Starting today, uninsured Americans will be able to sign up for health plans through the federal HealthCare.gov exchange during a new special enrollment period through May 15. Created by one of President Biden’s first executive orders, it’s intended to help “restore and strengthen Americans’ access to quality, affordable health care.”
That sounds reasonable. But it misunderstands why these folks are uninsured in the first place. The coverage on Obamacare’s exchanges is too costly and of poor quality. Opening the exchanges for three more months won’t bring premiums down, reduce deductibles, or make the plans’ provider networks more robust. Only relaxing the regulations at the heart of Obamacare can do those things.
Just look at the difference in individual market premiums pre- and post-Obamacare. In 2013, the year before the law’s many mandates took effect, average monthly premiums in the more than three dozen states using HealthCare.gov were $232. Four years later, they were $476. That’s an increase of 105%.
It’s no wonder nearly three-quarters of uninsured Americans have named the high cost of health plans as their reason for going without coverage, according to recent polling from the Kaiser Family Foundation.
Obamacare’s strict rules and regulations are responsible for these premium spikes. The law prohibits insurers from charging older people more than three times what they charge younger ones. Yet older Americans’ claims costs are higher than that multiple. Those 55 and older account for more than half of all health spending. Patients between 19 and 34 years of age are responsible for just 11% of spending.
Complying with these rules has forced insurers to raise premiums for younger people to compensate for the risks associated with insuring older customers.
The law also requires insurance policies to cover 10 essential health benefits, regardless of whether patients want or need them. Each additional mandated benefit raises the cost of coverage.
As a result, exchange plans have become unaffordable for a growing number of Americans, particularly those who don’t qualify for the law’s premium tax credits. Between 2016 and 2019, 2.8 million patients who did not receive federal subsidies for coverage exited the exchanges.
The narrow provider networks offered by many marketplace plans make them unattractive even for those who can afford them. In 2019, nearly three-quarters of exchange policies featured restrictive networks.
Then there are the exchange plans’ deductibles, which have marched upward. According to a 2020 report from the Centers for Medicare and Medicaid Services, median deductibles for individual bronze plans, the least comprehensive on the exchanges, exceeded $6,700 in 2020. That’s an increase of 12% over the 2016 figure. The median mid-level silver plan deductible was $4,600 last year, 33% more than in 2016.
Many people don’t find exchange coverage worth the cost, if they have to shell out thousands of dollars before they receive a dime from their policy. Consider a family of four picking the average lowest-cost bronze plan, which had monthly premiums of $1,077 last year. Tack on the median deductible for a bronze family plan, which is “at least two times the individual deductible,” per the CMS report, and our hypothetical family is looking at perhaps $25,000 in spending before their insurance kicks in.
In light of these high prices and meager provider options, it’s no wonder so many uninsured Americans don’t consider purchasing an exchange plan. According to a recent study from the Robert Wood Johnson Foundation and the Urban Institute, half of uninsured Americans who had heard of marketplace plans didn’t explore the option to sign up for coverage. Seventy percent cited cost as the primary reason why.
President Biden isn’t oblivious to these realities. His $1.9 trillion stimulus proposal, which House Democrats recently green-lit, includes a significant expansion of premium subsidies for marketplace plans. No one would have to pay more than 8.5% of their income for coverage. The federal government would cover a greater share of premiums for people of modest means.
Under current law, people with incomes between 100% and 400% of the poverty level receive premium tax credits on a sliding scale that caps their premiums at 2% of income at the lower end and just under 10% at the top end.
These giveaways wouldn’t be necessary if Biden were willing to tackle Obamacare’s systemic problems. Short of that, superficial changes to the enrollment period, $50 million in new funding for advertising and outreach to the uninsured, and more generous government handouts will simply perpetuate a status quo that fails American patients.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.