Examining The Affordable Care Act’s Effect On Coverage

By Brian Blase
July 20, 2021, Health Affairs Blog

A recent report released by the Department of Health and Human Services claims that 31 million Americans were enrolled in coverage related to the Affordable Care Act (ACA). Without proper context, this number is misleading and is being misinterpreted. 
Here is what you need to know:
  • There has been virtually no change in private health insurance coverage because of the ACA. 
  • The net gain in health coverage because of the ACA is entirely or almost entirely due to an increase in Medicaid enrollment.
  • A sizeable percentage of the new enrollees in Medicaid do not meet eligibility rules for the program.
  • On a per enrollee basis, the ACA’s cost is far higher than was projected. 
A primary problem, if not the most glaring problem, with the ACA is that the design of both the Medicaid expansion and premium subsidies produce significant low-value health spending.

The American Rescue Plan Act significantly worsens the situation by lifting any income restrictions on who is now eligible for premium subsidies and making federal Medicaid subsidies to states even more generous.

Rather than doubling down on the ACA’s inefficiencies by directing even more subsidies to health insurance companies or trying to coerce more states to expand Medicaid, Congress should take a different approach. Such an approach could build on the new individual coverage health reimbursement arrangements (ICHRAs).

These reforms could relax the ACA’s rigid regulatory structure in ways that would lower average premiums, such as eliminating the law’s age-rating band and minimum loss ratio and loosening benefit mandates; permitting people to use the contributions on a wider range of plans; and permitting lower-income households to combine an employer contribution with a government subsidy to help them afford coverage.

Rather than adding more taxpayer money to the ACA’s inefficient subsidy structure with expanded tax credits, this approach would preserve taxpayer dollars and provide households with more options to purchase coverage that works best for them.
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