Health Care Policy Update: Health Care Law’s Premium Bills Come Due

This week, The New York Times, Los Angeles Times, and U.S. News and World Report all noted that Americans – particularly young adults – should brace for very high health insurance premiums starting next year. Why? President Obama’s health care law.

Recall that in 2009, while the health care battle raged in Congress, leading accounting and actuarial firms (Oliver Wyman, PriceWaterhouseCoopers, Hay Group, Milliman) released reports quantifying how much the President’s plan would increase premium costs. Health care law supporters simply ignored the warnings. In fact, President Obama repeatedly promised: “If you’ve got health insurance, we’re going to work with you to lower your premiums by $2,500 per family per year. And we will not wait 20 years from now to do it or 10 years from now to do it. We will do it by the end of my first term as President of the United States of America.”

President Obama’s time is up. The health care law did not make insurance premiums cheaper. In fact, average family premiums soared from $12,680 in 2008 to $15,745 in 2012. Supporters of the health care law may try to spin the story, but the numbers don’t lie. The average American family’s health insurance premium is $3,065 more than when President Obama took office. Unfortunately, the price is about to go even higher.

In December 2012, health insurance company CEOs began to sound the alarm. They said consumers would face premium increases up to 100 percent as the health care law’s market rules take effect. Industry leaders and policy wonks dubbed this phenomenon “rate shock.” But the outcome really should not come as a shock to anyone who objectively analyzed the data.

• CBO estimated families buying coverage on their own would see premiums increase 10 to 13 percent -- a $2,100 annual increase due to the health law. CBO also said premiums will go up by 27 to 30 percent because the law requires Americans to buy more expensive government mandated benefit packages.
• Even Jonathan Gruber, one of Obamacare’s chief architects, admitted the law will significantly increase costs. He estimated that premiums in Wisconsin would jump 30 percent by 2016.

Democrats argue that taxpayer subsidies will help some people offset the cost to buy more expensive, government mandated health insurance. Of course, basic economics tells us that subsidizing a product does not make it cheaper. Many people eligible for taxpayer subsidies will still pay higher premiums than they do today, especially young people.

• A new American Academy of Actuaries study reveals that close to four million uninsured people between the ages of 21 and 29 can expect to pay more for single coverage than they otherwise would have – even with the government subsidies.
• The same study found that 80 percent of all Americans below the age of 30 who buy insurance in the individual market will pay higher premiums.
• Of course, the young also have been hit hard by the weak economic recovery. As of January 2013, the unemployment rate for young adults stood at 13.1 percent.

Health Care Headlines

The New York Times: “Some Employers Could Opt Out of Insurance Market, Raising Others’ Costs.” Federal and state officials and consumer advocates have grown worried that companies with relatively young, healthy employees may opt out of the regular health insurance market to avoid the minimum coverage standards in President Obama’s sweeping law, a move that could drive up costs for workers at other companies.

Los Angeles Times: “States Worry about Rate Shock During Shift to New Health Law.” Less than a year before Americans will be required to have insurance under President Obama's healthcare law, many of the law’s backers are growing increasingly anxious that premiums could jump, driven up by the legislation itself. Higher premiums could undermine a core promise of the Affordable Care Act: to make basic health protections available to all Americans. Major rate increases also threaten to cause a backlash just as the law is supposed to deliver many key benefits Obama promised when he signed it in 2010.

U.S. News & World Report: “Obamacare Is Raising Healthcare Costs, Not Lowering Them.” No one really knows how much Obamacare is going to cost the American government or the American people. All we really know for certain, something that a number of public and private econometric studies have backed up, is that it will be more expensive than the President led us to believe it would be.

The Wall Street Journal: “ObamaCare and the 29ers.” Here's a trend you'll be reading more about: part-time “job sharing,” not only within firms but across different businesses. It’s already happening across the country at fast-food restaurants, as employers try to avoid being punished by the Affordable Care Act. In some cases we’ve heard about, a local McDonald’s has hired employees to operate the cash register or flip burgers for 20 hours a week and then the workers head to the nearby Burger King or Wendy’s to log another 20 hours. Other employees take the opposite shifts.

Politico: “Under ACA, Employer Mandate Could Mean Fewer Jobs.” This March marks the third anniversary of the passage of the President’s sweeping health care legislation. But for many in the business community now facing a litany of difficult decisions in the law’s wake, this milestone will be met with capitulation rather than celebration.