How does Obamacare cause medical premiums to rise?

The facts are not in dispute – Obamacare will make health insurance premiums go up.

The Wall Street Journal explains what will happen to medical insurance premiums as more of Obamacare is implemented in 2014.

Excerpt:

Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions.

[...]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%.

While ObamaCare won’t take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. There are newly imposed mandates, such as the coverage for children up to age 26, and what qualifies as coverage is much more comprehensive and expensive. Consolidation in the hospital system has been accelerated by ObamaCare and its push for Accountable Care Organizations. This means insurers must negotiate in a less competitive hospital market.

Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher—a spread of about $5,500 per family.

But why? How does it happen?

Investors Business Daily has a look at the chain of causation.

Excerpt:

For years, ObamaCare critics focused on its least popular feature — the mandate that everyone buy insurance — taking their fight all the way to the Supreme Court.

But as ObamaCare’s official launch date approaches, even its backers are beginning to admit that the law could actually create powerful incentives for millions of people and thousands of businesses to drop their coverage, despite the mandate.

There is growing concern, for example, that the law’s market reforms will cause a huge “rate shock,” particularly for those young and healthy.

A February survey of major health insurance companies in five cities across the country found that they expect premiums for this group to climb an average 169%.

The cause of this rate shock is simple: ObamaCare imposes what is called “community rating” on insurance companies, effectively forcing them to charge the young and healthy more so they can charge older and sicker consumers less.

The five-city survey, for example, found that while the law will jack up rates for the young, it will lower them an average 22% for older and sicker customers.

At the same time, ObamaCare also forbids insurance companies from turning anyone down — a reform called “guaranteed issue” — which also will provide an incentive for some to drop coverage, knowing they can get it back any time.

“Even with the tax penalty … some healthy people would avoid purchasing coverage until they are sick,” Howard Shapiro, director of public policy at the Alliance of Community Health Plans, told regulators .

The problem is that if the young and healthy drop coverage, the result would be what the industry calls a “death spiral.” Premiums will climb as the pool of insured gets sicker, causing still more to cancel their policies.

This is just what happened in states that imposed strict community rating and guaranteed issue reforms in the past. In fact, of the eight states that did so, most ended up either dropping the reforms or loosening the rules after they saw enrollment decline and premiums climb.

It’s very important to understand that what Obama did with his health care plan will not cause premiums to go down. On the contrary, they have gone up and they will go up.

Filed under: News, Costs, Coverage, Employee, Employer, Health Insurance, Health-care, Inflation, Insurance, Medical Insurance, Obamacare, Premium, Prices

Unemployment rate rises: 169,000 more people not in labor force

First, I hope everyone remembers about the William Lane Craig vs Alex Rosenberg debate tonight at Purdue University. There is live-streaming available, details here.

And now, three scary stories from CNS News.

First, this one about the recent depressing jobs report.

Excerpt:

The number of Americans not in the labor force grew by 169,000 in January, according to the Bureau of Labor Statistics’ latest jobs report.

BLS labels people who are unemployed and no longer looking for work as “not in the labor force,” including people who have retired on schedule, taken early retirement, or simply given up looking for work. There were 89 million of them last month.

[...]The nation’s unemployment rate increased a tenth of a point in January, rising to 7.9 percent from 7.8 percent, a level the Labor Department described as “essentially unchanged.”

Second, this one about Obamacare health care plans.

Excerpt:

In a final regulation issued Wednesday, the Internal Revenue Service (IRS) assumed that under Obamacare the cheapest health insurance plan available in 2016 for a family will cost $20,000 for the year.

Under Obamacare, Americans will be required to buy health insurance or pay a penalty to the IRS.

The IRS’s assumption that the cheapest plan for a family will cost $20,000 per year is found in examples the IRS gives to help people understand how to calculate the penalty they will need to pay the government if they do not buy a mandated health plan.

The examples point to families of four and families of five, both of which the IRS expects in its assumptions to pay a minimum of $20,000 per year for a bronze plan.

And finally, this one about Obamacare’s effect on job creators, aka “the rich” who need to “pay their fair share”.

Excerpt:

Sixty-one percent of U.S. small business owners said they were “worried about the potential cost of healthcare” and 56 percent said they were “worried about new government regulations,” according to the Wells Fargo/Gallup small business index released on Jan. 31, which also showed that 30 percent of small business owners are not hiring and fear going out of business within a year.

“At the bottom of the list, but still at a surprisingly high level, 30% of owners say they are not hiring because they are worried they may no longer be in business in 12 months,” according to Gallup’s index summary. “This is up from 24% who had the same worry in January 2012.”

[...]Gallup said the reasons given for less hiring, such as healthcare and government regulations, are “troublesome” and have negative implications for the U.S. economy.

