Quantifying Obamacare’s Premium Increases
- Eliminating Obamacare’s coverage mandates will reduce premiums – up to 44 percent for people in their early twenties.
- In 2014, more than four times as many people buying insurance in the individual and small group markets were subject to Obamacare’s costly coverage mandates as received subsidies.
- Among people eligible for exchange coverage who do not receive federal financial assistance, 98 percent find Obamacare plans not worth the cost.
Obamacare forced millions of people to drop coverage that they liked, and many people in the middle class had more health insurance options at much lower cost before Obamacare took effect. Last year, a Manhattan Institute analysis of 3,137 counties found that Obamacare increased 2014 individual market premiums by an average of 49 percent from 2013 to 2014 as insurance plans changed to meet the multitude of new Washington rules.
Earlier this month, the Heritage Foundation released estimates of how three different Obamacare components have driven up premiums.
According to the analysis:
- Obamacare’s three-to-one age-rating band, which forces insurers to overprice coverage for younger adults to subsidize coverage for older adults, increased premiums for younger adults by about one-third.
- Obamacare’s mandate that insurance companies cover a Washington-prescribed set of benefits increased premiums by an average of nine percent.
- Obamacare’s minimum actuarial value requirement increased the cost of the least expensive plans by an average of eight percent.
In total, Heritage concluded that eliminating Obamacare’s coverage mandates would reduce premiums for people in their early twenties by 44 percent. It would reduce premiums for people near 40-years old by about 25 percent, and premiums for people near 65-years old by seven percent.
Small portion of people with higher premiums received a subsidy
To compel young people to purchase Obamacare’s overpriced insurance and to prevent excessive adverse selection in the individual insurance market, the law contained an individual mandate. The law further incentivized lower-income people to purchase coverage with subsidies that would lower premiums and out-of-pocket payments like deductibles. The subsidies are generous for people with incomes between 100 and 200 percent of the poverty level but phase out rapidly for people in the middle class.
Last week, the Heritage Foundation released an analysis of 2014 individual and small group market data showing that more than four times as many people buying insurance in the individual and small group markets were subject to Obamacare’s costly coverage mandates as received subsidies. The ratio was particularly skewed in Ohio. In the Buckeye State, eight people bought unsubsidized mandate-laden coverage for every person who received a subsidy to lower their premiums. The number of people across the country who would benefit from lower premiums by eliminating Obamacare’s coverage mandates appears to be far greater than the number of people who are receiving subsidies now.
Middle class shunning Obamacare coverage
Because of substantially higher premiums, and subsidies largely targeted at people below 200 percent of the poverty level, only a small percentage of the people enrolled in the exchanges are in the middle class. According to data released by the administration, only 17 percent of exchange enrollees in 2015 have income above 250 percent of the federal poverty level – a rough lower-end proxy for the middle class. Only two percent of all eligible people earning more than four times the poverty level found Obamacare exchange plans to be worth the cost. In other words, among people eligible for exchange coverage who do not receive federal financial assistance, 98 percent find Obamacare plans not worth the cost.
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