Administrative Costs More Than Doubled After Implementation of Obamacare

Costs totaled $414 per person in 2013 but rose to $893 per person year after implementation


Administrative costs more than doubled after the implementation of Obamacare, according to a report from the American Action Forum.

In 2013, before the Affordable Care Act was implemented, insurers' administrative costs totaled $414 per person. The year after Obamacare was implemented, administrative costs more than doubled to $893 per person.

"During the debate leading up to the passage of the Affordable Care Act, many advocates of that legislation argued that one of the benefits of establishing a government-run health insurance exchange in each state would be a reduction in administrative costs associated with private health insurance," the report states.

By reducing administrative costs, advocates also projected that premiums and national spending on health care would decline.

However, the administration announced in October that premiums on the exchanges would increase by double digits and recent data found that administrative costs have increased as well.

The exchanges did reduce insurers' administrative costs from $414 per person in 2013 to $265 per person in 2014, but the federal government ended up spending $628 per person to make up that cost. In the end, administrative costs totaled $893 per person with the assistance of government-run health exchanges.

"While insurers indeed appear to have spent less on administrative costs, both on a per-covered-person basis and as a percentage of total premiums since the law went into effect, government spending necessary to set up and operate the exchanges vastly exceeded the amount saved by private-sector insurers, leading to an increase in total administrative costs," the report states.

"In fact, just the federal government's expenditures in establishing and operating the [Affordable Care Act] exchanges—a function devoted solely to enrollment—vastly exceeds the total administrative costs, both for enrollment and operations—of private-sector insurers prior to the implementation of the exchanges."

In 2013, total administrative costs for insurers amounted to $4.64 billion. After the Affordable Care Act was implemented in 2014, total administrative costs increased to $13.87 billion.

"Despite the promises of the ACA proponents, implementing a system of government-run health insurance exchanges did not reduce overall administrative costs, nor did it reduce premiums," the report states.

The Department of Health and Human Services did not respond to requests for comment by press time.