Monday, June 24, 2013

Why a Health Insurance Penalty May Look Tempting - Says 55% of Americans MUST READ

 Traditional Major Medical Health Insurance Is Looking Less Appealing ????

OFTEN, when the government wants you to do something, it makes you pay if you don’t. That would seem to be the case with Obamacare, which penalizes companies for not providing health care. But in that penalty, there could be a paradoxical result: dropping health coverage could save companies a lot of money.       
 
Minh Uong/The New York Times

$11,429
Employer portion of family health benefit, average current cost
$2,000
Employer penalty for not providing benefits under Obamacare
Once new health insurance exchanges are up and running in October, companies with 50 or more full-time employees will face a choice: Provide affordable care to all full-time employees, or pay a penalty. But that penalty is only $2,000 a person, excluding the first 30 employees. With an employer’s contribution to family health coverage now averaging $11,429 a year, taking that penalty would seem to yield big savings.
      
Yet there may be costs in employee satisfaction, especially if companies don’t raise pay enough to keep workers whole when they buy insurance on the exchanges.
      
“No one wants to drop health insurance and have unhappy employees,” says Rick Wald, who heads Deloitte’s employer health care consulting practice.
      
Few experts see immediate, big changes to existing employer-sponsored coverage. But that may change in time. A generation ago, defined-benefit pensions were prevalent. Not so today.
So why did the government set the penalty at $2,000?
      
Policy experts don’t agree on the rationale, and the White House didn’t respond to requests for comment. Perhaps the intent was to start a gradual shift from employer-sponsored coverage to the new exchanges. Or maybe the low amount was a compromise needed to pass the law.
      
Whatever the reason, the government is about to conduct a huge experiment in corporate decision-making.
      
Sources: 2012 Employer Health Benefits survey from the Kaiser Family Foundation and Health Research and Educational Trust; the Affordable Care Act

Original Article By ANNA BERNASEK via http://www.nytimes.com/2013/06/23/business/why-a-health-insurance-penalty-may-look-tempting.html?_r=0

Risky Health Insurance Bets Could Backfire for Small Employers - A MUST READ!


Risky Health Insurance Bets Could Backfire for Small Employers


A growing number of small businesses have tried to reduce their health-care costs in recent years by replacing traditional insurance with self-insured plans. That means that instead of buying policies from big insurers such as Aetna (AET) or WellPoint (WLP), the company sets aside money to pay for workers’ medical claims directly. The practice is common at big companies, where a large number of claims make it easier to predict health-care costs. Most small employers, who can face exploding health bills from a single unexpected illness or injury, have still stuck to conventional insurance.

A new report today from the progressive Washington advocacy group Center for American Progress warns that a shift toward self-insurance by small companies may put their workers’ health and their own finances at risk. Self-insured plans aren’t subject to some of the requirements of health reform, such as the minimum coverage requirements that traditional policies must now provide. And as the CAP report points out, self-insuring can save companies real money if their workers are healthy:
“As long as these employee groups remain young and healthy, there are few incentives for employers to join the fully insured risk pool that includes older, less healthy individuals, who increase the price of insurance premiums.”
But if costs go up—if an employee or family member has a car accident, say, or gets cancer or HIV—the company might choose to buy an insurance policy, where the risk will be shared with other employers. Under Obamacare, insurers aren’t allowed to charge companies with sicker workers higher premiums. This could raise costs for other groups buying insurance:
“Churning between the self- and fully funded markets would allow small businesses to capitalize on the fully funded and regulated market only when employer risk is high without otherwise participating in the risk pool. This adverse selection could, in turn, raise premiums in the fully funded small group market.”
Think of the health insurance system as a spectrum of how much risk is shared. At one extreme would be a system where everybody pays the same amount into a pool of money (a “single payer”) that pays for everybody’s care. Risk is shared completely. At the other extreme, everyone would bear his or her own medical risk directly. There’s no insurance, and people are on their own to pay for the care they need.

The U.S. health-care system operates somewhere in between—risk pools are sliced and diced by geography, employer, and type of insurance. That creates incentives for “adverse selection,” or gaming the system by sharing risk only when you’re likely to have high costs, and going it alone when costs are low.

