Wall Street Journal: Let the Obamacare Enhanced Premium Subsidies Expire

Wall Street Journal: Let the Obamacare Enhanced Premium Subsidies Expire

WASHINGTON, D.C.-In an op-ed published by the Wall Street Journal, Ge Bai, a professor of accounting and health policy at Johns Hopkins University, argues against Democrats big-government push to extend wasteful, COVID-era premium subsidies for Obamacare plans, set to cost taxpayers $400 billion over the next decade. Congress should let these subsidies expire-just as lawmakers originally designed--and rein in waste, fraud, and abuse to protect taxpayers.

From the Wall Street Journal:

Affordable Care Act premium subsidies were originally available only to people with incomes up to 400% of the federal poverty level. In 2025 that's approximately $62,600 for a single person and $128,600 for a family of four. The Treasury Department transfers taxpayer funds directly to insurers to cap enrollees' premium contributions at a certain percentage of their income.

In March 2021, at the height of the pandemic, the American Rescue Plan temporarily extended premium subsidy eligibility to those with incomes above 400% of the federal poverty level, allowing people at any income level to receive subsidies originally intended for those with modest means. In August 2022, the Inflation Reduction Act extended those subsidies through December 2025.

Letting the subsidies go away merely restores the original Obamacare premium-support structure. That preserves access to subsidies for low-income populations, who already comprise 93% of the 24 million who get health insurance through the Obamacare exchanges. The expiration will affect roughly 1.6 million current enrollees. These are the people with incomes above 400% of the federal poverty level who have been receiving subsidies that cap their premium contributions at 8.5% of income. A family of four in Arizona making $600,000, a married couple in West Virginia making $580,000, and a single individual in Vermont making $180,000 all qualify for subsidies.

Simply put, since 2021, Congress has been bribing higher-income Americans to purchase expensive Obamacare plans by hiding the plans' true price tags using taxpayer dollars. Premiums have increased by nearly 80% since 2014 and more than doubled since 2011. They are projected to rise another 15% to 20% next year. Despite record taxpayer spending on premium subsidies-exceeding $130 billion annually-enrollees still pay average deductibles of $5,000 and out-of-pocket maximums of $21,000 while 1 in 5 of their medical claims are denied. Without Covid-era premium subsidies, these plans would hold little appeal to consumers.

Why are Obamacare plans so unaffordable? The inflationary provisions of the Affordable Care Act-such as the medical loss ratio, mandated "essential" benefits, community rating and premium subsidies-have inhibited insurers from offering affordable and flexible options. The law's regulatory burdens on providers have also fueled consolidation and driven up service prices. These structural flaws have long been recognized and are a major reason why the ACA, the American Rescue Plan and the Inflation Reduction Act have all failed to gain bipartisan support.

BACKGROUND

Since 2014, premiums have jumped nearly 80 percent, with more hikes expected despite $130 billion in annual subsidies. Yet, enrollees still face high deductibles ($5,000 on average) and denied claims (1 in 5). Covid-era subsidies hide these costs and prop-up unaffordable plans.

Obamacare's rules and regulatory burdens have long driven up costs while limiting quality insurance options. Even after these subsidies expire:

• Low- and moderate-income Americans, roughly 93 percent of enrollees, will still have access to generous subsidies.
• Enrollees will still, on average, have 90 percent of their premiums covered by the federal government.
• Most enrollees will pay between $3 and $12 a week for coverage.

Continuing these subsidies wastes taxpayer money, subsidizes the wealthy, invites fraud, and distracts from Congress's work on actually affordable alternatives. It's time for Congress to end this fiscal recklessness and let the market work.