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Obamacare’s New York Miracle

July 18, 2013

Local officials and insurance carriers are slowly releasing proposed 2014 Obamacare state exchange health plan rates this summer. They show how the health care law affects coverage costs in both the individual and small group markets. This week, the state of New York released the rates New Yorkers will have to pay to buy health insurance in its health care exchange. State insurance regulators said the approved individual market rates “represent a 53 percent reduction” compared to prices currently available in New York.

Obamacare supporters cheered the news as proof that the health care law will drive down costs for consumers. One activist told the new York Times, “the extraordinary decline in New York’s insurance rates for individual consumers demonstrates the profound promise of the Affordable Care Act.”

President Obama desperately wants the American people to think his health care law will drive premium costs down and that everyone will benefit. The data say otherwise. A non-partisan Society of Actuaries report projected that while rates might decline in some places, average monthly premium costs will go up 31.5 percent nationwide. When he’s selling his law, the President conveniently forgets to mention the people who are going to see their costs spike:

  • Ohio. The Ohio Department of Insurance announced that the average individual market health insurance premium in 2014 will cost 88 percent more. According to Ohio insurance regulators: “consumers will have fewer choices and pay much higher premiums for the health insurance starting in 2014 … Ohio’s current average cost to cover medical expenses for an individual health insurance plan is $223 … the average to cover those costs in 2014 is $420.”
  • California. The State of California released the rates Californians will have to pay to buy health insurance in its health care exchange. Additional analysis found, however, that in California’s individual market, excluding the impact of government subsidies, consumers will see increases of 64 to 146 percent. Policy experts found that California had disingenuously compared next year’s individual premiums to this year’s small employer premiums. This created an illusion that the health care law lowered premiums.
  • Rhode Island. State Health Insurance Commissioner Christopher Koeller announced that new rates for large employers will be 9.6 to 12 percent higher. Mr. Koeller said premium prices were “significantly lower” than those requested. So the commissioner is celebrating a rate hike when Washington Democrats told the American people that their law would cause premiums to drop.

The White House will claim New York’s premium rate experience can be replicated nationwide. It can’t. Let’s put the New York announcement into context.

A handful of states already have stringent Obamacare-like health insurance market requirements on the books. During the 1990’s, eight states – Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont, and Washington – passed insurance market reforms nearly identical to Obamacare. Officials touted the mandates as protecting consumers, but the state price controls actually led to severe premium increases and fewer health insurance choices.

  • In 1993, a 30 year-old man and woman living in New York paid, on average, an annual premium totaling $1,200 and $1,800, respectively. One month after passing similar Obamacare reforms, premiums skyrocketed to $3,240 per person. Some people faced premium increases totaling 170 percent.
  • In 1994, New Jersey passed guaranteed issue and community rating requirements. Over the next 10 years, premiums increased 50 percent or more annually.
  • After Massachusetts enacted similar insurance market price controls in 1996, 20 health plan carriers exited the insurance market. News reports indicated that, prior to enactment of the 1996 law, young people could buy insurance with a premiums as low as $25 per month. After the law passed, the same person’s premium was more than $600 per month.
  • When Kentucky instituted guaranteed issue and community rating laws, average premiums soared between 36 and 165 percent. Approximately 45 insurers pulled out of Kentucky’s individual market between 1994 and 1997. The state’s insurance commissioner said Kentucky was “moving toward a crisis” as the number of insurance providers faded to only one.

Even the liberal think tank Center for American Progress explained how Obamacare type mandates destroyed state insurance markets: “Massachusetts, along with several other northeastern states passed insurance market reforms similar to those in the [health care law], eliminating or restricting the ability of insurance companies to discriminate against the ill either in prices or coverage exclusions. The result in each state was very high nongroup insurance prices.”

New York is the poster child for what can go wrong when government places strict controls on the individual insurance market. By requiring insurance plans to accept any applicant (guaranteed issue), mandating insurers charge everyone the same price (community rating), and mandating 62 specific benefits, the state has boasted the highest individual market premiums in the country for more than two decades. What New York doesn’t have is an individual mandate forcing every resident to buy a health insurance plan. President Obama’s health care law does – ensuring that younger, healthier people bear the cost to cover older, sicker people.

Only 17,000 New Yorkers buy health insurance on their own in the individual market today. For these people, it should not come as a surprise that premium rates are slated to go down due to the federal health care law. It is the 615,000 new consumers the state estimates will buy health insurance who may not find the rates to be such a good deal. New York needed to increase its individual market enrollment 36 times over current figures in order to lower some people’s premiums by 53 percent.

The Society of Actuaries estimated that premiums in New York’s individual market today are exorbitantly high compared to the national average. Even after enacting Obamacare, premiums in New York’s individual market are predicted to remain significantly higher than the national average.

  • Pre-Health Law Enactment. The average non-group monthly individual premium cost in New York is estimated to be 97 percent higher than the rest of the country.
  • Post-Health Law Enactment. The average non-group monthly individual premium cost in New York is estimated to be 37 percent higher than the national average.
  • Post-Health Law Enactment vs. Pre-Health Law National Average. The average non-group monthly individual premium cost in New York after the health care law’s enactment is estimated to be 77 percent higher than the national average cost estimate prior to the health care law’s enactment.

Only the people forced to buy government mandated and approved insurance in New York’s individual market can decide if paying approximately 37 percent more than the national average for health insurance is a good deal or not. At the very least, President Obama should give the American people all the facts and let them make up their own mind.

Health Care Headlines

Forbes: The Apothecary: “The NY Times Tries – And Fails – To Protect Obamacare From Health Insurance ‘Rate Shock’” A front-page story in the New York Times announced that individuals shopping for health insurance in New York would see their premiums halved, based on figures released by the Cuomo administration. It was an “extraordinary decline” that “demonstrates the profound promise” of Obamacare, said one supporter of the law. But the cheerleaders are wrong. New York’s premiums will remain among the costliest in the nation, after Obamacare becomes fully operational. And the unique history of how the Empire State destroyed its individual health-insurance market—using policies quite similar to Obamacare’s—will translate, at best, to only a handful of other states.

Wall Street Journal, Editorial: “Big Labor Wakes Up to ObamaCare” Every revolution devours its children, but it's still surprising to see some of ObamaCare's keenest boosters deny paternity so soon after the birth. Witness the emotional volte-face from three top union leaders, warning that the program will "shatter not only our hard-earned health benefits, but destroy the foundation of the 40-hour workweek that is the backbone of the American middle class."

Wall Street Journal: “Union Leaders Seek Changes to Health-Care Law” The presidents of the three of the nation's biggest labor unions, who say they have been stonewalled by the White House, are asking Democratic leaders in Congress to change the new health-care law, which they say would otherwise devastate union-sponsored health-insurance plans.

Chicago Tribune, Editorial: “Hold Off Obamacare” The criticism and concerns are growing, and they’re not just coming from critics of the White House.

The Washington Post: “Obamacare Contractor Under Investigation in Britain” The British government has launched an investigation of Serco Group, parent company of the firm recently awarded $1.2 billion to manage key elements of the U.S. health-care law’s rollout.

Associated Press: “Fraud Fear Raised in California’s Health Exchange” As California prepares to launch its health care exchange, consumer groups are worried the uninsured could fall victim to fraud, identity theft or other crimes at the hands of some of the very people who are supposed to help them enroll.