Here's how much your premiums will increase without Obamacare

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Zack SigelManaging EditorZack Sigel is a former managing editor at Policygenius who oversaw our mortgages, taxes, loans, banking, and investing verticals.

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Updated March 27, 2019: Last year, a poll from the Morning Consult revealed that more than one-third of respondents didn’t know Obamacare and the Affordable Care Act were the same thing. Nearly half of the respondents believed the Trump administration could fulfill its promise to repeal Obamacare without affecting the Affordable Care Act. The takeaway: People want affordable health care, but they don’t think Obamacare provides it.

There’s a reason people might feel that way. Americans spend more on health care as a percentage of gross domestic product than any other country in the world, but don’t receive better outcomes as a result. The law is aimed at reining in costs, but health insurance premiums have soared. The reason for that is a flaw inherent to the Affordable Care Act itself.

Obamacare (which, it bears repeating, is just the unofficial nickname for the Affordable Care Act) lowers costs in three key ways. The first is that it expands Medicaid, the single-payer health insurance system administered by the states, by providing additional federal money for states to cover more people. (Don't know if you qualify for Medicaid? Check out our state-by-state guide.)

The second is by paying direct reimbursements to health insurance carriers to subsidize plans bought through the Obamacare marketplace, which are called cost-sharing reductions, and tax credits for low-income people who would otherwise struggle to pay their premiums. The third is the part of the law called the individual mandate, which forces Americans to purchase health insurance coverage or pay a steep fee.

You can learn more about open enrollment here.

The individual mandate double-edged sword

Although being forced to purchase a private product makes some people uncomfortable, the individual mandate works in much the same way that buying toilet paper in bulk from Costco lowers your overall cost per roll. The more people purchase coverage, the more incentive carriers have to lower costs across the board. (Read more of our coverage of what people know – and don’t know – about Obamacare.)

However, the authors of the Affordable Care Act made a crucial error. The law came into force at a time of an almost unprecedented number of mergers and acquisitions in health care, leaving some counties with only a single insurer from which to purchase coverage. Suddenly, it began to look less like buying toilet paper in bulk from Costco, Amazon, Walmart or Home Depot and more like having to buy your toilet paper only from Costco. The one or two companies that remained could charge whatever they wanted because you were required by law to be a customer. To many, Obamacare no longer worked as an affordable care act.

The counties with fewer insurers tend to be less affluent and more likely to blame the rising health care costs on Obamacare. That explains one result of the Morning Consult poll: People earning less than $50,000 were more likely to believe Obamacare and the Affordable Care Act were not the same thing. By kicking back the responsibility to provide health care to the states, many of which even at the time of the law’s passing were deeply opposed to expanding social benefits, Obamacare failed millions of people.

When asked what kind of heath care Americans wanted, many of them had no idea.

When the individual mandate works as intended, premium costs fall. If you’re one of the 151 million people who receives health insurance through your employer, you know how being part of a group plan can reduce your premium costs. The individual mandate effectively creates a group of insured people who bought plans individually. While health insurance premiums have increased since the passage of the Affordable Care Act, the law actually reduced the rate of increases. Between 2002 and 2008, average family premium costs increased by 58%. Since the passage of Obamacare, in 2010, average premium costs have only increased by around 33%. That’s still an enormous amount of money to spend on health care, but it shows the Affordable Care Act is making progress.

The mandate is dead, but you should get covered anyways.

Prepare for a premium hike

That progress may be ending. The Trump administration repealed the individual mandate at the end of 2017 as part of its massive overhaul of tax law. In a report released last month,, the federal, nonpartisan Congressional Budget Office says that the repeal of the individual mandate would lead to a decrease in coverage. In 2018, approximately 244 million people “will have health insurance, and about 29 million will not. By 2028, about 243 million are projected to have health insurance and 35 million to lack it.”

That’s a drop of 6 million people, 3 million of whom lose coverage between 2018 and 2019. The C.B.O. says that due to the repeal of the individual mandate, premiums for plans purchased individually (not through an employer) will be higher. States like Georgia could see premium costs increase by 57%, on par with the days before the Affordable Care Act.

As premiums rise, healthy people may decide they no longer need health insurance coverage. Because the individual mandate no longer compels them to purchase a policy, these people will leave the insurance pool and leave only sicker people behind. That has a multiplier effect on premiums: Not only are the remaining insured people more costly to insure, but the insurance company can no longer rely on healthy people’s premiums to subsidize their costs.

These effects will be exacerbated further. The C.B.O. projects that as premiums rise and more people forgo health insurance, health insurance companies will continue to withdraw from markets where it is no longer profitable to operate. With fewer and fewer companies to compete for your business, the remaining insurers could raise costs even more. “Premiums for nongroup health insurance will be about 10 percent higher in 2019 than they would have been if the individual mandate penalty remained in place and was enforced,” the report says.

How cost-sharing reductions kept costs low

In 2017, the Trump administration also halted payments of a certain kind of subsidy created by Obamacare to make health insurance plans more affordable. This subsidy is called a cost-sharing reduction, and it applies to benchmark health insurance plans. (Benchmark plans are also known as silver plans in the Obamacare market’s metals system, and they offer stronger coverage than bronze plans but weaker coverage than gold plans.) Cost-sharing reduction payments were made directly to insurers so they could offer benchmark plans as affordably as possible.

The report estimates that eliminating cost-sharing payments will make silver plans unaffordable. In fact, they may become more unaffordable than even gold plans for people who also receive a tax subsidy for their health insurance. “For people without subsidies,” the C.B.O. writes, “premiums are estimated to be slightly less than three times higher for a 64-year-old than a 21-year-old, on average, after accounting for regulations in different states.” But premium hikes appear for every tier regardless of whether you purchased a bronze, silver, or gold plan. As an example, the C.B.O. report estimates “average premiums for a 21-year-old, a 45-year-old, and a 64-year-old who buy the lowest-cost gold plans through the marketplaces to be about $8,800, $12,600, and $25,700, respectively, in 2028.”

Even people who continue to receive subsidies will feel the pain. “In 2017, the average gross premium for subsidized enrollees in all states that use the federally facilitated marketplace platform was about $5,850,” the report states, “but the average net premium paid after subsidies was about $1,250.” Gross premiums, according to the C.B.O., rose to $7,650 in 2018, and without the core mechanisms of the Affordable Care Act in place, it is only expected to rise higher. Premium tax credits may more than offset the cost for low- and moderate-income earners, but they won’t be of any help to those who aren’t eligible or didn’t apply in time.

For all its shortcomings, Obamacare at the very least helps keep premium costs at bay. At best, it reduced the number of uninsured people by millions, although it has a long way and millions more people to go. This is modest progress, but even that can be reversed if Republican attacks on the law continue.

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