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No, It’s Not ‘Complicated’; Obamacare Increases Premiums for Most People



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Liberal reporters and bloggers are trumpeting today a report from the Kaiser Family Foundation which claims that premiums under Obamacare will be “lower than expected.” Talking Points Memo describes the Kaiser paper as, potentially, a “big blow to one of the main conservative talking points against the Affordable Care Act: rate shock.”

But when you thumb through the Kaiser report, you learn something interesting. Its authors did not actually measure whether or not Obamacare would increase premiums relative to what they are today, because they claim it would be too “complicated.”

So if the Kaiser authors didn’t compare Obamacare rates to pre-Obamacare rates, how do they arrive at their conclusion that premium increases will be “lower than expected?” By comparing rates in 2014, under Obamacare, to rates “implied” by a Congressional Budget Office projection about premiums in 2016.

(Kaiser assumes that the CBO would have predicted that the second-cheapest “silver” plan on the Obamacare exchanges will cost $320 a month, drawing that from the CBO report predicting that in 2016, such a plan would cost $433 a month.)

That is to say, what matters to the Kaiser authors is not whether rates will go up relative to what they were before Obamacare. What matters is whether rates will go up by even more than the CBO predicts. Their thinking can be summarized this way: If a car today costs $10,000, and the CBO predicts the same car will cost $15,000 next year, next year’s price is “lower than expected” if the price only goes up by 40 percent, instead of the predicted 50 percent.

Needless to say, this is not how average Americans are going to think about rate shock. Average Americans pay a certain price for health insurance today. They will pay a different price for health insurance next year. The difference between those two prices will go a long way in determining whether the “Affordable Care Act” lives up to its name.

But the Kaiser authors didn’t want to conduct that basic analysis. “Doing so,” they write, “would require speculative assumptions and data that are not publicly available.” But that’s not true. Anyone who wants to find out how much it costs to buy health insurance for himself can do so on websites like ehealthinsurance.com or finder.healthcare.gov.

In fact, just yesterday, I and two of my Manhattan Institute colleagues, Yevgeniy Feyman and Paul Howard, published an interactive map that represents the most comprehensive compilation currently available of insurance premiums prior to Obamacare in the 50 states plus D.C. We don’t have detailed premium information for most states under Obamacare, but we’ve mapped out the impact of the new health law in 13 states plus D.C.

What we found is that rates in most of these states will go up under Obamacare, by an average of 24 percent. And that’s despite the fact that these 13 states include some of the most heavily regulated deep-blue states, like New York and Maine, that will see premium decreases under the law, because Obamacare effectively functions as a bailout for blue states that introduced Obamacare-like changes to their insurance markets in the 1990s.

The bulk of the states that we’re waiting to get data from—less than one month away from Obamacare’s rollout—are red states with inexpensive, lightly regulated insurance markets pre-Obamacare. That’s because red states typically declined to set up their own exchanges, leaving that task to Kathleen Sebelius and the federal government. Once that data is out, we’ll add it to our map, so stay tuned.

— Avik Roy is a columnist for NRO and a senior fellow at the Manhattan Institute. You can follow him on Twitter at @avik.



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