Avik Roy, Contributor, Forbes
For months now, we’ve been waiting to hear how much Obamacare will drive up the cost of health insurance for people who purchase coverage on their own. Last night, the U.S. Department of Health and Human Services finally began to provide some data on how Americans will fare on Obamacare’s federally-sponsored insurance exchanges. HHS’ press release is full of happy talk about how premiums will be “lower than originally expected.” But the reality is starkly different.
Based on a Manhattan Institute analysis of the HHS numbers, Obamacare will increase underlying insurance rates for younger men by an average of 97 to 99 percent, and for younger women by an average of 55 to 62 percent. Worst off is North Carolina, which will see individual-market rates triple for women, and quadruple for men.
HHS releases a trickle of data and a load of spin
Earlier this month, I and two colleagues from the Manhattan Institute—Yevgeniy Feyman and Paul Howard—published an interactive map that detailed Obamacare’s impact on individually-purchased health insurance premiums in 13 states plus D.C. As the accompanying article described, Obamacare increased premiums in those states by an average of 24 percent.
But those states were largely blue states that had set up their own, state-based insurance exchanges. The big data dump that we’ve been waiting for, since then, is from the majority of states that didn’t set up their own state-based exchange. That data is the responsibility of the Obama administration, namely HHS. Finally, with less than a week to go before the exchanges are supposed to go on-line, HHS has released a slim,15-page report and a press release that summarize some of the premium data.
“Premiums nationwide will also be around 16 percent lower than originally expected,” HHS cheerfully announces in its press release. But that’s a ruse. HHS compared what the Congressional Budget Office projected rates might look like—in 2016—to its own findings. Neither of those numbers tells you the stat that really matters: how much rates will go up next year, under Obamacare, relative to this year, prior to the law taking effect.
Comparing pre-Obamacare and post-Obamacare premiums
The HHS report doesn’t provide enough details about Obamacare’s premiums for us to incorporate the data into our interactive map. Our map compares the five cheapest plans available on the market today to the five cheapest plans available on Obamacare’s exchanges. The HHS report offers only the cheapest bronze, silver and gold plans, and the second-cheapest silver plan.
We look at rates for 27, 40, and 64 year olds; and rates for men and women. (Under Obamacare, rates for men and women are the same, which has the net effect of disproportionately increasing rates for men, who generally paid less under the old system.) The HHS report offers rates for 27-year-olds; and rates for the average-aged exchange participant, a figure that varies by state, but seems to generally land in the mid-thirties.
So, we conducted two comparisons between pre-ACA data and post-ACA data, as reported by HHS. The first comparison is between the cheapest plan available to 27-year-olds pre- and post-Obamacare. The second is between the cheapeast plan available to the average exchange participant, and to the typical 40-year-old pre-Obamacare. We would have liked to have compared rates for older individuals, but HHS didn’t report that data.
27-year-olds will face rate increases as high as 279 percent
As you can see from the map above, many 27-year-olds will face steep increases in the underlying cost of individually-purchased insurance under Obamacare. For the states where we have data—the 36 reported by HHS, plus nine others that we had compiled for our map that HHS didn’t report—rates will go up for men by an average of 97 percent; for women, 55 percent. (In the few cases where HHS reported on states that our map includes, we went with HHS’ numbers.)
(Still missing are data from Hawaii, Kentucky, Massachusetts, Maryland, Minnesota, and Nevada. The data from New York and New Jersey should be taken with a grain of salt, as their individual insurance markets are not like those of other states.)
40-year-olds will face rate increases as high as 305 percent
40-year-olds, surprisingly, will face a similar picture. The cheapest exchange plan for the average enrollee, compared to what a 40-year-old would pay today, will cost an average of 99 percent more for men, and 62 percent for women.
Remember that here, we aren’t conducting an exact comparison. Instead we’re comparing the lowest-cost bronze plan offered to theaverage participant in the exchanges, to the cheapest plan offered to 40-year-olds today. This approach artificially flatters Obamacare, because the median age of an exchange participant is, in most states, below the age of 40.
In both the 27-year-old and 40-year-old comparisons, we adjusted the pre-ACA rates to take into account people who would be charged more for insurance, or denied coverage altogether, due to a pre-existing condition, using the same methodology we’ve used in the past.
For most people, subsidies won’t counteract rate shock
All of the analyses I’ve discussed thus far involve changes in the underlying cost of health insurance for people who buy it for themselves. Many progressives object to this comparison, because it doesn’t take into account the impact of Obamacare’s subsidies on the net cost of insurance for low-income Americans.