Some states are trying to rein in the practice of self-insurance by small businesses, mostly by regulating stop-loss insurance. Those are secondary policies that employers buy that will pay out if medical claims get very costly. Last month Colorado passed a law (pdf) to limit how stop-loss policies can be sold to small businesses. It’s not clear yet how much self-insurance by small businesses might affect premium costs in the broader marketplace. But it’s clearly something regulators are watching.

Original Article by:  via http://www.businessweek.com/articles/2013-06-19/risky-health-insurance-bets-could-backfire-for-small-employers

Monday, June 10, 2013

OBAMACare Perspective: A Tsunami of Bureaucracy

Americans will be shocked by details of Affordable Care Act


The Affordable Care Act expands America’s healthcare system to provide guaranteed insurance coverage for all citizens, financially incentivizes and targets healthcare providers’ services to improve the wellness of their patients, and makes healthcare’s system of compensation based on wellness instead of fees for the treatment of sickness and disease. These are, philosophically, lofty ACA ideals on which almost everyone can agree.

healthcarelaw
 
While the concept of universal health insurance promoting wellness for all Americans is good, concerns about implementing the ACA in 2014 on a nationwide basis are these:

• In 2014, the U.S. population will approach 320 million.
• Approximately 50 million U.S. residents are uninsured – a large number of new clients to evaluate and enroll into healthcare insurance plans, as well as provide quality medical services.

• The U.S. healthcare market now services around 250 million persons. Sixteen percent of the U.S. Gross Domestic Product is expended for medical services. Delays and mismanagement could have a significant negative impact on the health of the U.S. economy.

• Over 40 federal government agencies are authorized by ACA legislation to promulgate regulations controlling the healthcare industry. Many of these regulations have not yet been released to the public – even though implementation of the ACA is supposed to commence around October 2013.

• To fund the ACA, every resident will be required to purchase healthcare insurance from a private insurer or from a healthcare insurance exchange operated in each state by either the U.S. government or a state healthcare agency. Healthcare exchanges in over 50 percent of the states have not yet been either announced or established.

The cost will be expensive

The U.S. Supreme Court ruled (National Federation of Independent Businesses v. Sebelius, Secretary of Health and Human Services) that ACA legislation was constitutional and requiring persons not purchasing mandated health insurance to pay a penalty to the U.S. government was a tax levied by Congress.

The ACA created a broad array of new taxes to help pay for the cost of universal healthcare insurance (irs.gov/uac/Affordable-Care-Act-Tax-Provisions).

There are numerous new taxes detailed at the referenced IRS website. Here are a few examples:

• 3.8 percent net investment income tax on unearned individual income over $200,000
• 0.9 percent additional Medicare tax
• 2.3 percent medical device excise tax
• Employer “shared responsibility” payment of $2,000 per employee
• Health insurance company taxes – based on each insurer’s market share
• Brand name prescription drug tax – based on drug maker’s market share
• Individual “shared responsibility” payment – effective in 2014.

ACA legislation was enacted March 23, 2010, and contained about 2,000 pages (healthcare.gov/law). Agencies of the federal government, as authorized by the healthcare law, are in the process of writing and issuing ACA regulations and guidelines. The precise number of pages of ACA guidelines is unknown but healthcare attorneys estimate they could total 20,000 pages by 2014.

As earlier stated, the lofty ideals of the ACA are goals most Americans would support. The concerns relate on how to achieve these goals. Bureaucracies of the U.S. government are not competent to manage one-sixth of the U.S. economy. The power of a free-market economy and the competitive forces of millions of American consumers will be diminished. The few government officials making decisions on healthcare cannot be adequately informed about the medical needs of more than 300 million Americans.
 
Implementation of the ACA could morph info a financial disaster. The healthcare industry could be overwhelmed by massive paperwork, corporate overhead costs, unsustainable operating losses, a backlog of new patients, slow bureaucratic response to time-sensitive matters, and mass confusion by millions of Americans endeavoring to deal with thousands of pages of legislation and regulations.
Only time will tell if the federal government can responsibly regulate the U.S. healthcare system or if ACA legislation reaches too far and attempts to do too much.

