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The ACA exchanges lost enrollees from 2016 to 2018, reflecting the declining reach of  President Obama’s health care plan.  Unsubsidized enrollment in Obamacare exchanges declined by 2.5 million people from 2016 to 2018, representing a 40 percent drop nationally, according to a study by Centers for Medicare and Medicade Services (CMS) released August 12, 2019. The decrease in enrollment between 2016 and 2018 occurred entirely among people who did not receive ACA premium tax credit subsidies.

By contrast, enrollment via ACA exchanges by persons receiving premium tax credit subsidies increased by 300,000 people during the same time frame. This stunning contrast provides statistical evidence for what many working people and business owners in the US can see simply by the “eye” test: that Obamacare is not working for them. In a statement explaining the study, CMS Administrator Seema Verma characterized the report as follows:

“As President Trump predicted, people are fleeing the individual market,” she said. “Obamacare is failing the American people, and the ongoing exodus of the unsubsidized population from the market proves that Obamacare’s sky-high premiums are unaffordable.”

CMS Administrator Seema Verma

Nearly a decade into Obamacare, it is inarguable that this large-scale social experiment only works, if at all, with heavy government subsidies. (In fact, eight of ten people–a full 80%–using the Obamacare exchanges received tax assisted subsidies in 2017). Obamacare advocates argue that alternatives such as health care sharing and short-term insurance plans “undermine” the ACA exchanges by offering a viable alternative to medical care consumers–alternatives that the exchange advocates want to eliminate from the marketplace.

These arguments in favor of Obamacare subsidies and against health care alternatives are nothing more than an ongoing plea by ACA supporters for governmental market protection. But ACA market protection measures punish small business and self-employed (the only people actually paying for insurance on the Obamacare exchanges) in a disproportionate measure, as compared to the insurance companies whose profits are protected by the subsidies.

The central problem of Obamacare is, and always has been, the “cost-shifting” problem: how do you convince healthy people to pay relatively above-market insurance rates so that unhealthy people can pay relatively below-market rates for the same insurance? President Obama’s answer to this question–to “force” healthy people onto the Obamacare Exchanges–was both predictable progressive policy and simplistic in its failure to foresee unintended consequences.

The Obama Administration argued in NFIB v. Sebelius (US 2012) that “the individual mandate is within Congress’s power because the failure to purchase insurance ‘has a substantial and deleterious effect on interstate commerce’ by creating [a] cost-shifting problem.” The US Supreme Court explained the Obama Administration argument for cost-shifting like this:

“the [individual] mandate forces into the insurance risk pool more healthy individuals, whose premiums on average will be higher than their health care expenses. This allows insurers to subsidize the costs of covering the unhealthy individuals the reforms require them to accept.”

[NFIB v. Sebelius at p. 17]

The Court rejected this argument for cost-shifting under the commerce clause. Nevertheless, by approving the Obamacare cost-shifting scheme as a “tax penalty” under Congressional taxing powers, the US Supreme Court allowed Obamacare, and the ACA exchanges, to go forward. Subsequently, Congress even removed the Obamacare “penalty” by passing the Tax Cut and Jobs Act of 2017. As things stand today, we know that cost-shifting under the individual mandate was unconstitutional, and cost-shifting by imposing a tax penalty is effectively a nullity following the TCJA.

Notwithstanding these developments adverse to their views, Obamacare advocates continually push for expansion of cost-shifting subsidies; all the while urging state and federal agencies to block competing health care alternatives in the name of protecting the need for cost-shifting–the very cost-shifting that lacks Constitutional support after removal of the tax penalty under the TCJA. These arguments are rapidly approaching the line of economic protectionism for a failing insurance mandate plainly disfavored by a majority of taxpaying Americans.

And so a new Constitutional question has taken shape: does the commerce clause authorize Congress–or individual states, for that matter–to subsidize the profits of Obamacare insurers while simultaneously using the law to attack free market competitors, without limits, where the original enabling law (individual mandate) is unconstitutional and the tax penalty has been voided by Congress? I don’t see it.

With unsubsidized enrollees dropping out of Obamacare at a high rate (as explained in the primary article of this post) and arguments to continue or expand subsidies sounding very much like economic protectionism with no commerce clause support, it appears that Obamacare subsidies themselves are primarily used to protect insurance company profits against unsubsidized health care alternatives, such as health care sharing, association health plans or short-term insurance.

Protecting the profits of large insurers through Obamacare subsidies through the ACA exchanges is hardly a legitimate legislative purpose of the ACA, yet this is is where we find ourselves today. Surely, legislative alternatives exist that can simultaneously remove subsidies and attend to the legitimate needs of persons who are in need of health care. While caring for the needy among us should always be a focus of a government of the people, the same cannot be said for economic protection of large insurance company profits.

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