind of balanced risk pool that would bring down rates.
“In my mind, at least, what we’ve created [under Obamacare] is primarily a vehicle to administer subsidized coverage. It’s not a marketplace at all,” Mr. Chen said.
Even those who receive government help haven’t used the portals in great enough numbers.
Robert Laszewski, president of Health Policy and Strategy Associates, said only about 4 out of every 10 Americans eligible for subsidies have signed up. Actuaries say about three-quarters should sign up to achieve a balanced market.
As it stands, enrollment is stagnating, with its first year-over-year decline and effectuated enrollment at 10.3 million as of March 15.
“Ideally, we need about 18 million to be sure of a balanced risk pool,” Mr. Laszewski said.
The upside to the poor performance is that Obamacare is costing less overall than it would otherwise. While the per-person costs are higher, the American Action Forum says, the program’s cost is $33 billion less than projected because of lower enrollment.
Democrats say Mr. Trump is making a difficult situation worse by refusing to commit to cost-sharing payments that reimburse insurers for picking up low-income customers’ costs. As a result, insurers are asking for higher rates than they otherwise would.
Congressional Republicans and the Trump administration’s Health and Human Services Department contend that the law is to blame for rising rates — Blue Cross Blue Shield requested a 26 percent spike in Georgia — and must be repealed and replaced with more affordable options that drive down premiums and spending.
“Rising costs and fewer choices — that is the legacy of Obamacare. Now is the time to advance real health care reform that empowers people to choose a health care plan that meets their needs without breaking their budgets,” said HHS spokeswoman Alleigh Marre.
House Republicans passed a repeal plan that pegged tax credits to age so government costs wouldn’t rise with premiums, yet Senate Republicans worried that those credits wouldn’t be generous enough for lower-income and older people.