Original Article By: Ed Laneis chief executive of Lane Consultants, Inc. and publisher of The Lane Report

California Health Insurance Premiums Under Obamacare Revealed - TN Rates Will Be More!

California Health Insurance Premiums

California Gov. Jerry Brown (D) announced 13 health insurance companies will offer products to the state's residents under President Barack Obama's health care reform law.
           
A 40-year-old Californian with a moderate income will pay between nothing and $219 a month for a basic health insurance plan next year under President Barack Obama's health care reform law, a state agency announced Thursday.

Covered California, the authority in charge of the state's health insurance exchange, has released details about what the health insurance market for individuals who don't get coverage at work will look like next year. In all, 13 health insurance companies will sell products on the exchange, and premiums will range from 2 percent more to 29 percent less than what comparable plans cost this year, the agency said.

California is not only the most populous state in the U.S., but it also has the highest number of uninsured residents, 7.3 million in 2011. The state is tied for the fourth-highest percentage of residents without health insurance at 20 percent, census data show. The state embraced health care reform soon after Obama signed the law in 2010 and is seen as a bellwether for whether the initiative can succeed.

The results of Covered California's negotiations with health insurance companies belie predictions of massive premium increases under the law, at least for products that offer a range of benefits similar to those currently sold to small businesses.

The average cost of a standard health insurance plan sold on the health insurance exchange will range from $304 to $321 a month in the Golden State next year, Covered California announced. Compared to existing plans with comparable benefits and factoring in available subsidies for low- and moderate-income people, prices like these represent either a small increase or a significant decrease in the monthly costs, the agency said.

"This is a home run for consumers in every region of California," Peter Lee, the executive director of Covered California, said in a press release. 'Our active negotiating will not only benefit potential enrollees to Covered California, but will benefit all Californians by making health care affordable.' California is one of just six states that will use their negotiating leverage to force lower premiums under Obamacare.

california health insurance premiums
Health insurance companies and political opponents of the health care reform law repeatedly have cautioned that its benefit mandates and limitations on industry practices like excluding sick people and charging higher rates to women and older people would dramatically raise premiums.
The evidence to date is mixed. In Maryland, CareFirst BlueCross BlueShield requested that the state approve a 25 percent hike in premiums for individuals for next year. In contrast, two health insurers in Oregon actually scaled back their proposed increases after seeing what their competitors planned.
Prices could be higher for individuals who currently buy skimpier coverage than will be permitted under Obamacare in the individual market. The law mandates that insurance covers things like prescription drugs and maternity care, which will tend to increase premiums. This especially could affect younger and healthier customers.

"Californians in the individual market may pay more than they have before for the additional benefits -- even if those are benefits they may never use," the California Association of Health Plans said in a press release.

Tax credit subsidies may offset premium increases for those who earn less than four times the federal poverty level, or $25,960 for a single person this year.


Starting next year, 5.3 million Californians who don't receive health benefits from their jobs will be eligible to buy health insurance from the exchange marketplace, according to Covered California. Individuals who buy health coverage for themselves rather than get it through their employment represent just 5.6 percent of the state's current health insurance market, the California Association of Health Plans said in a press release Thursday.

California's leading health insurance companies, including Kaiser Permanente, WellPoint subsidiary Anthem Blue Cross, Health Net, and Blue Shield of California will participate in the exchange. Several large national health insurance companies including UnitedHealth Group, Aetna and Cigna, won't sell products through Covered California.

"With today’s announcement, we have proof that health reform can stimulate competition and increase value for consumers," Blue Shield of California President and Chief Executive Officer Paul Markovich said in a press release.

Among those who can purchase health insurance via Covered California, 2.6 million will qualify for financial assistance because they have incomes ranging from 133 percent of the federal poverty level, which is $15,282 for a single person this year, to four times the poverty level. Those with lower incomes will gain access to California's Medicaid program, called Medi-Cal.
Covered California estimates that 46 percent of those eligible to shop on the health insurance exchange will be Latino, 33 percent will be white, 14 percent will be Asian and 4 percent will be African-American.

