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The ACA has stimulated dramatic changes to America’s individual health-insurance market. It has placed more restrictions on insurance pricing (i.e., charging individuals different premiums depending on their health and age), and it has mandated benefit increases for insurance plans. Such changes have caused premiums on the ACA exchanges to soar by 49 percent, on average; younger, healthier adults have seen their insurance costs rise the most.
To encourage enrollment on the ACA exchanges despite surging premiums, the ACA deploys carrots (premium and cost-sharing subsidies) and a stick (taxing individuals who remain uninsured). In 2015, for example, the average monthly premium subsidy for ACA-exchange enrollees was $263 per month, which reduced monthly premiums by 72 percent, on average—from $364 to $101.
In 2014, after accounting for attrition after the end of the first open-enrollment period (March 31, 2014), 6.7 million individuals had enrolled by December 31. In 2015, 2.6 million additional individuals enrolled (and remained on their plans), raising the total to 9.3 million people enrolled on December 31. If similar trends hold, total enrollment on the ACA exchanges will hit 10 million on December 31, 2016.
Overall, ACA-exchange enrollment has been lower than expected; in 2016, the gap between actual and forecasted enrollment is likely to widen further. For instance, in 2014, the ACA exchanges’ first year, enrollment (6.7 million) exceeded the CBO’s February 2014 forecast (6 million). But in 2015, total enrollment (9.3 million) lagged behind the CBO’s March 2015 forecast (11 million). And if current trends hold, total enrollment in 2016 (about 10 million) will be dramatically less than the CBO’s March 2015 forecast (21 million).
Are these lower-than-anticipated ACA-exchange enrollment figures the result of uninsured individuals securing coverage by other means—such as by enrolling in employer-sponsored coverage or Medicaid? Start with the former. As the Department of Health and Human Services has noted, in a growing economy, employer-sponsored coverage typically rises as more people acquire jobs. Instead, from the fourth quarter of 2013 to the fourth quarter of 2015, employer-sponsored coverage in the U.S. declined.
Or take Medicaid. Enrollment in this government-insurance program for the poor expanded during the aforementioned period; but such expansion largely matched the CBO forecast—and, therefore, was also incorporated into the CBO forecast for ACA-exchange enrollment. Indeed, if the ACA exchanges’ meager enrollment numbers were caused by a rise in coverage obtained elsewhere, America’s overall uninsured rate would have declined in 2015. Instead, it barely budged, hovering around 11.9 percent.
In reality, enrollment growth on the ACA exchanges has fallen far short of projections because uninsured middle-income Americans have largely decided that—despite the availability of subsidies and the penalty for not purchasing insurance—the insurance on offer is too expensive. Consider enrollment on the federal ACA exchange, where household income data on enrollees are publicly available. At the end of the ACA’s second enrollment period, only 49 percent (6.6 million out of 13.6 million) of eligible lower-middle-income adults had enrolled; and just 9 percent (1.5 million of 15.8 million) of eligible upper-middle-income adults had enrolled.
It is also true that as an individual’s income rises, the ACA’s premium and cost-sharing subsidies decline, which make the ACA exchanges’ already expensive coverage—and their high deductibles—even less attractive. The ACA exchanges pose serious problems for insurers, too. Enrollees have been older and less healthy than expected; by December 2015, the enrollment rate for young (typically healthy) adults, aged 18–34, had stagnated at 26 percent. Faced with such developments, various insurers, including UnitedHealthcare, have threatened to drop out of the ACA exchanges.
Nearly 30 million American adults remain uninsured. Despite the ACA’s vast—and growing—cost to taxpayers, it has failed to place the U.S. on the road to near-universal health-insurance coverage. To deliver coverage that is more affordable and attractive to middle-class Americans, structural reforms to the ACA are urgently needed. Until then, America’s middle class will suffer the ACA’s high costs without enjoying its benefits.