The Obamacare subsidies depend on Halbig’s outcome, and whether millions of Americans can afford their healthcare plans depends on the subsidies. At least, that’s the narrative. Commentators warn of a coming “death spiral” of extraordinary costs and insufficient incoming premiums as people cancel their plans without the subsidies. But what they’re ignoring is that Obamacare is on track to fail regardless of what the court decides.
What people aren’t grappling with is that with or without the subsidies, health insurance under Obamacare is simply too expensive. The hundreds of pills and procedures every insurance plan is now federally required to cover has bloated premiums beyond what most Americans want to, or often can, pay. That’s why Obamacare subsidizes the plans.
The whole point of Obamacare was supposedly to make health insurance more affordable. The problem is that Obama’s promise that “If you like your plan, you can keep your plan,” never squared with his plan to replace so-called catastrophic care plans with comprehensive coverage. Companies can’t cover breast implants and Viagra for the same price as covering cancer and car wrecks only.
Subsidies were the answer for affordable care. The federal government pays up to 100 percent of the premiums for certain insurance plans for people with low incomes. In total, the administration claims 6.7 million people will receive tax credits to pay their premiums and 70 percent, or 4.7 million, are using a federal exchange.
However, even with Medicaid expansion and subsidies, Obamacare still failed spectacularly to reduce premiums. Instead of reducing what every American family pays for health insurance by $2,500 per year, as candidate Obama promised in 2008, insurance premiums increased for millions of Americans once Obamacare made their existing plans illegal. Families can expect to pay 32% more per year to stay covered under Obamacare. And that’s with the subsidies.
Money for subsidies has to come from somewhere. Here’s where things really get tricky for Obamacare. The entire premise is that, even with subsidies, young, healthy people’s premiums will subsidize care for the sick and elderly. Turns out that young people don’t really want to do that. And why should they? The plan hoses young, relatively poor people right when they least need high bills for services they’re not using. And it helps older, relatively rich people who should be able to afford the care they need.
Nick Gillespie and Veronique de Rugy have pointed out for Reason magazine that today’s seniors are far wealthier than today’s young adults. While, 36% of millennials are still living under their parents’ roof, 83% of elderly households own a home. Poverty rates for those over 65 years of age are much lower than most other demographics. Households headed by people 65 or older have 22 times the wealth of households headed by people under 35.
Not only are many young people either unemployed or underemployed, the Consumer Financial Protection Bureau estimates that people under 40 owe 67% of the roughly $1.4 trillion that Americans owe on school loans. That’s on top of an average of several thousand dollars of credit card debt.
Obamacare forces people who can scarcely afford the extra cost to subsidize care for people who absolutely can afford to pay for their own health services. Obamacare’s solvency also requires that people who aren’t eligible for subsidies sign up. That, too, doesn’t really appear to be happening. Shockingly, people aren’t into paying a lot for services other people use more than they do. The plan will fail to reach solvency because it’s too expensive for the very people the plan needs on board in order to stay solvent.
Obamacare only works if many more young, healthy, and wealthy people get insured than were insured previously. Instead, Obamacare has only reduced the percentage of uninsured Americans by 3%, from a peak of 18 percent last year to 15 percent. And most of the signups are sick, poor, old people.
If the Administration prevails, 7.3 million people will continue to get subsidies, according to recent analysis from the Robert Wood Johnson Foundation. According to the Henry J. Kaiser Foundation, 83% of Obamacare plans are subsidized to some extent. Subsidizing the vast majority of health insurance plans without signing up a lot of new, healthy, unsubsidized payers simply does not work out, mathematically.
The Halbig case is certainly interesting. But even if the Administration gets its way, they’re a long way from out of the woods when it comes to Obamacare.
Cathy Reisenwitz is an Editor at Young Voices and a D.C.-based writer and political commentator. She is Editor-in-Chief of Sex and the State and a columnist at Townhall.com and writer for Bitcoin Magazine. Her writing has appeared in The Week, Forbes, the Chicago Tribune, The Daily Beast, VICE Motherboard, Reason magazine, Talking Points Memo and other publications and she has appeared on Fox News and Al Jazeera America. She serves on the Board of Advisors for the Center for a Stateless Society.