Under Obama's health care law, four grades of health insurance will be available on the state-based exchanges. They are named after metals that signify the levels of coverage and premiums: Bronze, Silver, Gold and Platinum. Subsidies are based on an individual's income and pegged to the cost of a Silver plan. People younger than 30 can opt for a bare-bones "catastrophic" plan, but cannot receive subsidies to offset its cost.

In practice, that means a 40-year-old Californian can choose among a variety of levels of coverage at a range in price. This table from Covered California illustrates the average amount a consumer will pay, displayed in black, and the value of what the government will pay to insurers, in green.

california health insurance premiums

One of the most important, and least certain, goals of health care reform is to attract younger and healthier people into the health insurance market. This segment of the population would pay premiums into the system but have fewer medical costs, and they are needed to balance the high health care costs of older, sicker people. This is particularly important, since Obamacare forbids health insurance companies from rejecting people with preexisting conditions and restricts how much older customers can be charged.

Unsubsidized catastrophic health insurance will cost an average of $136 to $168 a month for a 21-year-old next year, according to Covered California. That same customer could elect for a Bronze plan that, depending on her income, would cost between nothing and $185, or a Silver plan with monthly premiums that range from $44 to $230.

california health insurance premiums

Read Covered California's report on 2014 health insurance premiums:


Original Article By:

Want to Improve Health Care? Spend Less on It

Want to Improve Health Care? Spend Less on It


According to a new study of Medicaid recipients in Oregon, increased health-care spending has only a limited impact on improving people’s health. This points to an underlying reality: Hospitals and doctors’ surgeries may account for a considerable majority of health-care expenditures, but they aren’t the main factors in health outcomes. That’s true not only in the U.S. but around the world.
The Oregon study suggested that expanding Medicaid had considerable benefits: Recipients got more health care and didn’t suffer the impact of catastrophic health costs. Depression rates fell by 30 percent. But after two years, blood pressure and cholesterol levels of participants hadn’t shifted, and while more people were on medicine to control diabetes, the relevant tests suggest the treatments were having limited impact. Better health coverage for particularly vulnerable groups does save lives, but previous analyses have also suggested that a general expansion in insurance coverage doesn’t necessarily do a huge amount for health outcomes.

Americans get terrible value for money from their health spending. According to data from the World Bank, the U.S. spends $8,608 per person per year on health care. But the country has a lower average life expectancy than Chile, where health expenditure is $1,292 per year, or Israel, where expenditure is $2,172 per year. U.S. life expectancy is nearly four years shorter than it is in Spain, yet Spain’s annual health expenditure per person is about one-third of the U.S. level.

One reason for that weak link is the obscene prices charged by U.S. health providers. American hospitals as a whole often charge two to four times as much for a procedure than the cost of flying overseas and then paying full price for the same treatment somewhere else. But in partial defense of U.S. health care, the link between health expenditure and health outcomes is weak worldwide. The relationship between the number of doctors or hospitals in a country and mortality rates is even weaker. That’s because the measures that are most effective in raising a population’s life expectancy don’t require complex medical techniques and don’t cost that much.

The cheap interventions include vaccines that can be had for cents a shot. They can pretty much wipe out the risk of dying from a range of communicable diseases. Measles is one example: Thanks to more widespread vaccine coverage, the number of kids dying each year from the disease has fallen from 2.6 million in 1980 to 139,000 in 2010. Add a few more simple things—such as sugar-salt solutions to treat diarrhea, antibiotics to fight a range of infections, and better health practices such as washing with soap—and you massively reduce mortality rates, especially among young people. That’s how Vietnam can spend 63¢ a day per person on health care and get a life expectancy of 75 years—only marginally behind the U.S. expectancy of 79 years.

