Biden and congressional Democrats have included ACA fixes that some lawmakers have been calling for, but will the fixes work as intended? (Photo: Getty)
A new report from the Galen Institute strongly criticizes portions of the new $1.9 trillion COVID-19 relief bill being debated by Congress, saying that the health insurance expansion included in the bill will increase health care inflation and could do long-term damage to the employer-based insurance model in the U.S.
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"The proposed expansion recklessly boosts federal subsidies for health insurance in a way that exacerbates tax inequities, substantially replaces private spending with government spending, reduces incentives for work and productivity, and significantly adds to already unsustainable family and government health care expenditures," wrote the study's author, Brian Blase, PhD, a former top health care policy advisor to President Donald Trump.
A fix for the ACA?
The report looks at proposed changes to the Affordable Care Act, which are included in the Biden Administration's plan to provide COVID-relief to Americans. Biden and congressional Democrats have included ACA fixes that some lawmakers have been calling for, as Americans continue to struggle to afford health insurance.
These changes include an expansion of federally funded subsidies for enrollees, in order to make products on the ACA exchanges more affordable. Blase noted that the increased funding is greater for older and wealthier Americans.
Blase also said the increases in subsidies would be discriminatory. "The proposed PTC expansion will benefit men more than women," he noted in the report. "Since average income for men is $10,000 higher for men than women, and because this proposal provides greater benefits as incomes increase, it almost certainly benefits men more than women overall."
Supporters of the proposal say the expanded subsidies are intended to help the demographic groups who could not afford ACA plans, including relatively higher-income individuals who did not qualify for subsidies under the current rules, and were being priced out of the market by high premiums and deductibles.
In the past, Blase criticized the ACA for not helping higher-income Americans who needed health insurance. In a 2020 opinion piece for Forbes, he said the ACA had "largely failed," citing the shortfalls in coverage as one example.
"Giant subsidies are available for lower-income exchange enrollees, and they are, unsurprisingly, the only ones primarily enrolling. More than 70% of exchange enrollees have incomes below 250% of the federal poverty level ($31,900 for a single individual and $65,500 for a family-of-four). As premiums have skyrocketed, more than 4 million individuals who don't qualify for subsidies dropped out of the market between 2015 and 2018," he wrote.
The effect on employer-based insurance
In the report, Blase predicted that expanding subsidies will increase health care inflation, pushing up costs for both consumers and employers who sponsor insurance plans for employees. He added that the negative effects of the expanded subsidies would hit small employers the hardest.
"Millions of workers ultimately could lose their employer-based insurance," a statement released with the report noted. "Under the Democrats' subsidy expansion proposal, American businesses, particularly firms with fewer than 50 workers and those with lower-income and older workforces, would have large financial incentives to stop offering group health coverage. Start-up firms would have disincentives to offer group insurance."
The end result, the report said, would be that many Americans would switch to government-run health care. "Such a huge subsidy expansion would lead to millions, and potentially tens of millions, of people shifting from employer-sponsored insurance to the much more heavily subsidized exchange plans," the Galen statement said.
Such warnings were common when the ACA was originally debated. But Blase also provides a possible counterargument to the assumption that workers would flock to the ACA exchanges. In the new report, his calculations show that most of the ACA coverage increases came from Medicaid enrollment. The report said the individual market has only increased insurance coverage by 2 million people, compared to pre-ACA numbers. "Enrollment, on an annualized basis, has been stuck at only about 10 million people since 2015—60% below expectations," he wrote.
Whether the new expansions will make the old fears about the ACA come true remains to be seen, as Congress continues to debate the proposal.
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