Enhanced Obamacare Subsidies Remain a 'Gift' That Keeps on Taking
The Congressional Budget Office (CBO) is projecting that some 2.2 million people will become uninsured in 2026 if the enhanced premium subsidies that Democrats green-lit for exchange coverage expire as scheduled at the end of next year.
Eventually, the CBO says, the end of those subsidies will result in 3.8 million people, on average, going without coverage every year through 2034.
Democrats have seized on numbers like these to plead with Republicans to extend the subsidies. But the GOP should hold firm in its opposition.
The enhanced subsidies are little more than multibillion-dollar transfers from the federal Treasury to insurance companies.
Ending them would simply return us to Obamacare's pre-pandemic status quo.
The vast majority of exchange enrollees would see the amount in premiums that they're responsible for rise minimally.
The current round of enhanced Obamacare premium subsidies ensures that no American — even the very wealthy — must pay more than 8.5% of their income on health coverage.
For those earning between 100% and 150% of the federal poverty limit, the subsidies made exchange coverage effectively free.
These subsidies would not have been necessary if Obamacare's insurance market regulations hadn't effectively outlawed low-cost plans and sent premiums and deductibles soaring.
In 2013 — the year before the exchanges opened for business — average individual market premiums were $244. Next year, the average benchmark premium will be $497 -- more than double.
The Biden administration chose not to address the core drivers of this premium inflation.
Instead, it has used the enhanced subsidies to insulate consumers from these cost increases. In fact, the enhanced subsidies have given insurers cover to hike premiums in order to boost their own revenues.
After all, the higher the premium, the more the insurer claims in subsidies from the government. Earlier this year, the CBO projected that extending the subsidies would increase the federal budget deficit by $335 billion through 2034.
Contrast that eye-popping cost to federal taxpayers with what enrollees can expect to pay once the subsidies expire.
According to a report from Urban Institute, Americans earning between 100% and 150% of the federal poverty level — that is, between $31,200 and $46,800 for a family of four— would see their monthly premiums rise from zero dollars to just over $32 per person, on average.
This group currently accounts for more than half of federal exchange enrollees.
Do the math, and these folks will be asked to devote roughly 3% of their income toward premiums, with taxpayers picking up the rest. It's hard to see how 3% of income represents a hardship.
For families of four earning between 200% and 250% of the federal poverty level — that is, between $62,400 and $78,000 in 2024 — monthly premiums would increase by a little less than $48 per person, on average.
As Daniel Cruz and Greg Fann of the Paragon Institute asked, "Do we really believe millions of Americans with high-cost chronic conditions will go uninsured due to a $30 to $45 increase in monthly premiums?"
The average household spent more than $327 a month eating out in 2023.
The increase in the number of uninsured projected by the CBO this month mainly shows just how little Americans value the coverage sold on the exchanges.
Many people would rather go without coverage that confines them to narrow networks and saddles them with high deductibles and out-of-pocket costs than spend a few dozen bucks more a month on an exchange plan.
Once the enhanced subsidies expire and Americans are responsible for spending their own money, perhaps they'll demand that Washington relax the regulations and mandates that have sent premiums into the stratosphere.
Until that happens, they'll be stuck with a system that rewards insurers for keeping premiums high and deprives patients of high-quality coverage optionsat — astounding cost to taxpayers.
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 Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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