By Doug Badger
The Heritage Foundation, May 26, 2021
The recently enacted American Rescue Plan Act spent an estimated $90 billion on free health insurance for the unemployed and on temporarily increasing Obamacare premium subsidies. That temporary expansion made some of the nation’s highest-paid workers eligible for government premium assistance, giving those who already had private insurance incentives to shift to government-subsidized coverage.
In his new paper for Heritage, Senior Fellow Doug Badger explains the damage this temporary Obamacare premium expansion already is doing and the even greater damage it would cause if it were to be made permanent.
Congress should not have enacted these temporary expansions. It would be worse to make them permanent, Badger explains.
President Biden has proposed enlarging the premium assistance program in the Affordable Care Act to make bigger payments to insurance companies on behalf of those who already have subsidized coverage. He has also proposed a permanent entitlement to government assistance for everyone, including those in the top two income quintiles.
A permanent Obamacare subsidy expansion would benefit primarily the rich, those who already have private coverage, and insurance companies. It may also induce employers to drop employees’ existing coverage, forcing workers into a government program with high cost-sharing and narrow physician networks.
Badger writes that the decision to temporarily increase federal premium subsidies was ill-considered:
- It was based on the false premise that millions of workers and their dependents had lost coverage due to government lockdowns.
- It poured almost all the new spending into subsidizing the premiums of people who already had insurance, and it made the nation’s highest earners eligible for government premium assistance.
- It enlarged federal payments to insurance companies in one of their most profitable lines of business and created perverse incentives to inflate premiums.
Making these subsidies permanent not only would double down on these bad policies but could also result in millions of Americans losing their employer-sponsored coverage.
Congress erred in enlarging premium subsidies in March. It should not compound that error by making the expanded subsidy structure permanent.