Eliminating subsidies that help low- and moderate-income people purchase coverage through government-run health insurance marketplaces would sharply boost costs for consumers and cause more than 11 million Americans to lose their health insurance, according to a new paper by the section of the RAND Corporation devoted to nationalizing health care.
How is that number possible? Only 8 million people have used the new program and 74% of the sign-ups were previously insured. It's government accounting done by a think tank, in the form of a computer model they created based on static parameters and dire predictions.
Insurance companies just had to pay a giant $8 billion levy because of all the new registrations they supposedly got - that tax was passed by consumers in the form of higher premiums. New people who thought they were getting a better deal have $4,000 deductibles even if they get a discount on the monthly premiums. Yet the RAND paper claims costs will skyrocket 40 percent if the subsidies are removed and that enrollment would drop by 68 percent. So the numbers would go back to pre-ACA levels but they assume people would continue to pay high premiums even though they did not before.
All large political donors have already been exempted or deferred and the tax subsidies have been challenged in court on the grounds that the wording of the law allows such aid only to those people who buy policies through state-run marketplaces. Marketplaces in most states are operated by the federal government. This issue is now being considered by several federal courts across the nation, with the big issue being why only small businesses and individuals are being forced to pay.
The RAND paper claims that an ACA-compliant market that did not provide tax credits to low-income people would consist of a relatively small number of high-risk individuals, which would drive prices higher and prevent the majority of potential enrollees from purchasing affordable coverage.
"If subsidies are eliminated entirely, our research predicts substantial disruption in the individual health insurance market," said Christine Eibner, the paper's lead author and an economist at RAND. "Without the subsidies, prices would jump sharply and many people simply could not afford to enroll."
Eibner and study co-author Evan Saltzman used the RAND COMPARE simulation, a simple Monte Carlo, parameter-based output which projects the effects of health policy changes at state and national levels based on their suspected inputs and then extrapolates the effects that eliminating subsidies and other potential changes might have on premiums and enrollment in the individual health insurance market in 2015.
Their estimate found that ending the mandate requiring individuals to have health coverage would cause enrollment in the individual market to fall by more than 20 percent, with 8.2 million Americans becoming uninsured. While premiums would only 7 percent, the sharp decline in enrollment suggests the mandate is important to achieving the Affordable Care Act's goal of medical coverage regardless of the cost, according to RAND researchers.
RAND has long advocated tax-and-spend funding and a no-option individual mandate to force healthy people to enroll in the individual health insurance market. Forcing people to pay is key to avoiding a scenario where only sick people sign up for individual health insurance.
They also modeled the impact of replacing the tax subsidies, which cap individual spending as a percentage of income, with vouchers or other programs that would provide a fixed government subsidy.
Replacing the existing subsidies with alternatives such as vouchers would make the health insurance marketplaces more sensitive to changes in the age mix of those enrolling, according to the study. For example, with vouchers instead of tax credits, each 1 percentage point reduction in young adult enrollment would trigger a premium increase of about three-quarters of 1 percent on the insurance marketplaces. A 1 percentage point reduction in young adult enrollment would trigger a smaller premium change -- less than one-half of 1 percent -- with the ACA's current tax credit structure.
Report: "Assessing Alternative Modifications to the Affordable Care Act: Impact on Individual Mark Premiums and Insurance Coverage." Funding provided by the Office of the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services.