Big insurers are beginning to panic. At the end of this year, the generous COVID-era taxpayer subsidies they’ve enjoyed on coverage sold through Obamacare’s exchanges will expire.
Good. The subsidies represent billions of dollars in corporate welfare for insurance companies — and obscure how premiums have surged under Obamacare.
The enhanced subsidies are a product of the 2022 Inflation Reduction Act. They ensure that no one who buys insurance on an Obamacare exchange pays more than 8.5 percent of their income on premiums. The subsidies cover a steadily increasing share of premiums as income declines below four times the poverty level — $128,600 for a family of four. Those who make less than 150 percent of poverty — $48,225 for a family of four — qualify for premium-free coverage.
Unfortunately, “free” is another way of saying taxpayers are on the hook for more and bigger insurance premiums.
That suits insurers fine. They’re happy to expand their business at the public’s expense.
Expanded subsidies have also concealed that premiums have been ballooning. The cost of exchange coverage rose 50 percent faster than that of employer-sponsored coverage between 2014, the first year that exchange coverage was in force, and 2023. This year, the average monthly benchmark silver premium is $497. That figure can be substantially higher for more comprehensive coverage.
It’s no surprise that many progressives want the expanded subsidies and enhanced tax credits to carry on indefinitely. After all, the ultimate goal of many is “Medicare for all” or some other version of a single-payer, nationalized system. The more people who become dependent on the government, the better.
According to the Congressional Budget Office, making the enhanced subsidies permanent would cost $335 billion over the next decade. That’s not an expense we can afford as the national debt soars toward $29 trillion.
It’s also worth noting that a sizable share of spending on exchange subsidies has gone to people who have underreported their income to qualify for free coverage, according to a recent study from the Paragon Institute. Making the subsidies permanent would encourage more fraud.
It would further displace employer-sponsored coverage, too. The Congressional Budget Office estimates that 3.5 million fewer Americans would have policies through work if the exchange subsidies are made permanent, primarily because of “a reduction in offers of employment-based coverage.”
Essentially, companies would stop covering their employees and let taxpayers pick up the tab.
That’s too bad for patients because the Obamacare plans also leave a lot to be desired. Typically, provider networks are limited, and going out-of-network is very expensive. That often leads patients to delay care altogether.
One study found that 11 percent of patients enrolled in Obamacare plans have skipped or postponed care — more than double the share of those enrolled in private, employer-sponsored coverage.
The big winners from a permanent extension of the generous subsidies would be insurance companies. Since enrollees don’t see the actual cost of their coverage, insurers can raise premiums without much scrutiny. The higher the premium, the more the insurer collects in taxpayer subsidies.
It’s no surprise that insurers are lobbying hard for an extension. Centene’s CEO indicated that it could lose 30 percent of its Obamacare enrollees if the tax credits are allowed to expire. That’s a lot of taxpayer money at risk for the insurer.
It’s time to boot insurers off this gravy train. On his first day in office, President Trump reversed policies that would have spent more money on outdated pandemic programs. He can continue in that vein by resisting pressure to extend wasteful Obamacare subsidies beyond the end of this year.