President Joe Biden recently signed the $1.9 trillion American Rescue Plan into law. With a stroke of his pen, he claimed to put “working people in this nation first. It’s not hyperbole; it’s a fact.”
A closer look at this so-called “rescue” package suggests otherwise. Democrats tucked two provisions into the law that will force middle-class taxpayers to cover the health insurance costs of the well-to-do — and add more waste to our health care system in the process.
The first provision expands subsidies for health plans sold through Obamacare’s exchanges at an estimated cost to taxpayers of $34 billion.
Previously, anyone making four times the poverty rate — about $106,000 for a family of four — was ineligible for federal subsidies. Now, for the next two years, anyone who shops on the exchanges will pay no more than 8.5% of annual income in premiums. Taxpayers will pick up the rest.
These more generous subsidies will do little to ratchet down the uninsured rate. According to an analysis from the Congressional Budget Office, the expanded subsidies will only result in an additional 1.7 million people gaining coverage.
Perversely, these new subsidies will deliver thousands in taxpayer lucre to the wealthy. Consider a family of four that brings in $185,000 a year. Now, they’ll be eligible for nearly $3,000 a year in taxpayer assistance with their exchange premiums, according to ananalysis by Brian Blase of the Galen Institute.
In some parts of the country, households with more than $500,000 could receive government money to help cover their premiums.
Those probably aren’t the “working people” President Biden was referring to.
Another wasteful provision in the American Rescue Plan is its 100% subsidy for laid-off workers’ COBRA premiums. Previously, unemployed people could stay on their employer-sponsored health plans if they covered both the employer and employee shares of the premium, plus a 2% administrative fee.
From April 1 through Sept. 30, that jobless worker will pay nothing.
As with all government handouts, there’s no such thing as a free lunch. COBRA coverage is expensive. Average premiums for employer-sponsored health plans are nearly $1,750 a month for a family of four, according to the Kaiser Family Foundation.
The tab for taxpayers will approach $8 billion. In some cases, middle-class workers will pay for gold-plated COBRA coverage for laid-off workers who were making six-figure salaries before the pandemic hit.
There are far less wasteful ways for people who have lost their insurance over the past year to regain coverage. In many states, people can buy short-term plans specifically designed for these sorts of insurance gaps. Such plans often go for less than $100 a month.
Some states have banned short-term plans, saying that they’re “junk insurance.” The Biden administration and newly confirmed Health and Human Service Secretary Xavier Becerra will likely try to take such bans nationwide.
Laid-off workers are also eligible for subsidized insurance through Obamacare. Anyone who has a qualifying “life event,” like losing a job, is eligible to sign up for an exchange plan within 60 days of that event. The Biden administration has also opened up a special enrollment period through Aug. 15 for anyone to purchase exchange coverage, even if they lost their job more than 60 days ago.
Democrats claim that the more generous exchange and COBRA subsidies are temporary. But Congress will face enormous pressure to extend these federal payouts.
Put simply, the American Rescue Plan isn’t a means to “building back better.” It simply builds more government waste and inefficiency into our health care system.