New ACA Study Considers What Happens When Generous Government Subsidies End | Mercatus

A large subsidy program that has helped insurers offering Affordable Care Act (ACA) compliant coverage in the individual market expires this year. In 2017, for the first time, insurance premiums alone must cover expenses in the individual market. A new working paper released today by the Mercatus Center at George Mason University measures the importance of this subsidy program, sheds new light on insurers’ generally poor results in 2014, and discusses what likely lies ahead for the law.

The study, authored by myself, Doug Badger of the Galen Institute and Ed Haislmaier of the Heritage Foundation contains two key findings. First, insurers incurred substantial losses overall despite receiving much larger back-end subsidies per enrollee through the ACA’s reinsurance program than they expected when they set their premiums for 2014. Second, we estimate that in the absence of the reinsurance program insurers would have had to set premiums 26% higher, on average, in order to avoid losses—assuming implausibly that the overall health of the risk pool would not have worsened as a result of the higher premiums. Our findings raise serious questions about the ACA’s future, particularly when the reinsurance program ends and premium revenue must be sufficient to cover expenses.

Source: New ACA Study Considers What Happens When Generous Government Subsidies End | Mercatus

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s