Brian Blase in The Wall Street Journal for “An Alternative to Expanded ObamaCare Subsidies”

Yesterday, the Wall Street Journal published my op-ed “An Alternative to Expanded ObamaCare Subsidies,” offering a sensible alternative to the unwise Affordable Care Act (ACA) subsidy expansion contained in the Democratic reconciliation bill. The expanded subsidies, enacted in the American Rescue Plan (ARP) Act, expire after 2022. This presents Democrats with a political problem since enrollees would face premium increases right before the midterm elections. My proposal recognizes the political problem that Democrats have as well as the numerous problems with extending the expanded subsidies. I outlined the solution in my piece in the Wall Street Journal:

Fortunately, there is a responsible solution to Democrats’ political problem that keeps the worst effects of the expansion at bay: Permit existing enrollees to keep the enhanced subsidy, but prevent new enrollees from receiving it.

I explained why the expanded ACA subsidies are fundamentally problematic:  

The expansion has also lined the pockets of insurance companies at taxpayers’ expense. The original ObamaCare subsidies gave enormous pricing power to insurers, which have seen their profits soar. The law limited how much of household income families would have to pay for premiums for exchange plans regardless of the total premium amount. Insurers could jack up prices, knowing that customers would be insensitive to cost changes because subsidies—meaning taxpayers—would make up the difference. The typical exchange enrollee pays only about 15% of premiums now, with taxpayers picking up the other 85% or so. All this is inflationary and the American Recovery Plan’s ObamaCare provisions made things even worse by increasing the subsidy size and expanding the pool of those who qualify.
 
That inflationary effect will likely get much worse if the reconciliation bill’s extension passes. Without an income cap, most people without employer coverage can qualify for the subsidized plans, and employers have an economic incentive to drop coverage. The tax benefit that companies receive from providing health care plans to employees is much smaller than that associated with ObamaCare. Employers can save money if they decline to offer coverage to workers and instead put those funds toward wages, knowing staff can obtain subsidized exchange plans.

These existing and future problems can be resolved:

But all of this can be avoided if Democrats instead simply grandfather in existing enrollees and leave it at that. About half of all exchange enrollees have coverage for less than a year, largely because they get jobs and then leave the program for employer-provided insurance, which is typically accepted by more doctors and hospitals. This means there’s a lot of churn off the program and that adopting a grandfathering policy over an outright extension of the expanded subsidies could save at least $30 billion. That change would frustrate progressive organizations and insurers that wanted the extra cash, but that’s not a large political cost.

Congress should adopt an amendment implementing this sensible solution. It wouldn’t fix everything in the reconciliation package, which is filled with bad policies.  But such an amendment would be one way to reduce the reconciliation bill’s cost, inflationary effect, and loss of employer coverage.
 
For a more fulsome discussion of the reconciliation bill’s health care provisions, you can review my policy brief coauthored with Dr. Joel Zinberg and Drew Keyes.

All the best,
 
Brian Blase
President
Paragon Health Institute

© Paragon Health Institute 2022. All Rights Reserved.

Paragon Health Institute (PHI) is a non-partisan, not-for-profit policy research institute. Any views, beliefs, or opinions expressed by PHI’s Public Advisors are those of its Advisors and do not necessarily reflect the official policies or positions of PHI or its employees. Any views, beliefs, or opinions expressed by PHI or its employees belong solely to PHI and do not necessarily reflect those of PHI’s Public Advisors.