According to The Wall Street Journal, a new study published in JAMA Health Forum reveals the Affordable Care Act’s individual market has become a “money pit” for taxpayers. The research shows that in 2024, taxpayers paid nearly 80% of the premiums for subsidized ACA plans, a massive jump from just 30% back in 2014. That translated to over $114 billion paid directly to insurers this year, which is one-third more than 2023 after inflation and more than six times the 2014 amount. Congress expanded these subsidies in 2021 and extended them through 2025, leading to a situation where 90% of subsidy-eligible enrollees had access to plans costing $10 a month or less. The study’s authors, professors from Johns Hopkins and Texas Christian University, argue the subsidy design directly transfers the financial risk of rising premiums from enrollees to taxpayers.
The Subsidy Flywheel
Here’s the thing about how this works. The subsidies are designed to cap what people pay for a benchmark plan as a percentage of their income. So when premiums go up—and they have, due to market consolidation and other factors—the taxpayer portion automatically increases to cover the difference. It’s a perfect correlation, and it creates a kind of flywheel effect. Higher premiums trigger bigger subsidies, which pours more taxpayer money into the system with no real spending limit. And with the enhanced subsidies, even higher-income households got in on the deal. The result? A program that’s ballooned far beyond its original scope as “targeted assistance.” Now it looks more like a broad, open-ended entitlement.
Winners, Losers, and Fraud
So who wins in this setup? Health insurers and brokers are obvious beneficiaries, as a steady river of guaranteed government dollars flows their way. Politically, it’s a win for Democrats who can point to higher enrollment and low out-of-pocket costs. But the losers are pretty clear: taxpayers, and specifically those in employer-sponsored plans who are dealing with their own rising costs. There’s also a real crowding-out effect. The study found the market for unsubsidized ACA plans shrank by a quarter since 2014. Basically, the product isn’t attractive enough for people to buy without a huge government discount.
And then there’s the fraud problem. When you have a system where applications are rubber-stamped and premiums are near zero, it’s an open invitation for abuse. The article points to GAO findings where nearly all fake applications were approved. That means taxpayers aren’t just subsidizing legitimate low-income families; they’re also on the hook for fraudulent enrollments. It’s a structural flaw that seems almost designed to waste money.
A System With No Off-Ramp
The big question now is, what happens next? Congress faces a decision on extending these enhanced subsidies again past 2025. The study, which you can read here in JAMA Health Forum, is clearly meant to arm critics with data. The argument is that we’ve created a monster with no accountability. Premiums rise, subsidies rise, and the bill just gets sent to the public. There’s no market pressure to control costs because the government is absorbing the shock.
I think the most damning point is that this exposes a core contradiction. The ACA was sold as making healthcare more affordable and efficient. But if the only way to make it “affordable” is for taxpayers to cover 80% of the tab for a shrinking pool of people, has it actually worked? Or has it just created a massively expensive dependency? The data suggests it’s the latter. And pulling back now, politically, seems almost impossible. That’s the real money pit.
