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Wonkblog: Obamacare Will Raise Premiums…a Lot

obamacareThe U.S. Government Accountability Office has released a new report that offers the most comprehensive data to date on the current costs of health insurance across all 50 states. At Wonkblog, Sarah Kliff used the report to compare the current costs of insurance to the predicted costs of insurance under the ACA (which, we’ve said, wonks should have been doing all along).

Here’s what she found: “You’ll notice that the numbers in my chart [of current insurance prices] are significantly lower than those in HHS’s estimates of average premiums under Obamacare.” In other words, Wonkblog has admitted that Obamacare premiums, pre-subsidy, are probably going to be “significantly” more expensive than existing premiums. But, she continues,

I would caution against reading too much into that. Part of the difference is undoubtedly due to the Affordable Care Act: Premiums increase when sick people enter the market, and policies are required to cover more benefits. But another part of it is a less sexy issue of data formatting that makes the HHS and GAO data a bit of an apples-to-oranges situation. The HHS data are capturing both Obamacare policies and the cost of insuring older adults, and any comparisons to the GAO figures should probably be made with a massive grain of salt.

If we need a better comparison to accurately predict price differences, then wonks should be working hard at getting that comparison. In the meantime, as Kliff says, this is the best data we have, and it isn’t pretty.

As it has become clearer to the public that (at least according to the best data available) Obamacare will raise, not lower, health care prices, ACA supporters have made two arguments. First, they note that existing plans may be cheaper, but they’re also “skimpy” and often come with high deductibles. So Obamacare is worth the higher costs it will impose. Second, they argue that even if premiums skyrocket, the subsidies will help make insurance affordable for most people.

Related to this second argument, the WSJ published an illuminating piece on a key demographic for Obamacare: the healthy young. If they don’t sign up in large numbers, the measure will fail, but subsidies may not be large enough to make this happen:

Interviews here with more than two dozen single workers of modest income between 24 and 31 years old suggest that insurance plans will be a hard sell. Subsidies for 26-year-old workers range from $118 a month for someone earning under $16,000 to less than $1 a month for one earning $26,500, according to an analysis of insurance data.

For [25-year-old Gabe] Meiffren, the cheapest available insurance plan he could buy with the subsidies would cost him $116 a month, with a $6,350 annual deductible. His subsidy would total $14 a month, based on his $25,000 annual income.

Because of this, Meiffren told the WSJ that insurance just “isn’t in the budget.” For all the optimistic talk of subsidies, they probably won’t be enough to keep many young people like him from reaching the same conclusion.

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  • wigwag

    If 25 year old Gabe Meiffren is unwilling to pay $116 per month for health insurance which is surely less than he pays for his cable television/ Internet connection and probably less than he pays for his cell phone service, then if he shows up in an emergency room with a ruptured appendix or bleeding as a result of a car accident he should be allowed to drop dead.

    Why should tax payers or insured premium payers pay for him to be hospitalized when he can afford his cell phone and cable television service but not health insurance?

    • cheato321

      Why should Gabe pay $116 a month/$1400 a year (plus a $6350 deductible) when the average 25-year old only incurs about $200 a year in medical expenses?

      Why are we taxing the poor/young to pay for the healthcare of the rich/old?

      • Corlyss

        Because they have money the government needs, they don’t vote, and the government can’t make elders pay for squat because elders vote in disproportionate numbers. Never mind that its the government’s money paid to them via the EITC.

    • f1b0nacc1

      While I agree with your policy perscription (don’t treat them if they choose not to pay), surely you realize that this is absolutely NEVER going to happen.
      More to the point, however, how do we know when someone chooses not to pay versus cannot pay? Does a patient admitted to an emergency room have to undergo means testing to prove their choices were ‘acceptable’? The fact of the matter is that we either treat everyone (which means that universal insurance of some sort ends up being the norm) or we treat only those who CAN pay, for whatever the reason, and live with the consequences. You and I both know that the latter scenario isn’t going to happen anytime soon.

    • foobarista

      When I was in my late 20s and early 30s, I was a self-employed consultant, and just paid any medical bills in cash. Fortunately, I didn’t have any big ones, but it made little sense for me to pay several hundred bux a month when I saw the dr once or twice a year. Also, since I was paying in cash, dr visits typically were under $100 per visit. The most expensive visit was minor foot surgery, which cost about $500. I probably saved fifty grand not buying medical insurance, and made sure I had enough cash that I could cover most medical expenses.

      • Andrew Allison

        A less risky approach is high-deductible insurance. As I’ve mentioned before, I’m paying less annual premium for a $3,500 deductible policy than the monthly premium for a $250 deductible. Put differently, you can pay the deductible in monthly premiums or pay for your routine medical care out of pocket.

        • foobarista

          At the time (mid to late 1990s), HSA-style high-deductible policies didn’t yet exist. After HSAs came into being, high-deductible policies got a lot better than they were at the time. I looked into them at the time, and they were so restricted in what they’d cover that they weren’t worth the bother. I would have done an HSA policy if they’d been available.

      • Corlyss

        Unfortunately neither you nor any one else is allowed to make that sort of self-interested calculation in a nanny state where a majority of happy health insurance policy holders militated constantly to get state run health insurance for people who didn’t have it.

        No good deed goes unpunished, and if all of those who so militated find their premiums skyrocket and their deductables become stratospherically high, serves the morons right.