At the same time, as people get richer, they spend more money on health care but also more money on a range of things that make them sick—such things as fats, cigarettes, sugar, and alcohol. About a third of the world’s adult population now smokes, and cigarettes kill five million people a year. Over the past 30 years, global obesity rates have approximately doubled, and obesity takes away 36 million years of healthy life pdf) from the world’s population every year.


That’s why health can sometimes improve when people have less money to spend. Cuba’s economy nosedived in the 1990s after the Soviet Union’s support ended. A recent study in the British Medical Journal reports that between 1980 and 1997, the average Cuban lost more than 5 kg in weight, obesity rates plummeted, and cigarette consumption per person fell by half. Deaths due to diabetes also halved between 1996 and 2002, and deaths from coronary heart disease fell more than a third. As Cuba’s economy recovered, deaths due to diabetes returned to precrisis levels.

Back in the U.S., obesity rates have declined slightly since 2009—falling from 26.5 percent of the population to 26.2 percent. Smoking rates also fell. Perhaps part of that is a very small silver lining to the recession. Overall, improving diet and exercise habits, combined with weaning a fifth of the population off nicotine, would do more to improve health than throwing yet more money at a dysfunctional health-care system.

With lower violent crime and safer driving as well, the U.S. might even surpass Spanish levels of life expectancy, for a fraction of what Americans spend on health care today. Doctors and hospitals can do some things to ameliorate the results of our addictions to fat, sugar, nicotine, guns and automobiles –but it would be far better for America’s health to fix the addictions themselves.
It’s shocking that, in one of the richest countries in the world, millions are still denied access to health care—and especially preventative services—because they can’t afford coverage. And the pain and disruption associated with paying medical bills is immense. The U.S.’s move toward universal health coverage is a step in the right direction. But the U.S. also needs to get more serious about keeping people out of doctors’ offices and hospitals in the first place. That’s the most effective –and by far the cheapest— path to longer, healthier lives.

Original Article By via http://www.businessweek.com/articles/2013-05-13/want-to-improve-health-care-spend-less-on-it

Wednesday, June 5, 2013

Your Health Insurance Company May Owe You Money - MUST READ!

Your Health Insurance Company May Owe You Money

Photograph by Martin Barraud

Last year health insurance companies sent small businesses $321 million in rebates. In California, tens of millions more are on the way, according to the Los Angeles Times. The money comes from a little-known piece of Obamacare meant to keep premiums in check.

In all the talk about death panels, mandates, and insurance exchanges, it’s easy to miss how the Affordable Care Act tries to limit health insurance premiums. The rule, known as the medical loss ratio, requires insurers to spend at least 80¢ of every premium dollar on medical care. That means marketing, salaries, dividends to shareholders, and other expenses can’t make up more than 20 percent of what an insurer collects from policyholders. (The proportion insurers must spend on medical care goes up to 85¢ for policies sold to large employers.)

The idea is that if the actual cost of paying for medical care comes in well below what insurance companies predict when they set premiums, that money goes back to the policyholders rather than becoming a windfall for the carrier. The first rebates went out last summer. Insurers refunded $1.1 billion on policies that covered more than 12 million Americans, with an average rebate of $151 per family, according to the Department of Health and Human Services.

While it’s easy to conclude that insurers are deliberately overcharging consumers and employers, the rebate actually discourages insurers from pricing plans too conservatively, says Cori Uccello, a senior health fellow at American Academy of Actuaries, the professional society of risk modelers.“There is some underlying uncertainty in what claims are going to be,” she says. And the adjustment only works in one direction: to benefit policyholders if plans are priced too high. “If that plan’s claims experience is worse than expected, they don’t get to go back and charge more,” Uccello says.
The bulk of the rebates in California this year are heading to small businesses, the L.A. Times’ Chad Terhune reports:

“Blue Shield, the state’s third-largest health insurer, will be sending rebates to about 29,000 small businesses. That’s because the San Francisco insurer spent 76.6% of premiums on their medical care. Those small firms cover 90,000 employees and dependents.
“Anthem Blue Cross, a unit of industry giant WellPoint Inc. (WLP), will be giving rebates to nearly 45,000 small businesses. The state’s largest for-profit health insurer spent 79.3% of premiums on their medical care, just shy of the threshold. Those small employers cover about 322,000 workers and family members.”
 
