Since there has been discussion on Forbes - here is another article on the subject.
Rate Shock: In California, Obamacare To Increase Individual Health Insurance Premiums By 64-146%
http://www.forbes.com/sites/theapothecary/2013/05/30/rate-shock-in-california-obamacare-to-increase-individual-insurance-premiums-by-64-146/
A portion of the article explains the sleight-of-hand that Carl exalts in the OP.
But the data that Lee released tells a different story: Obamacare, in fact, will increase individual-market premiums in California by as much as 146 percent.
Lee’s claims that there won’t be rate shock in California were repeated uncritically in some quarters. “Despite the political naysayers,”
writes my
Forbes colleague Rick Ungar, “the healthcare exchange concept appears to be working very well indeed in states like California.” A bit more analysis would have prevented Rick from falling for California’s sleight-of-hand.
Here’s what happened. Last week, Covered California—the name for the state’s Obamacare-compatible insurance exchange—released the rates that Californians will have to pay to enroll in the exchange.
“The rates submitted to Covered California for the 2014 individual market,” the state said in a
press release, “ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions.”
That’s the sentence that led to all of the triumphant commentary from the left. “This is a home run for consumers in every region of California,” exulted Peter Lee.
Except that Lee was making a misleading comparison. He was comparing apples—the plans that Californians buy today for themselves in a robust individual market—and oranges—the highly regulated plans that small employers purchase for their workers as a group. The difference is critical.
Obamacare to double individual-market premiums
If you’re a 25 year old male non-smoker, buying insurance for yourself, the cheapest plan on Obamacare’s exchanges is the catastrophic plan, which costs an average of $184 a month. (That’s the median monthly premium across California’s 19 insurance rating regions.)
The next cheapest plan, the “bronze” comprehensive plan, costs $205 a month. But in 2013, on
eHealthInsurance.com (NASDAQ:
EHTH), the average cost of the five cheapest plans was only $92.
In other words, for the average 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent.
Under Obamacare, only people under the age of 30 can participate in the slightly cheaper catastrophic plan. So if you’re 40, your cheapest option is the bronze plan. In California, the median price of a bronze plan for a 40-year-old male non-smoker will be $261.
But on eHealthInsurance, the average cost of the five cheapest plans was $121. That is, Obamacare will increase individual-market premiums by an average of 116 percent.
For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double.
Spinning a public-relations disaster
It’s great that Covered California released this early the rates that insurers plan to charge on the exchange, as it gives us an early window into how the exchanges will work in a state that has an unusually competitive and inexpensive individual market for health insurance. But that’s the irony. The full rate report is subtitled “Making the Individual Market in California Affordable.” But Obamacare has actually
doubled individual-market premiums in the Golden State.
How did Lee and his colleagues explain the sleight-of-hand they used to make it seem like they were bringing prices down, instead of up? “It is difficult to make a direct comparison of these rates to existing premiums in the commercial individual market,” Covered California explained in last week’s press release, “because in 2014, there will be new standard benefit designs under the Affordable Care Act.” That’s a polite way of saying that Obamacare’s mandates and regulations will drive up the cost of premiums in the individual market for health insurance.
But rather than acknowledge that truth, the agency decided to ignore it completely, instead comparing Obamacare-based insurance to a completely different type of insurance product, that bears no relevance to the actual costs that actual Californians face when they shop for coverage today. Peter Lee calls it a “home run.” It’s more like hitting into a triple play.
Obama attacked insurers in 2010 for much smaller increases
That Obamacare more than doubles insurance premiums for many Californians is especially ironic, given the political posturing of the President and his administration in 2010. In February of that year, Anthem Blue Cross announced that some groups (but not the majority) would face premium increases of as much as 39 percent. The White House and its allies in the blogosphere, cynically, claimed that these increases were due to greedy profiteering by the insurers, instead of changes in the underlying costs of the insured population.
Related links:
http://www.bloomberg.com/news/2013-05-24/california-fudges-the-math-on-obamacare.html
http://conservativeintel.com/2013/05/23/calif-under-obamacare-bare-bones-coverage-will-cost-twice-as-much-for-some/#
http://washingtonexaminer.com/dont-be-fooled-by-californias-premium-claims/article/2530379
http://www.nationalreview.com/corner/349732/obamacare-california-yuval-levin
