A LARGE SPENDING bill moving through Congress proposes to permanently expand Affordable Care Act (ACA) subsidies, also known as Obamacare subsidies, to make coverage “more affordable.” While the goal to improve affordability is laudable, the nonpartisan Congressional Budget Office recently confirmed the proposal carries massive unintended consequences for those with pre-existing conditions. When looking at all of the health provisions in the bill, three million Americans would lose their private employer insurance. These folks would have no choice to stay as those plans would be dropped.
As Congress considers ways to trim the massive spending bill down, these health coverage provisions should be the first to go. They’re simply not ready for prime time.
The fact is that losing job-based coverage will impose a substantial burden. That’s because, generally, private employer coverage is better for those with pre-existing conditions than ACA exchange plans. Instead, ACA plans tend to limit choice to only certain doctors, and patients have to pay more before the insurance kicks in.
Let’s give some specifics. The most popular health plan employers offer, according to the Kaiser Family Foundation, is something called a Preferred Provider Organization. These plans provide the broadest networks and allow patients to see specialists without a referral, allowing someone with a pre-existing condition to find the right doctor.
As open enrollment for 2022 ACA exchange coverage began on Nov. 1, these plans, unfortunately, were not available to residents of New Hampshire on HealthCare.gov.
Plans that protect patients from large out-of-pocket exposure are also not available. Each plan sets a maximum a patient would have to pay in a year to see in-network providers. They call this the maximum out-of-pocket (MOOP). This does not include the cost of premiums. The lowest MOOP available in New Hampshire for 2022 coverage is $6,300. By contrast, Kaiser finds that the MOOP for employer coverage is often less than $2,000 and averages around $4,000. Thus, passing the spending bill would mean those that live in New Hampshire with pre-existing conditions, and everyone else who has their employer coverage canceled, will be far worse off than before. They’ll be left with fewer provider options, and higher costs to see them.
Imagine how this impacts a 40-year-old woman with diabetes who gets coverage at work. She sees her doctor regularly to properly manage her diabetes, and her medications mean that she maxes out her insurance every year. She’ll likely pay an additional $2,300, if not $4,300 every year out of her wallet under the new bill. On top of that added expense, her longtime trusted specialists may not be available in her narrower network, forcing her to switch to new doctors. If she wanted to stay with her current doctors, she may have to pay for that care herself.
This disruption doesn’t have to happen, so long as Congress removes this section from the final bill. At the end of the day, the result of these new subsidies is an additional $210 billion of deficit spending that mainly lines the pockets of insurance companies.
After Obamacare kicked off in 2014, monthly premiums here jumped from $405 in 2014 to $613 in 2018 — a 51 percent increase in just four years.
The design of the ACA subsidies fueled these premium hikes because the subsidies go up dollar-for-dollar with premium increases. This keeps premiums stable for subsidized enrollees but essentially gives insurance companies a blank check to keep increasing costs. Put another way, insurers get rewarded by raising premiums.
This is clearly a broken system. Rushing to expand ACA subsidies without making any meaningful reforms will only lead to higher costs.
What should Congress do instead? Three things.
First, Congress should switch ACA subsidies to a fixed amount based on what a patient can afford on their income, not on whatever amount the insurer wants.
Second, Congress should create a reinsurance program that funds a portion of high-cost claims. This would function similar to the recently launched New Hampshire program enacted by the state in 2019 and approved by the Trump administration in 2020, which lowered premiums by 13.9 percent this year.
Finally, Congress should give insurers more flexibility to design health plans for those with pre-existing conditions.
These policies work to deliver a more competitive, affordable market without forcing patients off job-based insurance. It’s time for Democrats and Republicans to begin working together.