The Real Fix for ObamaCare

The problem isn’t the size of the subsidies. It’s their structure. 

By Tony LoSasso and Kosali Simon. Mr. LoSasso is a professor of economics at DePaul University. Ms. Simon is a distinguished professor of economics at Indiana University. Excerpts:

"The Affordable Care Act’s subsidy formula guarantees that people buying health insurance through the marketplaces pay no more than a fixed percentage of income for a benchmark plan. The government pays the rest. This shields buyers from premium increases but ensures that when premiums rise, taxpayers pay more. Insurers face little pressure to compete on price, and government costs grow faster than enrollment."

"In 2015 ObamaCare enrollees who received assistance paid about 36% of their premium out of pocket; by 2023 that share had fallen to 17%."

"average net premiums for subsidized enrollees largely remained flat even as gross premiums rose because taxpayers absorbed the increase."

"A sustainable marketplace would look more like the Federal Employees Health Benefits Program: The government makes a predictable contribution pegged to a lower-cost, benchmark plan; consumers who choose pricier options pay the difference. The system, sometimes called “managed competition,” helps keep public costs in check and rewards insurers that deliver value rather than raise premiums."