NCPA - National Center for Policy Analysis

Congress Should Leave the Health Care Exchange Business

March 4, 2015

On March 4, the Supreme Court heard oral arguments in King vs. Burwell. At stake is the Administration's payment of subsidies to health insurers operating in states using the federal exchange. A decision to uphold the ACA, as written, will surely cause millions of people to stop paying premiums that will double, triple, or more after the Supreme Court strikes down the illegal subsidies, writes John R. Graham, senior fellow with the National Center for Policy Analysis.

States that accept the loss of illegal subsidies will also lose the employer and individual mandates to buy government-defined health insurance. These are generally the most reviled features of Obamacare and any governor or state legislature that re-imposes them will face the wrath of many businesses and workers.

Nevertheless, the President will surely ask Congress to amend the law to open the subsidy spigot again. This creates an opportunity. Unfortunately, it is not the opportunity to repeal and replace the ACA, which most Americans have waited for five years.

Four proposals that both Congress and the President should find acceptable include:

  • Congress could get out of the exchange business. Instead of forcing people to buy health insurance through a government exchange, Americans should be able to buy health insurance however they want: online from private exchanges, or on the phone or in person from an agent or broker.
  • Eliminate the individual and employer mandates. These are red lines for individuals and employers, which the President crossed. Repealing the individual mandate would reduce the deficit; and repealing the employer mandate will increase employment among low-income workers.
  • Subsidize individuals, not insurance companies. This tax season, millions of Obamacare beneficiaries are going into shock as they learn from the IRS that the Obamacare policy they bought was overly subsidized. Instead of subsidizing health insurers through exchanges, individuals should be to apply for tax credits themselves.
  • Rescale the subsidies to make them fair. Obamacare subsidies phase out as household incomes increase, creating a high effective marginal tax rate for households with incomes up to about $80,000.

Source: John R. Graham, "Obamacare Versus The Affordable Care Act," National Center for Policy Analysis, March 4, 2015. 


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