Obamacare Paradox: Unsubsidized, But Satisfied Insurance Customers

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Source: Getty Images

Source: Getty Images

Government data shows that more than 80 percent of individuals who have selected health insurance plans through the state or federal Affordable Care Act exchanges were eligible for the federal tax credits that subsidize the cost of premiums and out-of-pocket medical expenses for lower-income Americans. With approximately 5 million enrollments recorded as of mid-March, that means that around 1 million people signed up for coverage and did not qualify for federal subsidies. According to the Department of Health and Human Services, this puts the ratio of subsidized to unsubsidized exchange enrollees well within the bounds projected by the nonpartisan Congressional Budget Officer, which determined that 86 percent of exchange enrollees could receive financial assistance and the system would still be supportable.

To put this in context, the Urban Institute has found that of the 12 million Americans buying health insurance on the broader individual market, about half are not eligible for subsidies. That distribution of insurance customers — with the exchanges seeing far more lower-income, and therefore subside-eligible, enrollment numbers than the individual insurance market — suggests that those who do not benefit from subsidized insurance pillar of the healthcare reform are staying away from the exchange system. While it is true that people who qualify for financial assistance are more likely to enroll for coverage via the marketplaces, the fact that those who are not eligible for subsidies are purchasing exchange insurance at a much lower rate is not a sign of their displeasure with Obamacare necessarily. That is an important distinction to make because of the criticism that have be leveled at the subsidies.

Subsidies have been a major focal point of the campaign against the healthcare reform. Senator Ted Cruz of Texas took aim at the tax credits in a August 2013 interview with conservative radio host Rush Limbaugh. He likened the subsidies to a sugar addiction, a tool for President Barack Obama to ensure that the American people would never support a repeal of the healthcare reform. “President Obama’s strategy is very simple,” he said. “He wants to get as many Americans as possible addicted to the subsidies, addicted to the sugar, because he knows that in modern times, no major entitlement has ever been implemented and then unwound.” In other words, when the exchanges are “up and running” it will be too late.

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