Politics & Policy

Obamacare, Individualized

Obamacare would raise premiums on individual consumers? We've known that all along.

On Monday, the Congressional Budget Office released a new analysis of Senate Majority Leader Harry Reid’s health-care bill. Behind all the Democratic spin, a truth emerged: Obamacare will increase premiums by up to 13 percent for the 14 million Americans who buy their own health insurance. So, as the Senate floor opened for debate, Republicans, naturally, wagged their fingers at Reid for championing a supposed cost-saving bill that does just the opposite.

Thing is, the CBO’s numbers aren’t that shocking. For months, report after report has shown that those owning individual plans will take a hit if Obamacare passes.

You’d hardly get that from the mainstream media. Over the weekend, they gave heavy coverage to the work of Jonathan Gruber, an economist at the Massachusetts Institute of Technology and Obamacare supporter who believes that Reid’s bill will actually make individual premiums more affordable. These media reports typically neglected to mention the other analysts whose results squared with the CBO’s.

With the Lewin Group reporting that the number of Americans with individual insurance plans is likely to increase from 14 million to 31 million by the time the Senate’s plan is fully implemented, it’s worth remembering that the CBO’s score reveals a hole in the Obamacare hull that has been leaking since summer. Below is a quick reminder of the analyses that emerged this fall.

‐In September, the CBO sent Sen. Max Baucus (D., Mont.) a letter detailing the costs of the Senate Finance Committee’s bill. Costs for those buying their own plans under the proposed insurance exchange would “tend to be higher than the average premiums in the current-law individual market,” said the CBO. The reason: Insurance companies would be limited in how much they could charge people with preexisting conditions and high expected health care costs (such as the elderly), so people with low expected costs for health care (such as healthy young people) “would generally pay higher premiums.”

‐Later in September, the Joint Committee on Taxation, a bipartisan congressional committee, issued its own analysis of the Baucus bill. The risk of higher premiums, again, raised red flags. The JCT said that the bill’s proposed excise tax on insurance providers would be passed on to consumers in the form of increased premiums. “Many consumers [would] respond by reducing their demand for insurance above the excise tax cap,” said the JCT.

In October, the Centers for Medicaid and Medicare, part of the Department of Health and Human Services, published an actuarial memorandum on the expected costs of Obamacare. Their predictions weren’t pretty. “In aggregate, we estimate that for calendar years 2010 through 2019 national health expenditures (NHE) would increase by $750 billion, or 2.1 percent,” said the CMS. “As a result, the NHE share of GDP is projected to be 21.3 percent in 2019, compared to 20.8 percent under current law.” That’s quite a slice. Individuals, as expected, will foot much of the increased bill: “For individuals, there is a requirement to obtain health insurance or otherwise pay a penalty tax of 2.5% (of one’s income). . . . We estimate that this provision would provide $59 billion in revenue to the Federal government in fiscal years 2014–2019.”

Soon after, Oliver Wyman, an international consulting firm, reported that premiums could increase by approximately $1,500 per year for individuals because of the influx of new consumer claims in the market. Premiums for small businesses, it added, could be 19 percent higher.

‐PWCs numbers echoed what Milliman, Inc., a global consulting firm, found earlier this year: that premiums could increase even more if the uninsured flood a new individual market ill equipped to deal with the changes. “The combined effect of immediate implementation of the reform initiatives . . . would be expected to increase average premiums over and above normal trend levels in both the small group and individual insurance markets.” Young people, said Milliman, would be forced to pay up: “If the most expensive monthly premium could not be more than 7.5 times the cheapest premium, then premiums for younger individuals may increase as much as 40% more than the average rate change.”

Democrats may claim that the increased premiums for individuals will be balanced out by federal subsidies, but not all individuals, of course, would qualify for the cash. Nevertheless, the studies are clear: Should Obamacare pass, and more and more Americans drop from employer-based plans, many of the new consumers shopping for individual health insurance will face pricey premiums.

– Robert Costa is the William F. Buckley Jr. Fellow at the National Review Institute.

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