Earlier this year I purchased health insurance on the Obamacare exchange in Washington, D.C. While I knew prices would be high, they were still something of a shock. And now congressional Democrats, with the laughably named “Inflation Reduction Act,” are poised to make it worse.
I pay a premium of $750 a month for my exchange plan. Even with a subsidy, it is over $500. It also has a deductible of $4,000. Back in the day, the political left would have called that “barely insurance.” These days, though, there are almost no leftists extolling the virtues of the Obamacare exchanges, probably because there are none.
President Obama promised Obamacare would save the average family about $2,500 in health care costs. Presumably, the resulting drop in health insurance costs would reduce the amount of subsidies needed for people purchasing coverage on the exchange.
None of that has happened. In 2014, the first year of the exchanges, the average premium was $353. By 2019 that had risen 58 percent, to $558. Over the last five years, the average subsidy jumped from $383 to $524, an increase of 37 percent.
In March 2021, Congress passed President Joe Biden’s “American Rescue Plan” that increased the amount of subsidies by $36 billion through 2022. The Inflation Reduction Act will extend the increase through 2025 at a cost of $55.6 billion.
Subsidies are one reason the cost of health coverage has risen so precipitously. The subsidies increase demand which causes prices to go up.
A subsidy is determined by taking the second-lowest-cost silver plan on an exchange, known as a “benchmark plan,” and subtracting from that the amount of income that Obamacare requires a person to spend on an exchange plan, known as an “expected contribution.”
A 30-year-old man living in D.C. making 250 percent of the federal poverty level in 2021 would have a monthly income of $2,683. His expected contribution was 8.29 percent, or about $220 per month. The benchmark plan in D.C. would cost him about $335 per month, netting a subsidy of $115, which he could put toward any plan on the exchange.
The American Rescue Plan increased subsidies by reducing the expected contribution. Now the amount that a 30-year-old must pay is only 4 percent of his income, or $106 per month. That increases his monthly subsidy to $221.
In the last three years prices on the exchanges had begun to stabilize as a result of regulatory changes the Trump administration put in place. Not surprisingly, the Biden administration repealed those changes last year.
That, combined with the increase in subsidies, is causing prices to rise again. A recent study of exchanges in 13 states and D.C. found that premiums will rise by about 10 percent in 2023.
What’s most insidious is that this sets the stage for a government-run, single-payer system. There will be a growing constituency for such a system as subsidies increase and people on the exchanges become more dependent on the government. And it will enable the left to make the effective, albeit dishonest, argument that the rising price of insurance shows that markets don’t work for health coverage.
Biden and the Democrats think that the way to combat skyrocketing inflation is with more government spending. Apparently, they believe the same about health insurance.