As a consequence of some Obamacare requirements — such as the requirement that health insurers accept everyone who applies, never charge more based on serious medical conditions (modified community rating), and/or start paying for many often-uncovered medical conditions — health-insurance premiums have been going up. But not everyone is equally affected by the increase in premiums. According to Institute for Policy Innovation’s Merrill Matthews and past chairman of the Social Insurance Public Finance Section of the Society of Actuaries Mark Litow, the market that’s likely to be hit the hardest is the the individual market (more than the small-employers market and much more than the large-employers one). Their piece in this morning’s Wall Street Journal is also interesting in that it lists the states that will see the largest and smallest increase in insurance premiums. They write:
We compared the average premiums in states that already have ObamaCare-like provisions in their laws and found that consumers in New Jersey, New York and Vermont already pay well over twice what citizens in many other states pay. Consumers in Maine and Massachusetts aren’t far behind. Those states will likely see a small increase.
By contrast, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases—somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.
They explain that “ironically citizens in states that have acted responsibly over the years by adhering to standard actuarial principles and limiting the (often politically motivated) mandates will see the biggest increases, because their premiums have typically been the lowest.” We also know that a vast majority of young Americans will see their cost go up under the new law. On Saturday, Avik Roy of the Manhattan Institute reported on a new study by Kurt Giesa and Chris Carlson in the latest issue of Contingencies, the American Academy of Actuaries’ bimonthly magazine, which shows that 80 percent of Americans in their twenties will face higher costs under the law, even after taking under consideration the premium-assistance subsidies. He wrote:
Obamacare’s insurance exchanges were originally designed to subsidize the purchase of regulated, private-sector insurance for those with incomes between 138 percent and 400 percent of the federal poverty level: based on 2012 guidelines, that amounts to between $31,809 to $92,200 for a family of four.
But Giesa and Carlson estimate that 80 percent of Americans below the age of thirty in the individual market will face higher premiums, despite subsidies. “Our core finding is that young, single adults aged 21 to 29 and with incomes beginning at about 225 percent of the FPL, or roughly $25,000, can expect to see higher premiums than would be the case absent the ACA, even after accounting for the presence of the premium assistance.” Fully 80 percent of these twenty-somethings have income above $25,000.
What’s interesting is that, according to Roy, about two-thirds of the uninsured population is under the age of 40. In other words, we are starting to see how the law may be hurting the most those “uninsured” Americans that it claimed it would help. He adds:
Overall, the authors found that “premiums for younger, healthier individuals could increase by more than 40 percent” in the non-group insurance market due to Obamacare’s community rating provision. (A handful of states that already mandate community rating, like Massachusetts and New York, were excluded from the Giesa-Carlson analysis.)
There is plenty more information about the study and what it means here.
Finally, if you aren’t depressed enough, I would recommend reading this piece by Reason’s Peter Suderman about why Obamacare won’t control health-care costs.