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Affordable Care Act not working as intended

Brian Blase

When the Affordable Care Act passed five years ago, government prognosticators and private research organizations projected between 21 million and 27 million exchange enrollees in 2016. But last month, the Obama administration announced that it had reduced that target to just 10 million enrollees.

In 2010, the Urban Institute, a left-of-center think tank, projected that almost as many people with income above four times the poverty level ($47,080 for a single person and $97,000 for a family of four in 2015) would enroll in exchange plans as people with income less than half these amounts. It turns out that more than 25 times as many people with income below twice the poverty level bought an exchange plan as people with incomes above four times the poverty level.

In a new study published by the Mercatus Center at George Mason University, I explore why Affordable Care Act enrollment projections were so wrong. Here are the most likely explanations:

First, for most uninsured people, the costs of enrolling in Affordable Care Act plans exceed the benefits. For example, a recent economics study found that a typical single person making $40,000 is generally $1,500 to $3,500 better off by remaining uninsured as opposed to purchasing an exchange plan.

Second, exchange plan deductibles are very high. In 2015, deductibles averaged $3,000 for single coverage and $6,000 for family coverage for the most common type of plan. Tellingly, the only people who enrolled in exchange plans in large numbers — those below twice the poverty level — are the only ones who qualify for large subsidies to reduce these deductibles.

Third, exchange plans contain fewer doctors and hospitals than expected.

Fourth, the individual mandate isn’t motivating as many people to enroll as anticipated. Moreover, hardship exemptions that relieve people who had any difficulty paying premiums from having to pay the penalty have weakened the mandate’s effectiveness.

Fifth, the Affordable Care Act requires insurers to offer coverage to all applicants at standard rates regardless of health condition. Large net attrition in exchange enrollment in both 2014 and 2015 suggests that many people may be dropping coverage after treatment.

Insurers are also losing more money than anticipated. I estimate they lost about 12 percent of health plan premiums in 2014 despite a huge subsidy to cover most of the cost of their expensive enrollees.

In sum, as premiums increase, deductibles are rising and provider networks are actually shrinking. These changes make health plans even less desirable to people who aren’t already sick or don’t qualify for large subsidies.

The failure of exchange plans to attract people who don’t receive giant subsidies should cause policymakers to revisit the law and allow people to purchase insurance products that they actually want.

Brian Blase is a senior research fellow focusing on health care policy with the Spending and Budget Initiative at the Mercatus Center at George Mason University. He wrote this for