    • Corlyss

      I feel the same way about people who live in hurricane alleys, tornado zones, and natural flood plains. If they are willing to assume the risk, let’s by all means let ’em. Just don’t suddenly weaken when the bodies pile up in the emergency room waiting area, don’t mandate that any hospital receiving federal aid treat patients with traumatic injuries, and don’t let congressmen rush in with special relief legislation to spend taxpayer money on people who assumed the risk.

    • cubanbob

      How he spends his money is his business, not yours. If you really were vexed about subsidies, then support the abolition of Medicaid to abled-bodied adults who can work. They should be supporting themselves.

      • wigwag

        What I said was that if he doesn’t have health insurance that he can obviously afford (I strongly suspect that young Mr. Meiffren pays for internet service) then if he becomes sick or injured he should be allowed to die if he cannot pay for his medical care out of pocket.

        Otherwise taxpayers end up paying for the costs of his medical care or other premium payers pay higher premiums to underwrite the free care that he gets.

        Let him pay for his care or let him die; why should anyone else pay for the costs of his urgently needed care? After all, he was more interested in paying for things that matter like his cell phone and his cable television.

  • bigfire

    Emperor Palpatine: Everything is proceeding as I have foreseen (Return of the Jedi).

    The aim of Obamacare the complete destruction of the current health system so a new super NHS system can be implemented. Really nothing to see.

    • Andrew Allison

      There is another possibility, namely that it’s intended to keep the campaign contributions from heath insurance companies and big pharma flowing LOL

  • wigwag

    “As it has become clearer to the public that (at least according to the best data available) Obamacare will raise, not lower, health care prices, ACA supporters have made two arguments…” (Walter Russell Mead)

    Being that much of the data is freely available, one can only assume that Professor Mead is deliberately obfuscating the data with the intention of misinforming his readers.

    Here is the data for the monthly cost of individual plans in New York City for 2013 and the exact same plans in 2014. The reduction in prices is staggering.

    Aetna Health: 2013-$2,159; 2014- $798.86
    Atlantis Plan: 2013-$1,792.72; 2014-$737.05
    Empire Blue: 2013-$1,916.32; 2014-$650.28
    GHI: 2013-$3,318.77; 2014-$852.26
    HIP: 2013-$1,716.21; 2014-$555.61
    Managed Plan:2013-$1,532.28;2014-not avail.
    Oxford: 2013-$2,197.74; 2014-$965.24

    It is worth pointing out that in 2013, New Yorkers seeking individual coverage had seven plans to choose from. In 2014, New Yorkers seeking individual plans will have 70 plans to choose from. By the way, high deductible plans are included on the New York health exchange under Obama Care; there are several high deductible plans to choose from.

    Some people have pointed out that individual coverage represents a small percentage of the market; that’s probably because prices were so high in 2013 and are far more reasonable in 2014. In 2014 many plans in New York will cost less than $200 per month before the tax subsidy that will be available based on income level.

    The data is now also available for small business plans in New York City and the cost of these plans has plummeted as well.

    Here’s just one example but it is emblematic of many available plans. In 2013 the most generous Freelancers Union group plan (platinum plan) charged a monthly premium of $632.50 per month. In 2014, under Obamacare, the Freelancers Union will offer the exact same plan for $523.23 per month. In 2013, groups that purchased high deductible plans for their employees from Freelancers Union paid a monthly premium of 251.21 per month. In 2014 those same groups will pay $214.33 for exactly the same insurance.
    Professor Mead is being disingenuous when he claims that Obamacare will cause health insurance premiums to rise in 2014. But I don’t want to be as dishonest as he’s being. The reality is that the tremendous reductions in premium prices that are being seen in New York will not be recapitulated in every market. In some places premiums will go up, in some places they will go down and in some places they will remain about the same.
    Obamacare will produce winners and losers; the idea that any health reform could be adopted that wouldn’t produce winners and losers is too ridiculous to even contemplate.
    But there is something fundamentally dishonest about Professor Mead’s unwillingness to let the facts get in the way of his preconceived notions.
    In New York, the cost of health care for both individuals and groups has fallen dramatically thanks to Barack Obama.
    Professor Mead doesn’t have to like it, but he shouldn’t pretend it isn’t true.

    • bannedforselfcensorship

      Good thing New York represents all of America.

      • wigwag

        Your comment is just as disingenuous as Professor Mead’s post. I never said or implied that New York represents all of America. What I said was,

        “The reality is that the tremendous reductions in premium prices that are being seen in New York will not be recapitulated in every market. In some places premiums will go up, in some places they will go down and in some places they will remain about the same. Obamacare will produce winners and losers; the idea that any health reform could be adopted that wouldn’t produce winners and losers is too ridiculous to even contemplate.”

        • Rick Caird

          New York is a heavily regulated market. Surprisingly, the news reports indicate an 18% reduction rather than the ones you are claiming. I do not believe you are comparing apples to apples as you claim.

          However, the rates are based upon a large number of young health people signing up to subsidize the older and sicker ones. If that does not happen (and it probably won’t) expect radical increases next year. Second, I expect you are quoting subsidized prices. Subsidies are paid by someone. they are not free.

          The final point is that the cost of our health care is going to rise radically. Even the government is no longer claiming ObamaCare will bend the cost curve down. My best estimate is that health care costs will quickly move from 17% of GDP to 20%, or higher, due to ObamaCare. If you really want to reduce the costs, health insurance should be for catastrophic care only. Doctor’s who stop taking insurance reduce their rates by 50% or more. That is where the savings are..

  • Corlyss

    Another precinct heard from: NTEU wants repeal of Obamacare.

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