Administrative costs more than doubled after Obamacare implementation
Advocates of the Affordable Care Act (ACA) said the health care law would reduce the administrative costs associated with private health insurance. But the year after the ACA was implemented, administrative costs more than doubled.
According to a recent study by the American Action Forum, before the ACA was implemented, insurers spent $414 per person in administrative costs in 2013. The following year, those costs had ballooned to $893 per person.
The study also found that the exchanges did, in fact, lower the administration costs incurred by insurers from $414 per person in 2013 to $265 per person in 2014, but to compensate for the reduction, the federal government ended up spending $628 per person, bringing the total to $893 per person.
Study author Robert Book, a health economist and senior research director at Health Systems Innovation, said he was a little surprised by the increase, but more surprised by the allocation.
“Most of the increase was primarily on government spending to
operate the exchanges and to do public awareness campaigns to get people to
sign up,” Book told Patient Daily, adding that he would have expected insurance companies’
administrative costs to remain the same, but they dropped instead.
In totality, insurers spent $4.64 billion in administrative costs in 2013. In 2014, after the exchanges were introduced, total administrative costs rose to $13.87 billion, according to the study.
Many proponents of the ACA believed administering health care would be much more efficient if it were government-run, but the study shows otherwise.
“I wonder if (ACA proponents) have ever dealt with government agencies because most of the time, it’s more expensive for government to administer something, and that’s how it turned out in this case as well,” Book said.
ACA advocates also believed that having people sign up for insurance through the exchanges would have eliminated the costs associated with marketing, Book added, but the cost of operating the exchanges and advertising them turned out to be much larger than the amount saved by the insurance companies.
“While insurers did spend less per customer on administrative costs, federal spending more than made up the difference, making the exchanges into an expensive and wasteful subsidy to an industry that was not demonstrably in need of it,” the report said.
A 2015 report also by the American Action Forum broke down the additional burden on states due to the amount of paperwork the ACA imposes.
“There are six paperwork requirements related to the ACA that impose more than one million paperwork hours on local governments,” the report stated. “Combined, these six collections impose 27.1 million paperwork burden hours. In dollars, this translates to about $880 million.”
The ACA, commonly referred to as Obamacare, has been a topic of great debate since it was signed into law by President Barack Obama in 2010.
Republicans largely oppose the ACA and their promise to repeal the act was a common theme on the campaign trail – a promise Vice President-elect Mike Pence said GOP lawmakers intend to keep.
"Make no mistake about it," Pence said during a Wednesday news conference on Capitol Hill. "We're going to keep our promise to the American people -- we're going to repeal Obamacare and replace it with solutions that lower the cost of health insurance without growing the size of government."
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