For businesses of all sizes, the rebates go to the employer. Companies are supposed to pass along the portion of the refund that applies to employees’ contributions to health premiums.

Insurance companies, unsurprisingly, are not fans of the rule. The industry lobby, America’s Health Insurance Plans, points out that medical costs—not insurers’ overhead—drive rate increases. And the majority of health insurance policies didn’t have to send back money last year, according to HHS: “Approximately 66.7 million consumers are insured by an insurance company that provides the required value for their premium dollars. … 62% of consumers in the individual market; 83% in the small group market; and 89% in the large group market.”

Health insurers must pay rebates for 2012 by Aug. 1. Lots of people are focused now on what premiums will look like for the year ahead—and how much employers and consumers should fear rate shock in the first year of Obamacare’s mandates. But the real verdict on the premiums we’ll see quoted this fall may not come until 2015, when we find out how much insurers may have to refund.

Original Article By  via

Monday, June 3, 2013

Democrats' New Argument: It's A Good Thing That Obamacare Doubles Individual Health INS Prem.

Bridge across North Lake, Woodbridge, Irvine, ...

Irvine, California, where health insurance premiums for the average 25-year-old who purchases insurance for himself will nearly double under Obamacare. (Photo credit: Wikipedia)

Well, it’s been an interesting week in health care land. For a while now, independent analysts—and conservative critics—have raised concerns that Obamacare will dramatically increase the cost of individually-purchased health insurance for healthier people. This would, of course, contradict President Obama’s promises that “if you like your plan, you can keep it” and that the cost of insurance would go down “by $2,500 per family per year.” What’s new is that liberal columnists, facing reality, are conceding that premiums will go up for most people in the individual market. But they’re justifying it by saying that “rate shock” will help a tiny minority of people who can’t get insurance today. If they had said that in 2009, would Obamacare have passed?

Last month, progressive pundits were trumpeting news out of California that the cost of health insurance under Obamacare in that state was surprisingly low. “Well, the California bids are in,” wrote Paul Krugman on May 27. “And the prices, it turns out, are surprisingly low…So yes, it does look as if there’s an Obamacare shock coming,” the shock that Obamacare will work just fine.

It turns out, however, that Krugman was uncritically regurgitating California’s misleading press release. In fact, the average 25 and 40-year-old will pay double under Obamacare what they would need to pay today, based on rates posted at eHealthInsurance.com (NASDAQ:EHTH). More specifically, for the typical 25-year-old male non-smoker, the average Obamacare “bronze” exchange plan in California will cost between 64 and 117 percent more than the cheapest five plans on eHealth. For 40-year-old male non-smokers, it’s between 73 and 146 percent more.

Democrats now: It’s ok if premiums double for average people

Ezra Klein of the Washington Post, in response to my article on this topic, checked out the eHealth rates for plans in his hometown of Irvine, California, and compared them to a similar website sponsored by the government at healthcare.gov. He found that the third-cheapest plan there cost only $109 a month, “if they’ll sell it to you for that price.” According to the government, Ezra notes, 14 percent of people who tried to buy that plan—Health Net’s IPF PPO Value 4500—were turned away. Another 12 percent were asked to pay more than $109.

To Ezra, it’s galling that three-fourths of his compatriots can pay $109 for health insurance, because 12 percent were not eligible for the plan, and another 14 percent had to pay somewhat more. This is why Obamacare is a great achievement, he says, because Health Net will have to serve all comers, regardless of prior health status.

And I appreciate Ezra’s perspective. I, too, am a supporter of universal coverage, so I understand Ezra’s passion for providing health insurance to the sick. But what we didn’t know last week—and we do now—is how much more the healthy will have to pay for that insurance, under Obamacare. In Orange County, where Irvine is located, the three-fourths of the 25-year-old population that is in good health will have their premiums jacked by 95 percent.

And that’s for Obamacare’s “catastrophic” coverage; the more comprehensive “bronze” plan increases premiums by 130 percent. For the fraction—one-eighth of the total—who, under the old system, would have been charged more, the premium increase due to Obamacare will be somewhat less.

