With ACA subsidies set to expire, experts offer views on cost, coverage and alternatives

Key Concepts

• ACA (Affordable Care Act) Subsidies: Financial assistance provided to individuals to help them afford health insurance purchased through the ACA marketplaces.
• Enhanced Subsidies: An increase in ACA subsidies, implemented as a COVID-era policy, that directly benefits health insurance companies.
• Healthcare.gov: The federal website used for enrolling in ACA health insurance plans.
• Brokers: Individuals who assist consumers in enrolling in health insurance plans.
• HSA (Health Savings Account): A tax-advantaged savings account that can be used for medical expenses.
• Deductibles: The amount an individual pays out-of-pocket for healthcare services before their insurance plan begins to pay.
• Out-of-pocket limits: The maximum amount an individual will have to pay for covered healthcare services in a plan year.
• Fraud: Deceptive practices within the healthcare system, particularly noted in relation to enhanced subsidies and broker enrollments.
• Universal Coverage: The goal of ensuring that all individuals have access to health insurance.

The Debate Over ACA Subsidies and Healthcare Costs

This discussion centers on the impending expiration of enhanced ACA subsidies and the potential consequences for health insurance costs and the broader healthcare system. Two contrasting perspectives are presented by Jonathan Cohn of The Bulwark and Brian Blase of Paragon Health Institute.

1. The Immediate Issue: Extending Subsidies

• The Cost: Extending the current subsidies is estimated to cost approximately $350 billion over the next decade.
• The Deadline: A critical deadline is approaching, with open enrollment underway and the next plan year beginning soon.
• Cohn's Short-Term Solution: Jonathan Cohn advocates for a short-term extension of the subsidies, either for one or two years, as the most immediate and practical course of action. He argues that a broader conversation about fixing the healthcare system and improving or changing the ACA should have occurred earlier, as these complex issues take time to resolve.

2. Brian Blase's Critique of the ACA and Subsidies

• ACA's Failure: Brian Blase asserts that the Affordable Care Act has failed to make health insurance affordable, leading to higher premiums, deductibles, and narrower networks.
• Enhanced Subsidies: He clarifies that the core ACA subsidies remain in place, with 94% of enrollees still receiving significant taxpayer assistance. The issue at hand is a COVID-era policy that increased these subsidies, directly benefiting health insurance companies.
• Structural Problems: Blase identifies key structural problems within the ACA, arguing that the enhanced subsidies go to many enrollees who do not use healthcare services at all. He cites data indicating that 35% of all enrollees in 2024 did not use their plan a single time.
• Fraud Concerns: A surge of fraud has entered the program with these enhanced subsidies, leading to taxpayers sending money to insurers on behalf of individuals who do not receive medical care. Blase believes these inefficient subsidies prevent improvements in the quality of coverage.
• Proposed Alternative: Blase supports the idea of funneling money directly to individuals rather than insurance companies. He suggests redirecting a portion of the subsidies from insurers to patients, potentially allowing individuals to use these funds for HSA contributions, thereby giving them more control over spending and reducing planned deductibles and out-of-pocket limits. This approach, he argues, empowers patients and is essential for making the healthcare system more affordable and efficient.

3. Jonathan Cohn's Rebuttal and Defense of Subsidies

• Addressing Non-Utilization: Cohn acknowledges that a significant percentage of ACA enrollees (around 30-35%) do not file claims in a year. However, he argues that not using insurance in a year does not mean it's wasted, particularly for younger, healthier individuals who may not need medical services regularly.
• Fraud Concentration: While admitting that fraud is a real issue, Cohn points to research (including from Paragon Health Institute) that shows fraud is concentrated in states using the federal website, healthcare.gov. He attributes this to changes made to healthcare.gov that facilitated direct enrollment by brokers, leading to "brokers behaving badly."
• Separating Fraud from Financial Assistance: Cohn contends that measures can be taken to address broker fraud without removing financial assistance from individuals. He notes that states that did not implement these broker changes did not experience the same level of fraud.
• Skepticism of Short-Term Reform: Cohn expresses skepticism about implementing significant structural changes like redirecting subsidies to HSAs within the short timeframe available (three weeks into open enrollment, with the next plan year starting in less than two months). He deems such a rapid implementation "ridiculous."
• Concerns about Consumer Shopping: He highlights data showing that "people are terrible at shopping for health care" and fears that shifting the burden of spending to individuals could disproportionately affect those with significant medical expenses.
• The Fundamental Divide: Cohn frames the core of the debate as a choice between prioritizing spending less money (believing it leads to efficiency and less government) versus prioritizing ensuring people receive maximum assistance due to the high cost of healthcare (even if it means more spending and bigger government).

4. The Political and Practical Realities

• Midterm Elections: The looming midterm elections add a political dimension, with Republicans reportedly hesitant to be blamed for a sudden spike in premiums if subsidies are not extended.
• Workability of Direct Payments: Blase believes that redirecting subsidies from insurers to patients is workable and that proposals exist to achieve this. He points to a policy in the House-passed reconciliation bill that aimed to lower premiums by 12%.
• Cohn's Timeline Concerns: Cohn reiterates his strong doubts about the feasibility of implementing such a significant policy shift in the remaining weeks before the new plan year begins. He suggests that while some versions of these accounts might work well for certain individuals, they are not a "magic bullet."

5. Core Priorities and System Reform

• Blase's Vision: Brian Blase states his top priority is a "more affordable, accountable health system that improves Americans' health over time." He believes the ACA has fundamental problems and that continuing to send more money to health insurance companies will lead to worse healthcare and health outcomes.
• Cohn's Focus: While not explicitly stated as a "top priority" in the same way, Cohn's arguments suggest a priority on ensuring individuals receive adequate financial assistance to access healthcare, given its high cost.

Conclusion

The discussion highlights a fundamental disagreement on how to address rising healthcare costs and the structure of the ACA. Brian Blase advocates for reforms that shift power and funds towards individuals and away from insurance companies, believing this will foster a more efficient and affordable system. Jonathan Cohn, while acknowledging issues like fraud, prioritizes ensuring continued financial assistance for individuals to access healthcare, expressing concern about the feasibility and potential negative consequences of rapid, structural changes. The immediate challenge lies in navigating the approaching deadline for subsidy extensions and the political and practical implications of various proposed solutions.