Bipartisan Agreement on the Failure of the ACA

Yesterday, I testified at a Senate Finance Committee hearing on making health care affordable. At the hearing, Republicans and Democrats agreed that health care costs too much and that the Affordable Care Act (ACA) has not lived up to its name. As Senator Bill Cassidy put it, “I think there’s remarkable agreement between Democrats and Republicans. Obamacare failed to give access to all Americans to health care and Obamacare failed to control health care costs, and the kind of comments that have been made back and forth make that clear.”

In my written testimony, I laid out the major problems with the ACA and with proposals that would entrench a deeply flawed structure by extending COVID-era subsidy add-ons to health insurance companies. I highlighted nine reforms that Congress could enact to reduce cost pressures and provide Americans with greater control over their health care: 1) a CSR appropriation, 2) the HSA Option, 3) expanded HSA-qualified plans, 4) reforms to the ACA subsidies, 5) expanded short-term plans, 6) expanded Association Health Plans, 7) expanded ICHRAs, 8) expanded price transparency, and 9) expanded catastrophic plans.

In today’s newsletter, I provide my oral remarks before the Committee as well as an excerpt from the testimony that discusses my family’s experience of being covered through a short-term plan for a year and then for an ACA plan for the past four years.

My opening statement

Chairman Crapo, Ranking Member Wyden, and Members of the Committee:

Thank you for the opportunity to testify today.

The ACA promised affordable, high-quality insurance. It failed.

Millions of families lost their health plans and doctors. Premiums and deductibles soared. And networks narrowed.

The law entrenched an inefficient, insurance-dominated health sector with massive subsidies flowing straight from the Treasury to insurance companies. A new Joint Economic Committee report found that the main winners from the subsidies are health insurers whose stock prices have soared because of the ACA.

The ACA’s regulations increased premiums—nearly 50 percent in just the first year. Subsidies were needed so people could afford the more expensive coverage. The underlying regulatory and subsidy structure leads to ever-escalating premiums and prices. Since 2014, ACA plan premiums have increased twice as fast as employer plan premiums.

My family has an ACA plan. We just received notice that our premium will be $33,000 for a plan with a $14,000 deductible.

Higher premiums created pressure for still more subsidies. More subsidies lock in a high-cost system and permit large insurers and hospital systems to remain inefficient. If Congress wants to make health care more affordable, it must reform the structure itself, not throw more good taxpayer money after bad.

The ACA’s subsidies are ill-designed and inflationary. The enrollee’s share of the premium is capped, regardless of the total premium. When enrollees pay only a small slice of the premium or no premium at all, insurers face almost no price discipline. Insurers can raise premiums knowing that taxpayers will absorb almost all the increase.

The ACA regulations drive higher costs. For example, under the medical loss ratio, insurers must spend a minimum share of premium revenue on medical claims. In other words, to increase profits, insurers must increase premiums.

The ACA’s essential health benefit mandates require plans to cover the same set of services, regardless of what consumers want or need. These rules increase premiums and wasteful spending.

COVID-era subsidy boosts resulted in fully subsidized coverage and led to massive fraud. In 2025, there are 6.4 million people enrolled in fully subsidized plans who are not eligible, costing $27 billion. Many of these enrollees were signed up without their knowledge or consent, victims of massive fraud schemes. Forty percent of fully subsidized enrollees used no medical services in 2024. Federal taxpayers sent more than $35 billion to insurers for people who did not use the plan a single time.

The ACA’s subsidy structure, particularly with the COVID add-ons, incentivizes small employers to drop coverage. The percentage of small employers offering a health plan has dropped by one-third since 2010.

The ACA also led some state and local governments to drop retiree health coverage, offloading that expense onto the federal taxpayer. The COVID credits, by lifting the subsidy cap at 4 times the federal poverty level, provide large federal subsidies to wealthy early retirees.

