Report: Obamacare Triggering Double Digit Premium Increases

Posted: Jan 07, 2013 1:17 PM

I was tempted to roll out one of our sarcastic "surprise" headlines for this post, but nothing about this law is surprising anymore.  Over and over again, conservatives' admonitions and predictions -- ranging from premium levels to cost curves to basic logistics -- have been vindicated by events.  We already knew that individual and family premiums were on the rise thanks to the president's signature law; the New York Times now reports that the government is forcing insurance companies to reach into citizens' pockets and extract up to hundreds of additional dollars per month for healthcare:

Health insurance companies across the country are seeking and winning double-digit increases in premiums for some customers, even though one of the biggest objectives of the Obama administration’s health care law was to stem the rapid rise in insurance costs for consumers. Particularly vulnerable to the high rates are small businesses and people who do not have employer-provided insurance and must buy it on their own. In California, Aetna is proposing rate increases of as much as 22 percent, Anthem Blue Cross 26 percent and Blue Shield of California 20 percent for some of those policy holders, according to the insurers’ filings with the state for 2013. These rate requests are all the more striking after a 39 percent rise sought by Anthem Blue Cross in 2010 helped give impetus to the law, known as the Affordable Care Act, which was passed the same year and will not be fully in effect until 2014. In other states, like Florida and Ohio, insurers have been able to raise rates by at least 20 percent for some policy holders. The rate increases can amount to several hundred dollars a month. The proposed increases compare with about 4 percent for families with employer-based policies. 

If you click through to the Times' site, you'll notice that the headline embedded within the html code is, "Despite New Health Law, Some See Sharp Rise in Premiums."  It should read, "Because of New Health Law...etc."  Liberals will respond to this report with two arguments: (1) Health insurance premiums were already climbing before Obamacare was passed, so it's unfair to blame the law for these hikes, and (2) Regulators should be afforded more power to veto or amend 'excessive' increases.  On the first point, the president sold his unpopular law on the oft-repeated promise of decreased premiums.  Not just a lower rate of increase, mind you, but a real cost decline of roughly $2500 per family.  Instead, costs are escalating by thousands of dollars per year for some families (at an accelerated rate, compared to pre-Obamacare years), and the government is spending more on healthcare now than it would have in the absence of the law.  

On the second point, as the article mentions, some states already have the authority to exert price controls on healthcare costs.  Here's the problem: Two central pieces of Obamacare are "guaranteed issue" and "community rating."  The former is a concept that requires health insurance companies to "insure" every comer, regardless of health status or pre-existing conditions.  The latter forces these companies to provide coverage at a similar price point for everyone.  Those may sound like attractive outcomes in the abstract, but the catch is that health insurance companies recognize that their costs will vastly increase once this new crop of high-risk clients is added to their rolls.  Plus, paying the Obamacare mandate tax instead of buying coverage is a much cheaper option for many people.  This law will allow them to pay the relatively negligible tax and wait until they really need insurance (illness, accident, etc) to purchase it -- remember, insurers must comply and charge them roughly the same amount as anyone else.  This is a classic moral hazard on a massive scale, which also turns the insurance business model on its head.  Buying "insurance" after you urgently need it isn't insurance at all.  In order to remain in operation, health insurance providers are seeking ways to recoup that money and mitigate their losses, thus the inevitable higher costs are passed down to everyone in the form of higher premiums.  (Another cost-spreading endeavor is coercing younger, healthier people to pay more and buy more coverage than they'd typically need).   If the government can intercede to shut down or place arbitrary caps on premium hikes -- which has major populist appeal, for obvious reasons -- many insurers will have no choice to drop out of certain markets, or close their doors altogether.   If enough insurance companies are compelled to charge exorbitant fees or go out of business, the resulting public outcry will prompt liberals to step in and offer yet another big "solution."  That solution, of course, has been their end-game in all of this from day one: Single-payer, government-run healthcare:


The American people strongly oppose this government-operated healthcare system, perhaps because we're already broke, the government isn't particularly good at fulfilling many of its core functions, the current federal intrusion into healthcare has been a demonstrable jumbled mess, the appalling neglect, abuse, ageism and widespread rationing, and the chilling reality that government debt crises in single-payer nations simultaneously trigger severe healthcare crises.