Bankrupt Healthcare
Obamacare Premiums to Rise 7.5 Percent

Even the generally Obamacare-boosting Vox delivered its readers some bad news about the Affordable Care Act today:

No matter how you slice the numbers, Obamacare premiums will rise significantly next year. The Obama administration estimates rates will rise 7.5 percent in 2016, compared with 2 percent in 2015.

Insurance markets are complicated. But the story of Obamacare’s 2016 premium increase is actually pretty simple: Many health plans — even those with decades of experience selling insurance — underestimated how sick health law enrollees would be. […]

As prices get higher and as some health insurers scale back their benefit plans, there is the possibility that some consumers might decide coverage isn’t worth it. Premera Blue Cross in Alaska already found that new members who joined the plan in 2015 had health care costs 40 percent higher than those who did not renew.

Vox notes that the big question going forward is whether hikes will be the “new normal.” One fear is that the premium increases currently being phased in will push some healthy people out of the marketplaces (a circumstance that could in turn lead insurers to raise premiums again next year). The Vox piece doesn’t come down especially hard one way or the other on the question of how the hikes will effect enrollment, noting arguments and evidence on both sides. How consequential these hikes will be remains an open question.

But in the meantime, it’s important to look at the bigger picture. President Obama and ACA supporters seized on early premium numbers as evidence that the ACA was working. The Vox piece now admits that those initial numbers were not sustainable. Will other ACA proponents now admit that the law isn’t bringing down costs for Americans they way they thought it was?

Moreover, ACA or not, the U.S. healthcare system is too expensive. Thanks to ACA subsidies, more people have health insurance today than before the law was passed. But unless we address our cost problem, these subsidies will become harder to pay for, and the economic architecture of the law will be stretched even further. As we wrote before: “The authors of the ACA chose to address coverage rather than underlying cost issues, and that decision is slowly but surely coming back to haunt them.”

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