The election of Donald Trump — who promised voters that he would if elected “repeal and replace disastrous Obamacare” — has put the future of President Obama’s health law in jeopardy.
But “repeal-and-replace” cannot happen until after the inauguration on January 20. And that means that the millions of Americans currently shopping for health plans for next year on Obamacare’s exchanges will have to deal with huge premium hikes — at least, until open enrollment ends on January 31.
Premiums in 2017 will jump an average of 22 percent – giving lie to the Affordable Care Act’s eponymous promise.
But according to President Obama, these staggering rate increases are nothing to worry about. “Remember, these premium increases won’t impact most of the people who are buying insurance through the marketplace,” he said at a recent rally, “because even when premiums go up, the tax credits go up to offset the increases.”
That taxpayers are covering these hikes is no excuse for them. Moreover, the president’s explanation ignores the fact that many exchange shoppers will have to cover additional new costs out of pocket.
The president’s dodge is based on a Department of Health and Human Services report from this summer. That study looked at a “hypothetical scenario” where premiums spiked by double digits. It concluded that the majority of exchange customers would still be able to purchase insurance for less than $75 a month, thanks to tax credits provided by the law.
That scenario, of course, isn’t so hypothetical anymore. Exchange premiums are up 56 percent in Minnesota, 40 percent in North Carolina, 53 percent in Pennsylvania, and 116 percent in Arizona.
The Americans who receive tax credits may not care about those premium hikes. But taxpayers should. Next year, they’ll be spending more in subsidies for every person covered than Obamacare’s architects originally promised.
This year, the average subsidy nationally was $291 per month. That amount is projected to jump an extra $73 per month, or about $870 a year per person.
Even before the recent premium increases, federal spending on insurance subsidies was exploding. The non-partisan Congressional Budget Office found that despite enrollment shortfalls, exchange subsidies this year overran earlier estimates by $18 billion — for a total cost of $56 billion. That’s more than the federal government spends on the nation’s highways.
But the feds can’t cover everyone’s premiums forever. In fact, Obamacare caps the total amount in subsidies the government can pay out each year.
If the Affordable Care Act is still in place, beginning in 2019, and exchange subsidy spending exceeds 0.504 percent of GDP, the government will require some marketplace enrollees to cover a larger share of their premiums. And with subsidies growing as fast as they are, that cap is likely to be breached earlier than expected.
Not that subsidized exchange enrollees have it easy right now. They may be insulated from next year’s premium shocks, but they are still getting hit with sky-high deductibles — the amount individuals must pay out-of-pocket before their insurer starts covering their health expenses.
In 2017, the average deductible for individuals on the lowest-priced bronze exchange plan will cross the $6,000 threshold for the first time. For families enrolled in these plans — the least generous, in terms of benefits — the average deductible will be about $12,000.
What help are premium subsidies to a low-income family paying $12,000 a year before their coverage even kicks in?
It’s no surprise that many exchange customers are finding their plans “all but useless,” as the New York Times put it. In many cases, Americans have had to drop their coverage or delay medical treatment to keep their finances afloat.
The Obama administration’s response? More hand-waving about the need for enrollees to “shop around” on the exchanges for the right plan.
That’s easier said than done, with so many insurers fleeing the marketplaces. Exchanges in five states feature only a single insurer in 2017. Marketplaces in another nine states will have just two carriers.
Despite the president’s sunny rhetoric, federal subsidies are doing little to defray the extraordinary costs that exchange customers — and taxpayers — continue to shoulder under Obamacare. Instead of confronting these harsh realities, the Obama Administration would rather change the subject and hope nobody notices.
As the results of the latest presidential election make clear, Americans want to repeal and replace the ACA. They aren’t so easily fooled.