The exchanges are hurting. Uwe Reinhardt, among others, thinks the individual mandate isn’t stiff enough and that we’re too wimpy about its enforcement. Adrianna, among others, thinks the premium subsidies may be big enough to keep healthy people in the market.
I don’t know who’s right, but if we’re pinning our hopes on the premium subsidies, there’s trouble ahead. Through 2018, there’s a cap on the percentage of your income that you have to devote to premiums. As premiums go up, so too do the subsidies.
Starting in 2019, however, the percentage that you’ll be asked to pay will rise if premium growth outpaces inflation. (Check out §36B(b)(3)(A) of the Internal Revenue Code.) Over time, you’ll be asked to contribute an ever-greater fraction of your income to health care. No longer will the government bear the costs of skyrocketing premiums. You will.
As John McDonough has said, the lifting of the cap on premium payments is “the ACA’s political equivalent of the Medicare Part D ‘doughnut hole,’ something a future Congress will have to address if coverage is to remain affordable.”
Anyone want to take bets on what a future Congress might do?
UPDATE: The inimitable and all-knowing Loren Adler has pointed out to me that CBO has recently slashed projections of the number of enrollees in exchange plans. As a result, CBO doesn’t anticipate that overall spending on premium subsidies and cost-sharing subsidies will exceed 0.504% of GDP through 2025. That matters because, under the ACA, the cap on the percentage of income that families have to devote to health care is lifted only if spending exceeds 0.504% of GDP.
The ACA’s caps on income-contributions are therefore likely to remain in place in 2019 and beyond. Or maybe not: these projections are necessarily uncertain, and CBO projected that the 0.504% trigger would be hit as recently as last year. Time will tell.