ACA Subsidies Prevent Market Failure in Health Insurance

As we wait for Senate Majority Leader John Thune to follow through on his promise to hold a vote on extending Affordable Care Act subsidies, an interview on NPR’s 1A makes clear how those subsidies have kept health insurance costs down for all Americans… and how health care represents a failure of free-market economics.

In a nutshell (alas, 1A doesn’t have an online transcript of the conversation), the subsidies we approved during the pandemic capped the percentage of income Americans have to pay for insurance on the Affordable Care Act marketplaces. Since then, ACA enrollment has jumped from 11 million to 24 million. With more people buying policies with government help, the insurers participating in the ACA marketplaces have been able to spread risk and keep premiums down.

Read that again: contrary to cranky conservative arguments, increased government involvement, via subsidies, keeps costs down.

If Republicans succeed in ending the ACA subsidies die, ACA marketplace premiums will jump an average of 114%. 60-year-old South Dakotans making 401% of poverty income will see their premiums increase 237%. Many people can’t afford premium increases that big, and many (CBO says four million) will drop their coverage. The people most likely to drop their coverage are younger, healthier people who think they won’t need to see a doctor and thus won’t need health insurance.

That defection of young, healthy policyholders leaves participating insurers with older, sicker customers who will use their insurance more often and will increase costs for insurers. The insurers respond by raising their premiums for all of their remaining customers.

Read that again: as demand goes down for health insurance, prices go up. Continue that cycle, and you eventually reach a situation in which insurance costs so much that no one can afford it.

Health insurance doesn’t follow the free-market fundamentalism that conservatives like John Thune and Mike Rounds (who grew up selling insurance, so he should know better) preach to us as they march America off the MAGA-oligarchy cliff. Add to that the inability to engage in real free-marketism when you’re having a heart attack or your kid breaks a leg (hey, Sanford doc, before you set that bone, let me drive my son over to Avera and get a quote from them on this procedure), and our persistent and internationally unusual reliance on private insurance to cover our health costs makes no sense.

The Affordable Care Act works… not as well as universal single-payer, but it has helped millions of Americans get and keep health insurance and thus stay healthier and live better. Ending the ACA subsidies will hurt Americans’ finances and health. The free market won’t save us at the hospital—extend those ACA subsidies now!