This week marked the end of the 2021 open enrollment period for the Affordable Care Act (the ACA, known popularly as Obamacare). And, astoundingly, premiums in Obamacare markets for individual insurance aren’t as pricey as they used to be. According to a November report by the Kaiser Family Foundation, “Premiums for ACA Marketplace benchmark silver plans are decreasing on average across the U.S. in 2021 for the third consecutive year.”
Yet this sustained decline is the exact opposite of what doomsayers said would happen if the individual mandate was cut out and Obamacare regulations were relaxed. More than 10 years post passage of Obamacare, the truth is clear: competition, not federal fiat, is the key to affordable health care.
A decade ago, the American people were told that an onerous mandate to buy health insurance was needed to keep health care prices in check. Obamacare architect and Massachusetts Institute of Technology professor Jonathan Gruber argued that, without a requirement to buy coverage, premiums would skyrocket and uninsured Americans would be unable to afford care (but these Americans were too stupid to know the difference anyway). In reality, premiums for individual plans actually increased at a faster rate following the enactment of Obamacare. That is, until around 2018, right around the time the mandate was zeroed out.
Republicans in Congress zeroed out the non-coverage “tax” as part of the 2017 Tax Cuts and Jobs Act. And, even though this change didn’t technically go into effect until 2019, the Internal Revenue Service loosened enforcement of the mandate in 2018. It doesn’t necessarily follow that nixing the mandate reduced premiums, but it certainly poses a problem for arguments that the mandate was critical for health care reform. President Barack Obama’s former Solicitor General Don Verrilli admitted as much in recent oral arguments in front of the Supreme Court, arguing, “I don’t think there’s any doubt that the 2010 Congress thought that stick [the mandate] was important. But it’s turned out that the carrots work without the stick.”
Verrilli also pointed out that, when Congress decided to zero out the mandate in 2017, the Congressional Budget Office didn’t think that premium prices would appreciably increase.
The question remains as to what would explain the steady decrease in premiums since around 2018. While far too many insurance regulations remain in place, lawmakers and the Trump administration have rolled back rules that stifled competition. Under the original version of Obamacare, individual market enrollees had to buy plans with expensive “essential benefits,” such as pregnancy coverage and smoking cessation that many did not want or need. Rules finalized in August 2018 allow insurance shoppers to buy “short duration” plans that don’t have those requirements and can be renewed for up to three years.
This new flexibility empowered individuals to select a plan that best suited them, benefiting tens of millions of Americans. Unfortunately, these new market-friendly rules may not be around for much longer. President-elect Joe Biden wants to double down on Obamacare and has criticized Congress and the current administration’s changes to the law. Biden is also on the record supporting a “public option” as an add-on to Obamacare and has championed spending $750 billion over the next 10 years on the new initiative. This would effectively expand Medicaid for low-income Americans, despite preciously little evidence that Medicaid actually works to improve health outcomes.
Rather than double down on failed policies, Biden should pay close attention to how recent changes to the ACA made the law work better than it did before. Expanding – not limiting – choices for consumers is what keeps premiums in check. Americans should celebrate that premiums are on the decline. But we cannot afford to let our guard down.
Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.