Fact check: Do ACA premium hikes affect a "relatively small number of Americans"?
President Barack Obama signs the Affordable Care Act into law
November 22, 2016
By Cory Eucalitto
The Obama Administration recently announced rate hikes averaging 22 percent for 2017 coverage under the Affordable Care Act (ACA), prompting Donald Trump to declare the program a “total disaster.”[1] However, a number of media outlets have claimed that only a small number of Americans will actually be affected by the rate hikes.
For example, Washington Post reporter Glenn Kessler, in his October 27th “Fact Checker” feature, wrote that premium increases averaging 22 percent would affect a “relatively small number of Americans who buy their own insurance and do not get a tax subsidy.”[2]
Is Kessler correct?
No. Although a majority of ACA enrollees will not directly pay the higher premiums, the increased costs don’t disappear. They are shifted to taxpayers instead, as are billions of dollars in other ACA costs.
Taxpayers are providing an estimated $43 billion in fiscal year 2017 to subsidize insurance coverage purchased through the ACA exchanges (totaling $672 billion from 2017 to 2026). In addition, taxpayers are shouldering $67 billion in fiscal year 2017 for the federal portion of Medicaid costs for 11 million people who gained coverage under broader eligibility criteria set by the ACA (an estimated $969 billion from 2017 to 2026).[3] The government projects federal subsidies, taxes, and penalties associated with health insurance coverage will amount to an $8.9 trillion subsidy from 2017 to 2026.[4]
Background
The ACA increased health care coverage in two main ways: by expanding Medicaid eligibility and by subsidizing premiums for plans purchased through government-run exchanges.
Some 13.8 million individuals are expected to obtain ACA coverage for 2017.[5] The Department of Health and Human Services (HHS) estimates that premiums for individual “silver” plans (second-lowest of four) in ACA exchanges are rising 22 percent, on average, for 2017 (ranging from a 116 percent hike in Arizona to a 3 percent decline in Massachusetts and Indiana).[6]
According to government estimates, 85 percent of Healthcare.gov plan selections on Healthcare.gov were with advance payment of the premium tax credit, a subsidy for those with family incomes between 100 and 400 percent of the federal poverty level.[7] In 2017, 84 percent of uninsured individuals eligible for ACA insurance coverage would qualify for subsidies.[5]
Medicaid provides health care to lower-income individuals and families, pregnant women, the elderly and the disabled. It is jointly funded by the federal and state governments.[8]
The federal government reimburses states an average of 57 percent of Medicaid expenditures.[9] The ACA directed states to expand Medicaid eligibility or lose this federal share of funding. However, the U.S. Supreme Court, in NFIB v. Sebelius, deemed that threat to be unconstitutionally coercive.[10]
Under the ACA, Medicaid eligibility was expanded to individuals with household incomes up to 138 percent of the federal poverty level.[11] Thirty-one states have adopted the new criteria.[12]
The ACA also shifted coverage of children in families with incomes between 100 and 138 percent of the poverty line from the Children’s Health Insurance Program to Medicaid.[13]
Subsidy costs
As noted above, HHS projects that 13.8 million people will select a plan for 2017 through government exchanges, up from 12.7 million in 2016.[5] In 2016, 85 percent of individuals in states using Healthcare.gov received subsidies (through tax credits), meaning they did not bear the full cost of their health care coverage.[7]
The Congressional Budget Office (CBO) estimates that the tax credits will cost $43 billion in 2017, and a total of $672 billion between 2017 and 2026.[3]
| Net Federal Subsidies, Premium Tax Credit Subtotal, Billions of Dollars, by Fiscal Year | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Total |
| $43 | $53 | $60 | $64 | $68 | $71 | $74 | $77 | $80 | $83 | $672 |
Medicaid costs
Combined monthly enrollment in Medicaid and CHIP has increased 15.7 million since pre-ACA baseline levels (October 2013), from 57.4 million to 73.1 million in August 2016.[14] The CBO expects that figure to rise to 77 million in 2017.[15]
The federal government promised to fully fund the costs for expanded coverage for the first three calendar years (2014-2016). Starting in 2017, the federal government’s share will begin falling incrementally, to 90 percent by 2020.[16] No matter how the costs are apportioned, however, taxpayers must cover them.
