It’s beginning to look a lot like . . . open enrollment. On December 15, the Affordable Care Act’s sign-up period will officially close for coverage that takes effect January 1.
The Biden administration has already begun crowing about how many people have signed up. In mid-November, Health and Human Services Secretary Xavier Becerra boasted that 3.4 million people had enrolled between November 1 and 19. “This may be a very good Christmas for a lot of Americans,” he said.
Days earlier, President Biden announced that enrollment was up 40% compared to last year, and that a majority of Americans could get coverage for “$10 a month or less.”
But exchange plans are only affordable because Democrats have earmarked billions of dollars in new spending to cover most enrollees’ premiums. Rather than address the underlying problems with his old boss’s signature healthcare law, President Biden and his team have given insurers a direct line to the federal treasury.
It’s an expensive misstep, and future generations will be stuck with the bill.
Some 13.8 million people signed up for Obamacare in 2021, a 21% increase from the previous year. Last year’s enrollment surge—and this year’s projected increase—can be explained in part by the American Rescue Plan’s subsidy expansion. Originally set to lapse at the end of this year, the Inflation Reduction Act expanded these subsidies through the end of 2025.
The plan didn’t just make Obamacare subsidies more generous. It also extended them to people who make more than 400% of the poverty level—$111,000 for a family of four this year. Altogether, these expanded subsidies cost $30 billion in 2022. The Congressional Budget Office estimates they’d cost $248 billion over the next decade, if Congress extends them beyond 2025.
Advocates will tell you this is money well-spent, since premiums would have been 53% higher this year without them.
That’s right. It takes an additional $30 billion a year in taxpayer money to ensure a program with the word “Affordable” in its name is actually affordable.
The new spending doesn’t end there. The Biden administration is also giving publicly funded coverage to people whom Obamacare explicitly cut out of its subsidy regime.
The law stipulates that people offered coverage through work that is “unaffordable”—where their share of the premium is more than 9.83% of their income—can get subsidized coverage through the exchanges. But Obamacare determines affordability by looking at the cost of an employer-sponsored plan for an individual. Last year, the average employee share of the premium for self-only coverage was $1,327 annually; for family coverage, it was $6,106.
If the employee’s share of the premium for a family plan exceeds that 9.83% figure, too bad—a worker’s dependents can’t claim subsidized exchange coverage.
In October, the Biden administration “fixed’ this “family glitch” by announcing it would instead consider the cost of family coverage when determining whether an employer-sponsored plan is affordable. The change will essentially transition people with private coverage onto taxpayer-funded exchange coverage.
According to the Kaiser Family Foundation, roughly 90% of the 5.1 million people currently affected by this glitch are already covered by private plans. The cost of “fixing” it is roughly $45 billion over a decade, according to the CBO.
The White House estimates that only 200,000 people will gain coverage from this rule. According to Paragon Health Institute president Brian Blase, that means the federal government will spend roughly $225,000 over the next 10 years for each additional person who receives coverage.
All these subsidies are just driving up the cost of coverage. According to data from the Centers for Medicare and Medicaid Services, the average individual market premium was just $242 a month in 2013—the year before Obamacare’s exchanges opened. By 2019, the average premium was $589 a month.
Data from the Kaiser Family Foundation shows that the average deductible for a mid-level silver plan was $4,753 in 2022—up from $2,425 in 2014.
Bigger federal subsidies don’t solve this long-term problem. If anything, they make it worse.
By insulating enrollees from the true cost of their health coverage, Obamacare’s subsidies enable insurers to hike premiums without provoking outrage. Since the government is footing so much of the bill, insurers have no incentive to push back on healthcare providers who want higher reimbursements. Insurers can simply raise premiums again and again, continuing the cycle of runaway costs.
Democrats’ response to every health policy problem is to throw more money at it. That approach only sets up future generations for a frightening financial reckoning. And that may be the Democrats’ goal—to build the case for a federal takeover of the health insurance system à la Medicare for All.