by Katherine Restrepo
Director of Health Care Policy, John Locke Foundation
On November 1, round three of Obamacare enrollment begins. Americans who do not have access to employer-sponsored health insurance, are self-employed, or have been dumped into the individual marketplace by their employers will be given the opportunity to sign up for or renew their government-knows-best health insurance plan.
Real Clear Politics gives us a glance at premium percentage differences from last year to this year’s sign-up season, with North Carolina facing a 23 percent average increase.
Don’t forget that these percentage increases reflect the underlying cost of plans. Depending on annual household income, an individual or family can qualify for financial assistance, offsetting the total out-of-pocket cost of coverage. But the subsidies really only make these plans affordable for those living close to the poverty line — which is why a good chunk of the low- to middle-income population is not signing up for coverage. Department of Health and Human Services (DHHS) Secretary Sylvia Mathews Burwell has been voicing her concerns about the situation. The chart below provided by Avalere Health communicates the message pretty clearly:
The key takeaway here is that the combination of government price fixing and means-tested subsidies only makes health insurance more expensive for a lot of people. For more detail on the economics behind this, you can read my previous research and writings here and here. Such market distortions also explain why the Obama Administration recently reduced original Congressional Budget Office (CBO) enrollment projections for 2016 from 20 million to 10 million:
To address the affordability problem, the Obama Administration has decided to leverage an advertising campaign to entice the opt-outs into the exchanges. But if people simply can’t afford the choice of plans offered, what’s the point? One ad that did grab my attention on healthcare.gov’s Facebook page says,"Looking for affordable coverage? Most people find plans for under $75 a month with financial help." Before Obamacare’s exchanges came into the picture, comparable premiums for catastrophic plans were available to low-cost "invincibles" around my age — subsidies not included. Nowadays, it’s pretty common for someone who doesn’t qualify for subsidies to be paying upward of $200 a month for the most inexpensive catastrophic and bronze plans in the non-group marketplace.
So, how can health insurance be affordable and more accessible for more Americans? A large part of the answer involves reducing regulation to make medical care more affordable, like repealing Certificate of Need, permitting mid-level providers to practice within their full scope of authority, passing right-to-try laws, reducing the number of health insurance benefit mandates, or changing the federal tax code to allow the direct primary care market to expand. On the insurance side of things, perhaps it would be most politically feasible to cap the tax-exclusion on employer-sponsored health insurance. Revenue from any amount spent above the cap could help finance universal, refundable tax credits for people to use towards insurance. Federal funds can then be poured into state-administered high-risk pools to assist those with expensive medical conditions. In the meantime, the remainder of the insurance market will have room to offer products that will provide more value to policyholders.
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