During the 2012 presidential campaign, Mitt Romney maintained that the health-reform law he signed in Massachusetts was not the same as Obamacare. “Our plan was a state solution to a state problem,” Governor Romney insisted. He was trying to fix Massachusetts’ uniquely broken insurance market, he said; Obamacare, by contrast, was a “a power grab . . . a one-size-fits-all plan.” Nobody took him seriously — not conservatives, and not liberals. But today, as the nation braces for health insurance “rate shock,” Romney’s critique of Obamacare is ringing true. Call it Mitt Romney’s revenge.
It all goes back to Bill Weld, Romney’s Republican predecessor. In 1996, the heavily Democratic state legislature passed the Non-Group Health Insurance Reform Act, which transformed the individual market for health insurance, the market for people who shop for private insurance on their own.
The contours of that bill will sound familiar to observers of the Obamacare debate; it forced insurers in the individual market to cover everyone, regardless of pre-existing conditions, and it forced insurers to charge nearly equal rates to the young and the old, despite the fact that younger people consume very little health care. Governor Weld signed it into law.
The predictable happened. Because people could stay uninsured until they were sick, and then sign up for insurance afterwards, premiums shot up for the chumps who stayed continuously insured through health and illness. Over time, fewer and fewer people could afford insurance on the individual market; eHealthInsurance.com dropped out of the state entirely.
Romneycare, for all its flaws, was a way to bring Massachusetts’ individual insurance market back from the brink. It didn’t repeal the destructive but popular provisions from 1996; instead, it required everyone to buy health insurance — the infamous individual mandate — in order to make the market function again. It also merged the individual-insurance market into the one for small employers, in order to stabilize the former.
Romney was convinced that the problem of uncompensated care — uninsured people seeking free care from the emergency room — was the biggest driver of high insurance costs. “The key factor that some of my libertarian friends forget is that today everybody who doesn’t have insurance is getting free coverage from the government,” he said in 2006. That’s why he so strongly favored the individual mandate.
But Romneycare, once enacted, reduced uncompensated care by about $250 million a year, while increasing state health spending by more than three times that amount. By its own standard, Romneycare was a failure. The law didn’t reduce the cost of health care in the state; as of 2011, Massachusetts remained the costliest place in America to buy health insurance.
Romneycare did, however, succeed in one respect: it lowered premiums in the individual-health-insurance market by as much as 40 percent. Prior to 2006, it was nearly impossible to buy health insurance on your own in the Bay State. Romneycare, for all its faults, had effectively achieved universal coverage.
The best way to think about Romneycare is on a left-right scale of 1 to 10. If 10 is a libertarian utopia, and 1 is a left-wing dystopia, Governor Romney moved Massachusetts’ individual health-insurance market from a 2 to a 4. That is, it moved that market modestly to the right.
But most states have much freer — and functional — insurance markets than Massachusetts did. California, despite its reputation as a deep-blue state, has one of the most robust and competitive individual-insurance markets in the nation. In all corners of the Golden State, individuals can choose from more than 50 plans, with all varieties of deductibles, hospital networks, and the like. If Massachusetts’ market is now a 4, California’s is an 8.
Once Obamacare becomes fully operational in 2014, the old California individual insurance market will be abolished, to be replaced by Obamacare’s version of Massachusetts’ regulated exchange. In California, that means a sharp move to the left, and a sharp rise in premiums. A study I conducted for Forbes found that premiums for 25- and 40-year-olds in California will double for many healthy individuals. Ohio’s Department of Insurance announced that average premiums in its individual market will increase by an average of 88 percent.
There are a handful of states that have Massachusetts-like problems in their individual-insurance markets: Maine, New Jersey, New York, Vermont, and Washington. Those states are unlikely to see much impact from Obamacare on insurance premiums; indeed, premiums there might even go down. But nearly every other state will endure significant disruptions as Obamacare goes into full effect.
Progressives have been complacent about these problems. They’ve convinced themselves that because Romneycare “worked” in Massachusetts, Obamacare will work nationwide. But they’re ignoring what Mitt Romney had said all along, until he was blue in the face: that the Bay State isn’t like other states. It will be small consolation to those facing higher premiums if Romney is proven right.