Highlights:
The NAIC has sent a letter urging Congress to extend the enhanced premium tax credits under the Affordable Care Act (ACA), essentially advocating for Congress to expand a major entitlement program. While health insurance should remain as affordable as possible for all Americans, a continuation of COVID-related assistance from the federal government to help pay for health insurance premiums distorts the healthcare system while also placing the U.S. on a fiscally unsustainable pathway.
The advocacy activity also invites scrutiny on the activities of NAIC. NAIC acts in many ways like a trade association and standard-setting body for insurance regulators. It is designated as a charitable organization, but is not subject to typical financial disclosure rules. Moreover, it also serves as a quasi-regulatory body insofar as model-legislation it develops is often incorporated into state laws. The upshot is that the NAIC has wide-ranging influence on the regulatory environment for state-based insurance markets, but is substantially accountable to taxpayers.
The enhanced premium tax credits for which the NAIC is advocating were initially introduced under the American Rescue Plan Act of 2021 to provide temporary relief during the COVID-19 pandemic. These refundable credits were intended to provide funds to cover premiums for health insurance. The NAIC is urging Congress to once again expand these tax credits, to fulfill the shortsighted goal of increased enrollment in federal health insurance plans.
Rather than extending subsidies, the NAIC should promote fiscal responsibility and reduce government dependency. The ACA’s enhanced premium tax credits are a prime example of a well-intentioned policy with negative consequences. In fact, subsidies for health insurance have been found to contribute to inflation. The last thing the NAIC should do is advocate for policies that would cause prices for goods and services to spike once again.
While the NAIC paints a grim picture of what might happen if these subsidies expire, Congress must examine the broader implications of such an extension. The NAIC’s request to extend the enhanced premium tax credits perpetuates reliance on the federal government—distorting the insurance market. According to one analysis, “the taxes required to fund health insurance subsidies generate their own economic distortions.” These credits artificially improve affordability, increase reliance on the federal government, and discourage market-driven solutions that could lower healthcare costs.
The NAIC claims that “the end of the enhanced credits would also starve state reinsurance programs of the federal support they have used to reduce individual market rates overall.” Instead of fostering innovative investment options for insurers, the NAIC is seeking to extend federal intervention to lower premiums. A better approach would be to allow insurers to invest in assets with higher yields, which will lower costs and reduce reliance on the federal government.
Millions of Americans who have enrolled in these programs have become reliant on government subsidies to afford their coverage. Instead of addressing the root causes of rising healthcare and insurance costs, the subsidies and bailouts mask the problem and postpone the inevitable market correction.
The NAIC is asking for an extension of subsidies while ignoring the debt crisis facing the U.S. With the national debt soaring past $35 trillion, we cannot afford to continue widening the budget deficit without considering the long-term fiscal impact. According to the Congressional Budget Office, for every dollar added to the U.S. deficit, private investment decreases by 33 cents. The director of economic policy studies at the American Enterprise Institute found that over the next decade, 78 percent of the increase in government spending “will come from rising spending on Social Security, Medicare and interest payments on the debt.” The federal government has already committed billions of dollars to these subsidies, and further expanding them indefinitely would only increase the burden on taxpayers and make U.S. debt even more expensive to service.
Instead of continuing down this flawed and unsustainable path, Congress should focus on market-based reforms that address the underlying issues in our healthcare system. By fostering competition and cutting back on government interference and red tape, we can create a more sustainable healthcare system that can stand on its own.
The NAIC’s plea for extending these tax credits exemplifies its neglect of American consumers. The NAIC is blind to the economic realities and shortcomings of the ACA. Congress must stop health insurance bailouts and oppose extending these subsidies. Instead, policymakers should reform our healthcare system in a way that promotes efficiency, innovation, and fiscal responsibility.