Open-enrollment season is now underway for health insurance plans across the country, which means many Americans will be receiving unpleasant news about how much more their coverage will cost in the coming year. But for one group of consumers, premiums will actually go down for the second straight year.
Those would be individuals and families whose healthcare isn’t covered by their employers, and so shop in the insurance exchanges created by the 2010 Affordable Care Act (better known as Obamacare). At the 28 state exchanges run by the federal government, the average premium for the “benchmark” plan — a policy covering roughly 70% of a person’s expected medical expenses for the year — will be 4% less expensive in 2020 than it was this year.
California, which runs its own insurance exchange, will see an average increase in its benchmark plans of a little less than 1% in 2020. But don’t leap to the conclusion that the Trump administration is doing a better job holding down premiums than California is. Californians in the individual market will still pay less for insurance than the average American in that market does. And one reason is because California and the Trump administration are heading in opposite directions on the Affordable Care Act.
Simply put, California is trying to make the law work. But in other states that have relied on the federal government to operate their health insurance marketplaces, the law is working despite the Trump administration’s efforts to make it fail.
We’re not arguing that the ACA was a perfect piece of legislation or that it effectively held down healthcare costs. It wasn’t and it didn’t; premiums can still take too large a bite out of middle-class families with incomes just above the cutoff for subsidies. But it was a step in the right direction, and California’s aggressive implementation has done a far better job making insurance affordable to people not covered by employer health benefits than the Trump administration’s wrecking-ball approach to the law.
Even as he crowed about the reduction in premiums on the federal exchanges, Health and Human Services Secretary Alex Azar declared the law a failure. “The ACA simply doesn’t work and it is still unaffordable for far too many,” he said in a statement. “But until Congress gets around to replacing it, President Trump will do what he can to fix the problems created by this system for millions of Americans.” Too bad “fix” in this case means “worsen.”
More than a third of U.S. households aren’t insured by an employer plan or by Medicare. The ACA sought to make coverage available and affordable to that group by barring insurers from discriminating against people with preexisting conditions, providing subsidies for poor and lower-income consumers, and requiring all adults to sign up for comprehensive coverage unless it posed a financial hardship.
President Trump has undermined the law repeatedly since taking office, ending federal efforts to enroll people in Obamacare plans, steering younger, healthier Americans into plans that offer less protection and signing into law a tax bill that eliminated the tax penalty for not obtaining coverage. These steps exacerbated the problems in the state exchanges, where insurers had already been hit with higher-than-expected claims and were responding with hefty premium increases. But the uncertainty created by the administration’s real and threatened attacks on the ACA led insurers to charge more than they needed to for coverage in 2018, hence the premium cuts for 2019 and 2020.
California’s exchange, known as Covered California, also saw some large increases in its first few years. But state leaders managed to hold the exchange’s rates below the national average by working to keep healthier people in Covered California, rather than pushing them into thinner, cheaper plans. According to the state exchange, its pool of customers has consistently been 20% healthier — as measured by the cost of its insurance claims — than the federal average, cutting premiums by about $7.5 billion from 2014 to 2018. Because the bulk of the shoppers on the exchange are receiving federal subsidies, most of those savings went back to federal taxpayers in the form of lower subsidy costs.
Just as important, the lower premiums and policies that exempt basic forms of care from deductibles have kept more Californians who aren’t eligible for subsidies from dropping their insurance coverage. According to federal data analyzed by Covered California, the number of unsubsidized people who bought insurance in the individual market fell by 44% from 2014 to 2018 nationally, but only 17% in California.
The state also took two steps this year that should help hold down premium increases in future years. To shore up the federal mandate, it enacted a law requiring adult Californians to carry comprehensive health insurance. And to make that coverage affordable for more people, it created a state subsidy program to help moderate-income people whose earnings are higher than the federal subsidy cutoff. Those are the sorts of steps the federal government ought to be taking as part of a broad and long-term focused approach to bringing healthcare within all Americans’ reach.