The CBO estimates that federal funding for Medicaid to cover individuals made eligible by the ACA will cost taxpayers $67 billion in 2017, and a total of $969 billion from 2017-2026.[3]
| Net Federal Subsidies, Made eligible for Medicaid by the ACA, Billions of Dollars, by Fiscal Year | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Total |
| $67 | $71 | $77 | $83 | $91 | $99 | $107 | $116 | $125 | $134 | $969 |
Total costs
Exchange subsidies and Medicaid funding are only portions of the total cost of health insurance to taxpayers. The CBO and the Joint Committee on Taxation estimate that in 2016 “the federal subsidies, taxes, and penalties associated with health insurance coverage will result in a net subsidy from the federal government of $660 billion, or 3.6 percent of gross domestic product (GDP).” That amount is expected to grow 5.4 percent per year to $1.1 trillion (4.1 percent of GDP) in 2026, and amount to an $8.9 trillion total subsidy from 2017 to 2026.[4]
Finally, there is opportunity cost associated with every decision. Trillions spent annually on health insurance subsidies cannot be spent on other valued public services.
Conclusion
In an October 2016 fact check article, the Washington Post’s Glenn Kessler claimed that only “a relatively small number” of Americans would be affected by double-digit premium hikes for individual health insurance coverage purchased through the ACA exchanges.
Kessler’s conclusion is wrong. Although a majority of ACA enrollees will not directly pay higher premiums, the costs don’t disappear. They are shifted to taxpayers instead, amounting to $43 billion in 2017 for subsidizing individual plans purchased through government exchanges, and $67 billion next year for expanded Medicaid under the ACA. The government expects federal subsidies, taxes, and penalties associated with health insurance coverage will amount to an $8.9 trillion subsidy from 2017 to 2026.
See also
Launched in October 2015 and active through October 2018, Fact Check by Ballotpedia examined claims made by elected officials, political appointees, and political candidates at the federal, state, and local levels. We evaluated claims made by politicians of all backgrounds and affiliations, subjecting them to the same objective and neutral examination process. As of 2025, Ballotpedia staff periodically review these articles to revaluate and reaffirm our conclusions. Please email us with questions, comments, or concerns about these articles. To learn more about fact-checking, click here.
Sources and Notes
- ↑ Fortune, "Read the Full Transcript of the Second Presidential Debate Between Hillary Clinton and Donald Trump," October 9, 2016
- ↑ The Washington Post, "Confused by Obamacare? Here are answers to key questions," October 27, 2016
- ↑ 3.0 3.1 3.2 Congressional Budget Office, "Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026," March 2016, (pg. 31)
- ↑ 4.0 4.1 Congressional Budget Office, "Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2016 to 2026," March 2016, (pg. 2)
- ↑ 5.0 5.1 5.2 Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, "Health Insurance Marketplace Enrollment Projections for 2017," October 19, 2016, (pg. 2)
- ↑ Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, "Health Plan Choice and Premiums in the 2017 Health Insurance Marketplace," October 24, 2016, (pg. 20)
- ↑ 7.0 7.1 Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, "The Effect of Shopping and Premium Tax Credits on the Affordability of Marketplace Coverage," August 24, 2016, (pg. 2)
- ↑ Benefits.gov, "Medicaid Program," accessed November 7, 2016
- ↑ Medicaid.gov, "Medicaid, Financing and Reimbursement," accessed November 7, 2016
- ↑ U.S. Supreme Court, "National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services," June 28, 2012
- ↑ 138 percent of the federal poverty level is equal to $16,394 for individuals and $33,534 for a family of four. An individual is eligible with income below this level, if their state has expanded Medicaid. Healthcare.gov, "Federal Poverty Level (FPL)," accessed November 7, 2016
- ↑ The Henry J. Keiser Family Foundation, "Status of State Action on the Medicaid Expansion Decision," accessed November 20, 2016
- ↑ Medicaid.gov, "Affordable Care Act, CHIP," accessed November 7, 2016
- ↑ Medicaid.gov, "Medicaid & CHIP: August 2016 Monthly Applications, Eligibility Determinations and Enrollment Totals," November 3, 2016, (pg. 2-3)
- ↑ Congressional Budget Office, "Detail of Spending and Enrollment for Medicaid for CBO’s March 2016 Baseline," accessed November 16, 2016
- ↑ Medicaid.gov, "Affordable Care Act, Financing," accessed November 7, 2016
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