The Sticker Shock of Affordable Care Act Premiums

Strategic Insights -

The Affordable Care Act marketplaces are preparing for their annual open enrollment period, and millions of families are bracing themselves for sticker shock. Health insurers are increasing premiums on average by 26 percent, a significant jump that is set to lead to higher costs for those enrolled in the plans. Of the 24 million people currently enrolled, 22 million rely on government subsidies to defray the costs, and a planned expiration of pandemic tax credits could see their monthly payments more than double.

The Congressional Budget Office and Joint Committee on Taxation estimate that extending these subsidies would cost $350 billion over the next 10 years. The provision was originally touted as a temporary fix but has since become a perennial storyline in the US healthcare system. This has led experts to point out that the system is complex and costly due to a patchwork of tax-subsidized employer-sponsored plans and programs that fill gaps between them.

The system creates perverse incentives and inefficient cross-subsidies, burdens patients and providers with paperwork, and disrupts the continuity of care. Faced with political backlash, lawmakers have chosen not to reform the system, instead opting to add patchwork systems. Obamacare's design aimed to move the uninsured into exchange policies or Medicaid without upsetting existing plans.

Key Takeaways:

  • The Affordable Care Act marketplaces are experiencing a 26 percent average increase in premiums, affecting millions of families.
  • 22 million people rely on government subsidies for their coverage, and a planned expiration of pandemic tax credits could see their monthly payments more than double.
  • The Congressional Budget Office and Joint Committee on Taxation estimate that extending these subsidies would cost $350 billion over the next 10 years.
  • The US healthcare system is complex and costly due to a patchwork of tax-subsidized employer-sponsored plans and programs.
  • The current system creates perverse incentives, inefficient cross-subsidies, overwhelming paperwork, and disrupts the continuity of care.
  • The ACA did not achieve its goal of enrolling 21 million people in exchange policies; the actual number was 12.7 million in 2016.
  • The mandate was effectively repealed in 2017, but it did not have a significant impact on enrollments.
  • Democrats boosted subsidies, including offering them to families making 400 percent of the federal poverty line, under the guise of pandemic exigencies.

Statistics:

  • 24 million people are currently enrolled in Affordable Care Act plans, with 22 million relying on government subsidies.
  • The average premium increase for health insurers is 26 percent.
  • If pandemic tax credits expire, monthly payments for subsidized enrollees would more than double.
  • The Congressional Budget Office estimates the cost of extending subsidies at $350 billion over the next 10 years.
  • The national debt is $38 trillion and growing.
  • The ACA mandate was ineffective in achieving its goal of enrolling 21 million people in exchange policies; the actual number was 12.7 million in 2016.

Sources:

  • Editorial Board, Millions of families face sticker shock this weekend as open enrollment begins.
  • KFF estimates that pandemic tax credits would lead to a more than doubling of monthly payments for subsidized enrollees.
  • Congressional Budget Office and Joint Committee on Taxation estimate that extending subsidies would cost $350 billion over the next 10 years.
  • Editorial Board, The likeliest outcome is some kind of compromise that lets a broken system stagger on, in a permanent state of temporary crises.