When Politics and Policy Collide on the Obamacare Exchanges

Research Corner
March 21, 2023

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Soleil Shah, MSc, Research Reporter

Soleil Shah writes Tradeoffs’ Research Corner, a weekly newsletter bringing you original analysis, interviews with leading researchers and more to help you stay on top of the latest health policy research.

When Politics and Policy Collide on the Obamacare Exchanges

Thirteen years ago this Thursday President Obama signed the Affordable Care Act (ACA) into law. The historic policy passed along party lines and swiftly became known as Obamacare – a portend of the political divisions to come.

Even today, the ACA continues to be one of the most politically divisive bills passed in decades, with 87% of Democrats viewing it favorably compared to just 21% of Republicans.

The law’s politicization has been a major barrier to the expansion of Medicaid coverage in some of the red states where it could do the most good

But what effect has the law’s partisan baggage had on the millions of Republicans who are eligible to buy their own insurance on the ACA’s marketplaces? Do they still sign up – or do politics trump policy?

That’s the question at the center of a fascinating NBER working paper by Leonardo Bursztyn and colleagues.

Are Republicans less likely to use Obamacare?

The study made creative use of polling data from the Kaiser Family Foundation to measure how likely Republicans, Democrats and independents were to sign up for Obamacare plans. The authors also divided their populations by self-reported health (e.g., an unhealthy Democrat versus a healthy Democrat). 

After controlling for factors like insurance prices, age, race, education and income, the researchers found that between 2014 and 2019:

  • Unhealthy Republicans were four percentage points less likely to enroll in an Obamacare plan than unhealthy independents and Democrats.

  • Healthy Republicans were 12 percentage points less likely to enroll than healthy independents and Democrats.

And the authors took things one step further. They estimated that between 2014 and 2019, 3 million (or 20%) more people would have enrolled in Obamacare per year if politics had no sway over their behavior.

How partisanship leads to higher premiums 

Probing further, the authors asked: How has fewer Republicans signing up for Obamacare impacted the overall cost of insurance in the ACA marketplaces? 

In any insurance plan, healthy enrollees help pay for sicker ones’ claims and keep premiums down for everyone. By using federal health spending data, the authors estimated that Republicans not signing up for plans:

  • Increased the average cost of a marketplace plan by nearly three percent. 

  • Increased federal spending on subsidies, which help keep coverage affordable for people with lower incomes, by $105 per enrollee per year.

The authors posited that, in areas with fewer healthier Republicans signing up for ACA plans, insurers likely increased premiums to compensate. This made it even less likely for Republicans in those areas to sign up for ACA plans – causing insurers to respond by increasing premiums more. 

A growing political divide limits the power of federal policy

This paper offers one of many plausible and interconnected reasons why the ACA’s marketplaces have fallen short of some original goals. Coverage remains expensive for many and subsidized for most. Even this year’s record enrollment of 16 million still fell 8 million short of the 2023 levels the Congressional Budget Office predicted back in 2013 when the marketplaces first opened.

The authors also provide a cautionary lesson for policymakers as they consider government-led fixes to health care failures in an increasingly polarized society. 

One need look no further than the recent debates over COVID vaccine and mask mandates to understand that the impact of politics on the effectiveness of policies will likely only increase with time.