ACA premiums will rise next year because of underlying flaws with the program. The large underlying subsidies will largely cushion the premium increases for more than 93 percent of enrollees.

Most will pay less than $80 a month for a plan next year, with the federal taxpayer picking up 80 percent of the premium cost and a higher percentage for lower-income enrollees.

The Inflation Reduction Act set the COVID credits to expire after 2025. And they should end.

Extending temporary emergency subsidies would deepen a broken system instead of fixing it. The enhanced subsidies have supercharged fraud, benefited insurers more than patients, and increased taxpayer exposure.

In the near term, Congress should take three steps to help families.

First, appropriate the cost-sharing reduction payments. This would lower silver premiums by roughly 12 percent and deficits by $30 billion.

Second, give lower-income enrollees the option to take their CSR subsidy as an HSA contribution. Under an HSA option that Paragon developed, nearly seven in ten enrollees would be better off financially taking the HSA option, with average gains of about $1,500 a year. This is exactly what we should be doing: redirecting existing subsidies away from insurers and into accounts that patients control.

Third, Congress should expand more affordable and flexible coverage options for families and small employers—without new federal spending.

Thank you.

My Family’s Experience With the ACA

In January 2021, my wife and I moved our family to Florida. For the previous 18 months, we had been using temporary continuation of coverage (the analogue to COBRA for federal workers) following my service at the White House. Shortly after arriving, I explored enrolling in an ACA individual market plan. I called several major providers to ask whether they accepted ACA coverage. Most flatly said they did not—several even equated ACA plans with Medicaid, saying their practices did not participate in those narrow networks. Fortunately, the Trump administration had expanded access to short-term, limited-duration plans. The short-term plan option cost roughly one-third the premium of an ACA plan with a similar deductible and offered a broader network of physicians. With five children, it was an obvious decision for us, and the coverage worked well for our family.

When I launched the Paragon Health Institute, we offered an individual coverage health reimbursement arrangement (ICHRA) so employees could use tax-preferred employer contributions to purchase ACA-compliant plans that met their needs. In fact, in the fall of 2020 I had written a paper for the Galen Institute arguing that the best way to maximize consumer control was precisely this model: employers funding a bronze plan and contributing to an employee’s health savings account (HSA). That structure allows people to choose their plans while shifting more resources into HSAs—the most effective tool for empowering consumers to be cost-conscious purchasers of care. Beginning in November 2021, my family enrolled in an ACA-compliant individual market plan through Paragon’s ICHRA.

Since then, I have seen and experienced firsthand the steadily rising premiums, climbing deductibles, and increasingly narrow networks that now characterize the ACA individual market. Like millions of Americans, my family is paying both premiums and deductibles with almost no meaningful return. Even this year, when my daughter broke her arm, nearly all expenses fell below the deductible, leaving us responsible for the full cost. Our current plan’s premium is projected to increase to $33,000 next year, paired with a deductible of nearly $14,000. It is extraordinarily unlikely that my family will incur $47,000 in health costs next year—yet that is the financial exposure the ACA imposes. These trends underscore the deep structural flaws of the ACA.

For the first time, Paragon is seriously considering whether we can continue offering an ICHRA, because individual market plans have become so unattractive. Paragon employees do not receive ACA subsidies or COVID credits, as we offer an ICHRA that precludes employee eligibility for ACA subsidies. As of the date of this testimony, we still do not know what we will do about providing employee coverage next year. This is deeply discouraging. My hope was that ICHRAs would help strengthen the individual market by broadening the risk pool and bringing more private dollars into it. We need a vibrant individual market—both to offer options for people without affordable workplace coverage and to support a consumer-driven alternative to the employer system. Instead, ACA-driven premium and deductible inflation is pushing organizations such as mine to reconsider remaining in that market at all. Paragon will continue offering a health plan, but other firms in this position have decided to drop coverage or will drop coverage—a decision that will be easier if the COVID credits are extended.