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Boston Herald
Boston Herald
29 Dec 2023
Sally C. Pipes


NextImg:Pipes: How Obamacare tax credits spike premiums

For the health insurance industry, Obamacare open enrollment, which started last month, is the most wonderful time of the year. Millions of Americans are signing up for plans on the exchanges. Each click of the “submit” button adds a fistful more dollars to insurers’ bottom line.

Open enrollment comes complete with tax credits for lower-income enrollees. They’re supposed to make monthly premiums more affordable. But their biggest effect is the risk-free enrichment of insurance companies.

The pursuit of profit in a competitive market is the driver of economic growth and innovation. But when government dictates the specifications for the product that can be sold — in this case, the details of insurance coverage — and then effectively guarantees a profit for compliance, the result isn’t competition and better service but entrenched rent-seekers protecting their turf from competitors. The bigger the subsidies for “premiums,” the greater the entrenchment.

The Congressional Budget Office estimates that we will spend $1.1 trillion on Obamacare subsidies over the next ten years. All those subsidies will simply enable insurers to feather their beds. In 2024, most proposed rate increases for Obamacare marketplace plans will be between 2% and 10%, with a median increase of 6%.

Insurers have relentlessly hiked premiums since Obamacare’s exchanges opened. It’s been a great way to boost revenue courtesy of U.S. taxpayers. In 2013 — the last year before Obamacare took effect — average monthly premiums were $242. By 2019, they’d reached $589.

There’s little reason for insurers not to raise premiums year after year, as most of their customers don’t pay the bill — taxpayers do, via premium tax credits. Democrats have been content to look the other way — and instead tout a growing number of enrollees dependent on government for their insurance coverage.

Since Obamacare’s inception, Democratic lawmakers have continued to devise new methods of increasing spending on subsidies. A year after the start of the global pandemic, President Biden signed into law $1.9 trillion in “stimulus” spending, $34 billion of which went to expand exchange subsidies through 2022.

Then, last year, Congress green-lit the Inflation Reduction Act, which expanded these “temporary” subsidies until 2025.

So where has all of this money been going?

A 2018 report from the White House Council of Economic Advisers found that since Obamacare was implemented in 2014, stock prices for health insurance companies had outperformed the S&P 500 by 106%. That same paper stated that “insurers are now profiting on the individual market as well, with higher premiums that are largely covered by federal premium subsidies.”

This year, UnitedHealth Group, the largest health insurance company in the nation, continues to beat market expectations with strong growth. UnitedHealth reported $92.4 billion in revenue for Q3, a 14% increase from last year.

In cases like this, revenue growth includes the ability to absorb taxpayer money through government subsidies. That’s a great deal for insurance executives but a lousy one for everybody else.

Sally C. Pipes is president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “False Premise, False Promise: The Disastrous Reality of Medicare for All. Follow her on X, @sallypipes.