I’ve long argued that it’s irresponsible to ignore the change in underlying premiums, because subsidies only protect some people. Middle-class Americans face the double-whammy of higher insurance premiums, and higher taxes to pay for other people’s subsidies. However, it is important to understand how subsidies will impact the decisions by Americans as to whether or not to participate in the exchanges.
If you click on the “Your Decision” tab on our interactive map, you will now find the results, as assembled by Yevgeniy, for the 13 states plus D.C. in our original database. Here’s the bottom line: most people with average incomes will pay more under Obamacare for individually-purchased insurance than they did before.
However, the overall results make clear that most people will not receive enough in subsidies to counteract the degree to which Obamacare drives premiums upward. Remember that nearly two-thirds of the uninsured are under the age of 40. And that young and healthy people are essential to Obamacare; unless these individuals are willing to pay more for health insurance to subsidize everyone else, the exchanges will not serve the goal of providing coverage to the uninsured.
The bottom line: Obamacare makes insurance less affordable
For months, we’ve heard about how Obamacare’s trillions in health care subsidies were going to save America from rate shock. It’s not true. If you shop for coverage on your own, you’re likely to see your rates go up, even after accounting for the impact of pre-existing conditions, even after accounting for the impact of subsidies.
The Obama administration knows this, which is why its 15-page report makes no mention of premiums for insurance available on today’s market. Silence, they say, speaks louder than words. HHS’ silence on the difference between Obamacare’s insurance premiums and those available today tell you everything you need to know. Rates are going higher. And if you’re healthy, or you’re young, the Obama administration expects you to do your duty and pay up.
UPDATE: Brett Norman and Jason Millman of Politico laceratedthe administration for the fact that “the report doesn’t actually reveal very much about what most people will pay.”
It was a far cry from full disclosure. Want to know what you might pay for health coverage in an exchange next year? Too bad. The report gives lots of examples of the kinds of people who will get good prices — but everyone else will remain in the dark until at least next Tuesday, when Obamacare is supposed to open its doors.
The paper also noted that HHS carefully embargoed the release so as to try to prevent it from getting into the wrong hands; i.e., the hands of “outside health insurance experts.”
The report was issued to news organizations on Tuesday under a strict embargo, with specific instructions not to share the information with anyone else, like outside health insurance experts who might be able to provide more analysis of the numbers. Apparently, though, the word still leaked out.
Peter Suderman wonders why HHS thinks the “outside health insurance experts” are so scary:
The embargo guidelines suggest that HHS was wary of early scrutiny of the numbers. And along with the selective reporting, it does make one wonder whether HHS is anxious about premium levels when enrollment begins next week. If a comprehensive report on premiums could stand up to outside scrutiny, wouldn’t HHS be putting out a fuller picture, and courting outside analysis?
Andrew Sullivan thinks the White House needs “much better messaging.” Kathy Kristof of CBS MoneyWatch relates her own experience of seeing a 67 percent spike in her premiums, for a worse policy than she had before:
The promise that you could keep your old policy, if you liked it, has proved illusory. My insurer, Kaiser Permanente, informed me in a glossy booklet that “At midnight on December 31, we will discontinue your current plan because it will not meet the requirements of the Affordable Care Act.” My premium, the letter added, would go from $209 a month to $348, a 66.5 percent increase that will cost $1,668 annually.
What made my plan too substandard to survive under Obamacare? It did not provide maternity benefits. I’m 53 years old. I figure pregnancy would require an act of God. (Incidentally, maternity benefits will be covered on men’s policies too. Let’s hope medical science comes a long way so you guys can use those benefits.) My policy also did not cover substance abuse treatments or psychiatric care…
Meanwhile, the things that mattered to me — that I would be able to limit my out-of-pocket costs if I had a catastrophic ailment — got worse under my new Obamacare policy. My policy, which has always paid 100 percent of the cost of annual check-ups, had a $5,000 annual deductible for sick visits and hospital stays. Once I paid that $5,000, the plan would pay 100 percent of any additional cost. That protected me from economic devastation in the event of a catastrophic illness, such as cancer.
Kaiser’s Obamacare policy has a $4,500 deductible, but then covers only 40 percent of medical costs for office visits, hospital stays and drugs. Out-of-pocket expenses aren’t capped until the policyholder pays $6,350 annually.
Sure, that’s only another $1,350. But it adds to the additional $1,663 that I’m paying in premiums, making my personal cost for Obama care add to $3,018 annually. This, by the way, is the bare-bones policy under Obamacare — the Bronze plan. Premiums for plans that offer lower deductibles and premiums would cost almost twice as much, according to the Kaiser booklet.