Obamacare is becoming even more frail

Ted Kennedy once remarked that healthcare reform was the "great unfinished business" of American society, as the nation lacked universal coverage. America's system consisted of government programs for the elderly, poor, and disabled, with most working-age Americans obtaining insurance through their employers. However, those without employer-based coverage had to navigate a fragmented and costly individual insurance market.

The Affordable Care Act (ACA) of 2010 aimed to preserve the existing system while expanding coverage for lower-income individuals and simplifying the process for purchasing insurance through new "exchanges." Yet, even its supporters, like Bernie Sanders, acknowledged that the ACA was insufficient, particularly for those on the individual market.

Data now reveals that the ACA subsidies that helped subsidize the cost of insurance plans on the exchanges are diminishing. The individual mandate, which compelled people to buy insurance, was largely eliminated in 2019. Initially, enrolments remained low, but a generous expansion of subsidies in 2021 led to a nearly doubling of enrollees by 2025.

However, with the reduction in subsidies, the individual market now appears more fragile than ever. Figures from insurers and state marketplaces indicate that the number of people purchasing coverage through the exchanges dropped to 19.2 million from 21.8 million last year. The Congressional Budget Office projects that this number may fall below 17 million by the end of the year, as many individuals are foregoing coverage altogether.

The individuals who leave the exchanges tend to be healthier, leading to higher insurance costs for those who remain. This has resulted in increased premiums, with the average monthly payment rising from $113 to $178. To avoid the higher costs, some enrollees are opting for less comprehensive plans, with the average out-of-pocket expense before insurance coverage began increasing by nearly 40% to $3,800.

This deterioration in the quality of insurance plans has raised concerns about an adverse-selection feedback loop, where higher premiums and skimpier plans reduce the attractiveness of insurance, particularly for healthier customers. As they leave the exchanges, premiums are expected to rise further, with a median increase of 15% projected for 2027. If these increases become reality, pre-subsidy premiums will have grown by more than a third since 2025.

The CBO predicts that by 2028, nearly 10 million fewer Americans will have insurance on the marketplaces compared to last year. However, health economist Ben Sommers from Harvard believes that these changes will likely stabilize the market, returning it to the levels observed between 2016 and 2019. While the exchanges will be smaller and have fewer insurers, and the remaining population will be sicker, a sufficient number of individuals will likely remain enrolled due to the continued availability of subsidies.

Nevertheless, millions of Americans will still lack coverage, potentially leading to delayed treatment for necessary medical procedures and medicines. Hospitals will continue to provide emergency care to uninsured patients, regardless of their ability to pay. According to a consultancy, HCA Healthcare, the growing uninsured population will cost the company at least $1 billion in operating profits this year, representing roughly 15% of its expected net income.

This situation underscores the fundamental desire for health insurance among Americans, but highlights the persistent challenges in making coverage affordable for all.