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The Horror Stories of Obamacare's Rate Shock

Obamacare would "bring down premiums by $2500 for the typical family," President Obama boasted during the debate over his signature health legislation. While the veracity of that promise is up for debate, it's also important to parse out that when President Obama said "typical family," he also left out who he doesn't mean by "typical family." These are the stories of those left behind by Obamacare. They won't see their premiums fall. Instead, their insurance will double in price.


Obamacare uses the trident of an individual mandate, community rating and guaranteed issue to push everyone, healthy and sick, into the health insurance system. The way that Americans get insurance if it's not offered by their employer will be through state-based health insurance "exchanges." In those exchanges, insurance companies aren't allowed to price-discriminate between healthy and sick (community rating) and must offer insurance of a minimum benefit level to meet new federally-defined guidelines for insurance. People applying for insurance will also be offered subsidies from the federal government to buy insurance if their income falls below certain levels.

These minimum benefits and subsidy levels have begun to emerge as huge problems for some Americans. The minimum benefit levels tend to increase insurance premiums, as certain bare-bones plans are now outlawed. And the subsidy levels create huge "welfare cliffs" for Americans in certain categories, creating a disincentive to stop working.

SFGate reports on the case of Jacqueline Proctor:

She and her husband are in their early 60s. They have been paying $7,200 a year for a bare-bones Kaiser Permanente health plan with a $5,000 per person annual deductible. "Kaiser told us the plan does not comply with Obamacare and the substitute will cost more than twice as much," about $15,000 per year, she says.

This new plan, Kaiser's cheapest offering for 2014, would consume about 25 percent of their after-tax income. The new plan still has a $5,000 deductible but provides coverage for things her current policy does not, such as maternity care, healthy child visits and coverage for dependents up to age 26. Proctor has no use for such coverage, since her son is 30.


SFGate goes on to report that the Proctors' annual household income is $64,000 - about two thousand dollars over the line at which income subsidies phase out. If the Proctors' income was a mere $2000 less, they'd receive more than $14,000 of tax subsidies to purchase insurance. Because they're just over the line, they face an enormous effective tax rate on that extra $2000 of income.

Additionally, as the article points out, there are all those extra provisions that cause insurance to be more expensive. The Proctors' plan covers maternity care when it's unlikely the 60+ couple will need it. It covers offspring up to the age of 26 when their son just turned 30. The way that community-rated insurance works is that means that the Proctors' premiums for coverage that they will assuredly not use is used to subsidize those people who will be using it - maternity care for the younger set, for example, or coverage for those with college-aged progeny.

That's not to say that the Proctors won't benefit from the new minimum coverage levels. It could be the case that while they're forced to effectively subsidize maternity care for younger couples, younger couples will be forced to effectively subsidize, say, prostate screenings for Mr. Proctor.

This is what's key in the fundamental values that drove Obamacare. It's not just a massive reorganization of the way the health system works - it's a redistribution scheme. Obamacare redistributes wealth from couples like the Proctors, who have lived long, healthy, middle-class lives, to the chronically sick. A couple who are richer than the Proctors in the same age group - perhaps a couple who have been heavy smokers and are dealing with large health bills because of it - might now have the same insurance bill as the Proctors, but benefit because their usage of the health system is much heavier and their pre-Obamacare premiums were higher.


A DailyKos diarist found out the same thing: his plan was going to be outlawed by Obamacare and his montly premiums would double:

My wife and I just got our updates from Kaiser telling us what our 2014 rates will be. Her monthly has been $168 this year, mine $150. We have a high deductible. We are generally healthy people who don't go to the doctor often. I barely ever go. The insurance is in case of a major catastrophe.

Well, now, because of Obamacare, my wife's rate is gong to $302 per month and mine is jumping to $284.

I am canceling insurance for us and I am not paying any f***ing penalty. What the hell kind of reform is this?

As the DKos commenters were excited to point out, he probably just wasn't factoring in that he would be getting all sorts of new goodies, like maternity care and coverage for his 26-year-old offspring.

The Chicago Tribune reported on a 33-year-old single father from Illinois who is, like the previous cases, not seeing the cost of his insurance fall. Instead, the cost is doubling:

Adam Weldzius, a nurse practitioner, considers himself better informed than most when it comes to the inner workings of health insurance. But even he wasn't prepared for the pocketbook hit he'll face next year under President Barack Obama's health care overhaul.

If the 33-year-old single father wants the same level of coverage next year as what he has now with the same insurer and the same network of doctors and hospitals, his monthly premium of $233 will more than double. If he wants to keep his monthly payments in check, the Carpentersville resident is looking at an annual deductible for himself and his 7-year-old daughter of $12,700, a more than threefold increase from $3,500 today.

"I believe everybody should be able to have health insurance, but at the same time, I'm being penalized. And for what?" said Weldzius, who is not offered insurance through his employer. "For someone who's always had insurance, who's always taken care of myself, now I have to change my plan?"


These are the people who are hit hard by Obamacare's regulations. At the heart of Obamacare is redistribution. It's not always from the rich to the poor - it's from the healthy to the sick. More people will get insurance. Some of them will see their premiums fall. But a lot of Americans - the elderly middle-class couple, the Illinois single father, the humble Daily Kos blogger - will see their premiums rise, and possibly as much as double in price. It might be worth it, at the end of the day. But Obamacare was sold by the President as good for everyone, not as another government redistribution program.

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