And the vast majority of those who were turned away are able to find insurance—albeit at a higher price—elsewhere. Based on enrollment in Obamacare’s high-risk pool program, the number of people in America who are truly uninsurable is closer to 150,000. That’s a pretty small number in a nation of 300 million. Previous estimates of the uninsurable population came in around 2 to 4 million people, but it’s likely that for many of these individuals, the principal problem is not that they’re denied coverage, but that the premiums are high.


Experts in the economics of health insurance understand that this has been Obamacare’s central flaw from the beginning. The law’s heavy-handed approach to the health insurance market massively drives up premiums for the average person.

Ezra makes another accurate point that is important to emphasize: these increased premiums affect people who shop for insurance on their own. If you get insurance through your employer, especially if your employer is large, you should be significantly less affected. But an increasing number of people shop for insurance on their own, because fewer and fewer employers are sponsoring health coverage. According to the Congressional Budget Office, in 2022, around 25 million people will be purchasing coverage for themselves, and another 25 million will be enrolled on the exchanges. That’s a lot of people. And it doesn’t include the 30 million that will remain uninsured.

Universal coverage, done right, can address these problems in a way that makes insurance affordable for everyone. But Obamacare’s sops to special interests—from the various services all plans are required to cover, to the fact that the law forces young people to pay more to subsidize well-established older people—is not the right way, because it makes insurance too costly.


Democrats then: Rate shock is a right-wing myth

The key thing to remember is that back when Obamacare was being debated in Congress, Democrats claimed that it was right-wing nonsense that premiums would go up under Obamacare. “What we know for sure,” Obamacare architect Jonathan Gruber told Ezra Klein in 2009, “is that [the bill] will lower the cost of buying non-group health insurance.” For sure.

In 2009, was Ezra saying that it’s ok that premiums will double for the average person, because a minority of people will pre-existing conditions will benefit? No.

Earlier that year, AHIP, the private insurer trade group, commissioned a report from PriceWaterhouseCoopers to analyze the impact of Obamacare on health insurance premiums in the individual market. That report, which I reviewed here and elsewhere, found that the version of Obamacare then being considered by the Senate Finance Committee would increase premiums by 14 to 32 percent, depending on the year you looked at. In retrospect, the PwC report was a bit optimistic.
But Ezra described the PwC analysis as “the insurance industry’s deceptive report,” comparing it to sham research put out by the tobacco industry and Big Oil. Ezra did concede at the time that “buying better insurance will cost somewhat more,” because insurers would no longer be able “to sell a deceptive and insufficient product.”

But high-deductible, catastrophic insurance isn’t cheaper because it’s dishonest. It’s cheaper because it’s more efficiently designed. And it’s precisely that sort of efficiently-designed insurance that Obamacare abolishes.

Businesses in competitive markets can’t survive by cheating

This idea that high-deductible insurance, freely purchased in a voluntary exchange, is a “dishonest” product is an article of faith in some quarters. My good friend and Forbes colleague Rick Ungar recently dedicated an entire blog post to the subject. The numbers that come out of eHealthInsurance.com, Rick says, are lies. What data does Rick cite to prove this? He doesn’t cite any actual numbers. Instead, he cites…anonymous reviews on the internet.



Rick went to epinions.com, and pulled out quotations from people who were unhappy with eHealth’s customer service. And eHealth should certainly do what it can to address customer’s complaints. (The company, however, isn’t directly responsible for the customer service of the insurers whose products it sells.) Remember that, unlike with Obamacare, eHealth is a private business. No one is forced to use their services. Those who do have a bad experience on eHealth can go elsewhere, like healthcare.gov. eHealth, unlike the government, has an economic incentive to make its customers happy. Indeed, the default setting at eHealth is to sort the listed plans by customer popularity.
If we abolished every company with negative reviews on the internet, we wouldn’t have much of a private sector left. But that’s effectively Rick’s—and Obamacare’s—logic. Once the Obamacare battle station becomes fully operational, eHealth won’t be allowed to sell inexpensive insurance plans. Everyone will pay the higher rate, the higher rate that Rick Ungar’s commenters once thought was a bad deal.

