Behind the surge in Obamacare sign-ups

A tighter job market hasn't translated into more employer-based coverage

Tired of reading about the failed Biden administration? Here’s a success story that might brighten your day.

The U.S. is experiencing the most dramatic increase in health insurance coverage since the Affordable Care Act’s provisions went into effect in 2014. An estimated 15 million people signed up for ACA plans during the just ended open enrollment season, 3 million more than a year ago and about 2 ½ million more than the peak year of 2016.

The surge in enrollment was enabled by a huge reduction in out-of-pocket costs for exchange-based individual plans. The new subsidies were part of last spring’s $1.9 trillion American Rescue Plan (ARP), which passed Congress with nary a Republican vote.

In addition, Medicaid programs over the past year enrolled an additional 12 million people, bringing total enrollment to 83.2 million souls or nearly a quarter of the U.S. population. The biggest jumps occurred in states that failed to expand Medicaid under the ACA.

Where did tax-averse, stingy states like Texas and Florida get the money? Again, the bipartisan Families First Coronavirus Response Act, passed right after the initial shutdown in March 2020 , gave non-expanding states special subsidies to help their low-income citizens earning up to 138% of the poverty line obtain coverage through Medicaid.

This major shift into government-financed health insurance plans came despite the rapid recovery in the job market during the second half of 2020 and President Biden’s first year in office. The economy has now recouped all but 2.8 million of the jobs lost in the first few months of the pandemic. The unemployment rate fell to 3.9% in December, a COVID-era low and a rate economists consider full employment.

Most of those still missing workers represent either aging Baby Boomers leaving the workforce or parents forced to stay home to take care of children. The total number of people still unemployed and actively seeking work is now just 600,000 higher than it was in February 2020 – the month before the first shutdown.

That begs a question: Why has the sharp rebound in employment been accompanied by a sharp increase in taxpayer-financed health insurance coverage? Did employers somehow take advantage of the sudden but short downturn to decrease benefits for new or recalled employees?

Better pay, still no benefits

All the anecdotal evidence suggests just the opposite occurred. Employers face a job market where they must increase wages to retain and attract workers, who have not been shy about taking advantage of the rapidly improving conditions to seek better opportunities.

Unfortunately, despite the tight labor market, many workers in the bottom half of the wage distribution still work at jobs that fail to provide health insurance. The U.S. remains the only country in the advanced industrial world that ties this fundamental human right to employment.

Yet companies are not required to provide coverage, and many, especially those that employ large numbers of less educated, semi-skilled workers, do not. The result is an uninsured rate that still hovers around 9% of the population, although that may fall somewhat once new surveys are released later this year.

The recent progress could be upended if Congress fails to pass a slimmed down version of the administration’s Build Back Better bill. The president, House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer have pledged to include the expanded subsidies for exchange plans in the new bill. They are slated to expire at the end of this year.

That will be costly. The new subsidies reduced premium costs and out-of-pocket co-pays for low-wage workers and eliminated them for people earning less than 150% of the federal poverty level. Making them permanent would cost an estimated $220 billion over the next decade, according to the Congressional Budget Office.

The Democrats’ preferred pay-for is giving Medicare the right to negotiate drug prices on a limited number of drugs. Since Democrats can’t afford to lose a single vote, a lot will be riding on convincing the pro-PhRMA elements within the party to ignore the drug industry’s small army of lobbyists. For many, it will be the first time in their political lives they’ve crossed their patrons in the pharmaceutical industry.

The political challenge

Maintaining the backdoor expansion of Medicaid represents a more difficult challenge. Those extra subsidies expire when the COVID emergency ends, which is currently slated for the end of April. A fourth COVID wave could trigger another extension, but no one is rooting for that.

The next best alternative is facilitating a smooth transition that moves the low-wage workers newly enrolled in Medicaid into ACA-financed exchange plans. Officials at the Health and Human Services Department have already asked state Medicaid directors to begin planning for the end of the emergency.

“HHS is committed to giving states 60 days advance notice,” said Suzanne Bierman, director of Nevada’s Medicaid program. “Beyond that, we don’t know what’s going to happen.” Nevada, one of 14 states where Democrats control both houses in the legislature and the governor’s mansion, recently became the second state to set up a government-run public option plan, which should help bring down prices for other plans sold on its exchanges.

But maintaining the higher subsidies will be key to encouraging millions of people to make the switch. “If the expansion of subsidies is not extended, it will revert next January to the original ACA formula, which is considerably less generous for a lot of people,” said Charles Gaba, a health care analyst and founder of ACASignups.net.

Those earning below 138% of the federal poverty limit will suddenly face premiums that, even if low, represent another monthly bill for people who can barely afford food and rent. People who earn over 400% of poverty will again face the “subsidy cliff,” not the gradual rise in premiums included in the ARP.

Without Build Back Better, millions of low-income and middle-class families who signed up for health insurance last year will experience sharply higher premiums for their coverage during the next ACA plan sign-up season, which begins on November 1. That’s just days before the mid-term elections.

“If Democrats don’t manage to extend the subsidies, it will be political suicide,” said Andrew Sprung, who follows ACA developments closely at xpostfactoid.com.