We Don’t Need More Competition
Trying to fix Obamacare by increasing competition could easily do more harm than good.
“The Doctor” by Luke FIldes, 1891.Tate Gallery / Wikimedia
The complex design of the Affordable Care Act, combined with a strong concentration in the hospital market and active Republican sabotage efforts, has created a dynamic where most people on the individual market would be better off with a private-insurance monopoly. That is, for millions of low-income Americans, more competition on the exchanges would be a bad thing. To understand why, we need to look closely at how Obamacare subsidies are set and how insurers can and do exploit the subsidy formulas.
The ACA’s Competition Theory
The core theory behind the ACA’s exchanges was that a market for private insurers would drive down premiums. At first appearance, this seems to work. Looking at all counties using Healthcare.gov (thirty-eight states), the ones with more insurers tended to have lower premiums. Additionally, among people paying full price for insurance, the more insurers, the more people who bought coverage.
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