And if we go to a site equally as reliable as epinions.com—my comments section—we find a much more revealing assessment of eHealth’s business practices. Commenter Robert W. says that, because he has a pre-existing condition, the insurer in Georgia who listed a plan costing $130 a month on eHealth charged him $260 instead. Unsurprising. But several other commenters weighed in to say that they had had positive experiences on eHealth.

Commenter Steve Getman: “That wasn’t my experience when purchasing coverage from eHealthInsurance 3 years ago. The rate I ended up paying was the same as the quote.”

Walt Kienzle: “I had a quite different experience [from Robert W] with Blue Cross Blue Shield of Illinois. I was quoted $97 per month for my premium and that is exactly what I have paid for the past year. My policy is paid up until December, so they can’t change the rate until then. When a friend of mine who is also 51 needed to buy her own coverage, I pointed this policy out to her. She has rheumatoid arthritis and gets the same rate.”

Joseph Scott: “As a 26 year old male in San Francisco, I now pay $137 per month for medical insurance and $26 for dental on an independent plan. Using the CoveredCA site, my anticipated OBAMACARE premium, for a less desirable plan, will increase to $203 per months; not including dental.”

Johnny Heedless: “Like many others, what you’re describing is certainly not my experience. I currently purchase my insurance through ehealthinsurance.com I pay EXACTLY what I was quoted.”
There’s more where those came from. And needless to say, Rick didn’t talk about the quality of customer service under Medicaid, or other government agencies like the IRS, that Obamacare substantially expands to achieve its ends.

It’s true that, if you have a pre-existing condition and you don’t put it on your application form, the insurer will call you out for it, and charge you more. They don’t do this because they’re mean. They do that because insurers would go broke if they charged people less than the cost of their care. You can’t buy car insurance after you’ve crashed your car, or homeowner’s insurance after your home has burned down, without paying a higher price, for the same reasons.

There is a better way

I wholeheartedly agree that we should do something to help the small number of people with pre-existing conditions who genuinely can’t obtain insurance. There’s a better way, as Doug Holtz-Eakin and I explained here. It’s important to remember that the problem is an artificial one, created by World War II-era wage controls and a series of other unwise government policies.

Simple changes to Obamacare, like repealing the law’s requirement that young people pay similar premiums to old people, and relaxing its constraints on deductibles and co-pays, would help reduce rate shock. But Democrats put “community rating” in the bill in order to please their allies in the AARP, and many on the left are ideologically opposed to high-deductible insurance. These provisions have a lot to do with rising premiums under Obamacare, and removing them doesn’t prevent you from covering those with pre-existing conditions.

An argument you hear from the left is that it’s no big deal that Obamacare hikes premiums, because poor people won’t have to pay those prices; their plans will be subsidized by the government. But this is an economically and fiscally irresponsible point of view. We’re going to make health insurance unnecessarily expensive—thereby placing an extra burden on taxpayers and those ineligible for subsidies—and it’s no big deal because the government will insulate a select few from the costs?



The fact that Obamacare dramatically raises premiums on young people is a big deal, because the majority of uninsured people are young. It’s the fact that insurance is already so expensive that leads so many young people to opt out. They’re perfectly healthy; they don’t have a lot of money; but they’re being asked to shell out thousands of bucks for policies they won’t use. And Obamacare’s solution to this problem is…to force them to pay more? We’ll see how that goes.

But in the end, I’m glad that we’re finally having the intellectually honest argument about Obamacare that we should have been having all along. No, Obamacare won’t decrease the cost of your insurance by $2,500 a year. Indeed, it could raise it by that much. No, under Obamacare, you can’t keep your plan, if you like your plan. Instead, you’ll be forced to buy a costlier plan with add-ons that you neither need nor want.

If you’re a leftie, you likely think that’s a good thing. But you should have said so all along. The fact is that Obamacare was sold to the public under false pretenses, and the chickens are now coming home to roost.