Fourteen years ago, President Barack Obama signed into law the Affordable Care Act (ACA), or Obamacare, the most sweeping overhaul of the health insurance market in U.S. history, on March 23, 2010.
To celebrate the anniversary, the Obama Foundation featured 26 interviews on its website that “bring to life so many moments of triumph, impact, and compromise” in getting the law passed. Obama states on the website that “more than 21 million Americans now have access to quality, affordable health care.”
The ACA was sold to the public as a solution for individuals and families who lacked access to employer-sponsored health plans and could not afford the high premiums of individually purchased insurance. It has evolved into a highly complex, heavily subsidized, and increasingly expensive government enterprise that derives most of its growth from the dramatic expansion of Medicaid.
Medicaid on Steroids
In 2010, the uninsured were told they would be able to choose from a host of ACA-compliant private insurance plans on marketplace exchanges that would be both affordable and comprehensive in coverage, and those with pre-existing conditions were assured they could not be denied coverage and would pay the same premiums as healthy people.
The Congressional Budget Office (CBO) projected at the time that 25 million Americans would sign up for a plan, four million short of the number noted by Obama in 2024. The CBO also projected that coverage would be evenly split between private insurance and Medicaid expansion.
An assessment of Obamacare’s real-world impact by the Paragon Health Institute found that, as of 2021, “while 19 million additional people got health insurance coverage, only about 2 million got private insurance. The remaining 17 million were covered under the act’s Medicaid expansion provisions.”
As John C. Goodman, president of the Goodman Institute for Public Policy and co-publisher of Health Care News, noted in Forbes on March 19, the private insurance sold in the Obamacare exchanges “would increasingly come to resemble Medicaid with a high deductible.”
Planned or Coincidence?
Many of the ACA’s original provisions, such as the individual mandate and its fines for non-compliance, were overturned by the courts, Congress, or executive orders. Its structure was further undermined by consumers who did not flock to the exchanges.
The promised affordability of the plans did not materialize, except for people who qualified for premium subsidies. To attract new enrollees, Congress enacted enhanced premium subsidies through 2025.
“Under the ACA, Medicaid was significantly expanded to non-disabled, working-age adults earning up to 138% of the federal poverty level,” wrote Adam Millsap in Forbes, on March 22. “To entice states to expand Medicaid, the ACA also increased the federal match given to states to offset the program’s cost, known as the federal assistance percentage (FMAP).”
The ACA-driven Medicaid expansion has had wide-ranging effects. In another Paragon study, Brian Blase and Drew Gonshorowski note that Medicaid is now the largest program in state budgets, exceeding spending on K-12 education.
Rising Cost of Health Insurance
Americans with private group coverage are paying more than ever due to the ACA’s costly regulations on health plans, wrote Sally Pipes, president and CEO of the Pacific Research Institute, in Newsweek, on March 25.
“In 2019, just five years after Obamacare’s cost-inflating regulations took effect, average premiums had more than doubled, compared with what they were pre-ACA,” wrote Pipes. “Premiums have since continued to climb. The average family in 2023 paid 22 percent more for employer-sponsored coverage than they did in 2018.”
“These cost increases are no accident,” wrote Pipes. “They were baked in from the start. Obamacare’s mandates are designed to increase costs for the general population as a means of subsidizing coverage for favored groups.” Insurance companies, through their heavily subsidized ACA marketplace plans, could be considered one of those “favored groups.”
The premium subsidies are “a very efficient mechanism for the Treasury to transfer money to health insurance companies,” Brian Blase, president of the Paragon Health Institute, told The Washington Post, on March 30.
Boon to Health Insurers
The ACA’s Medical Loss Ratio (MLR) regulation was designed to limit insurers’ profits, but the premium subsidies reduced the insurers’ incentive to control costs, says Jonathan Wolfson, chief legal officer and policy director at the Cicero Institute.
“Everyone knew the ACA would send the insurance companies millions of new customers, as Obamacare ‘capped’ their profits with the MLR,” said Wolfson. “But the MLR actually gave the insurance companies a profit incentive to let prices rise because 15 percent of $100 million is a lot more profit than 15 percent of $50 million. As my colleague Josh Archambault and I explained, the MLR may be the least discussed problem with the ACA, but patients feel its effects every time they pay higher premiums or visit the doctor.”
No Competition, No Market
Jeff Stier, a senior fellow at the Consumer Choice Center, says the government-driven approach to health care was bound to fail.
“Unfortunately, this outcome shouldn’t surprise anyone with a basic understanding of markets—when the government comes in and creates, in painstaking detail, a ‘marketplace’ for anything, ‘market’ is never an accurate way to describe it,” Stier said.
“A true, functioning marketplace must be competitive and allow for insurers to respond to consumers,” said Stier. “That was never designed to happen under the Obamacare system, so consumers’ needs are ignored because insurers must answer to regulators.”
Bonner Russell Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.
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