Bad news! I remember the good old days of the Bush administration, when we had lower taxes, a 4.4% unemployment rate, and a $160 billion dollar budget deficit. Maybe watching tonight’s debate with WLC and this Duke University naturalist tonight will cheer me up.

Filed under: News, Economy, Health Insurance, Health-care, Hiring, Job Creator, Jobless, Joblessness, Jobs, Medical Insurance, Obamacare, Regulation, Small Business, Socialism, Taxes, The Rich, Unemployment

Obamacare’s new tax on medical devices trickles down to hospitals and patients

From the Wall Street Journal.

Excerpt:

Small medical-device makers have little choice but to pass their new 2.3% excise tax— meant to pay for the health law —on to hospitals and other customers, said the chief executive of one manufacturer that began surcharging hospitals for its wares on Jan. 1.

“The government thinks we’re just going to absorb these costs, but for a company like us, it’s a lot of money,” said Kevin Rudolph, the chief executive of the family-run respiratory valve maker, Hans Rudolph Inc. Instead, he said, device makers will be raising prices or adding surcharges to bills— just like other companies that faced excise taxes in the past.

In a December letter to several thousand hospital customers, Mr. Rudolph told hospitals his company would add a new line item for the tax beginning on Jan. 1. Hospitals and group-purchasing organizations began protesting last week as similar warnings from other device makers began piling up, the Wall Street Journal reported Saturday.

The tax is meant to raise $30 billion to help cover the health law. The device industry has lobbied to repeal the tax, which applies to sales, rather than profits. The recent clashes between hospitals and device makers underscores the breadth of the tax: It applies to companies that make big ticket items such as pacemakers and hip implants, as well as smaller firms selling surgical tools or making the plastic tubes, clips and valves that are ubiquitous in hospitals and nursing homes.

Mr. Rudolph said his firm had opted to tell hospitals upfront they’d be charged for the tax, rather than sneaking it into price increases. “I think it’s better for the customer to know what’s going on, even if they don’t like it,” he said Monday.

Hans Rudolph Inc. typically makes a 4% to 6% profit on about $5 million to $6 million in annual sales, Mr. Rudolph said. The 53-year-old Shawnee, Kan., company was founded by Mr. Rudolph’s father, and grandfather, Hans. The two elder Rudolphs built the company out of a Kansas City, Mo., basement, where Hans devised several respiratory devices. Key products still include spirometry components, for the common breath test in which patients are asked to exhale into plastic tubes.

Though the company has done well, Mr. Rudolph said, it can’t afford the tax. “We just like people to understand that the government is imposing this tax on us, so the cost of medical devices is going up,” he said.

I think that the lesson to learn here is that big government socialism doesn’t reduce the cost of anything by raising taxes on job creators. Those anti-business taxes just get passed onto consumers. In some cases, the business moves abroad or at least expands abroad, instead of staying in high tax environments. There was a plan put forward by the Republicans to reduce the costs of health care by introducing free market forces of choice and competition. Free market forces reduce the costs of all our other consumer goods, while improving the quality. Just think of computers and cell phones that are always getting better for less money. But Americans rejected that plan for Obama’s big government plan. We thought we would escape the costs of health care by taxing and regulating the providers of health care. But we were wrong. In the end, we’ll pay for it.

Related posts

• Medical premiums will continue to rise as Obamacare is implemented
• Christian business Hobby Lobby defies Obamacare abortion mandate
• When health insurance is forced to cover more, insurance premiums go up
• Obamacare in action: Denny’s to charge 5% surcharge and cut employee hours
• Papa John pizza CEO: cuts to employee hours likely, because of Obamacare
• A primer on the fiscal cliff facing us in January 2013: tax hikes and Obamacare
• Companies announce layoffs in the wake of Obama’s re-election
• Sally Pipes: how Obamacare causes doctors to quit practicing medicine
• Why do some people oppose Obamacare? What does Obamacare do?
• The full list of Obamacare tax hikes in order from largest to smallest
• California: Obamacare exchanges will raise health insurance premiums up to 25%
• Survey: doctors prefer Romney over Obama
• Health insurance premiums up $3,000 since Obama was elected
• Report: Obamacare regulations will cost taxpayers and businesses $1.8 trillion
• Obamacare subsidizes the risky behaviors of sexually active women
• Obamacare begins forcing states to cap and cut prescription drug benefits
• Department of Justice threatens to seize business from Catholics
• CBO: 20 million Americans could lose employer-provided health coverage under Obamacare
• A simple introduction to Obamacare
• 75% of the costs of Obamacare will be paid by those making $120,000 or less
• CBO: Obamacare cost is $1760 billion, not $940 billion that Obama claimed
• CBO report: four million will lose employer health care due to Obamacare
• Democrat Jim Cramer explains how Obamacare forces businesses to outsource

Filed under: News, Costs, Coverage, Employee, Employer, Health Insurance, Health-care, Inflation, Insurance, Medical Device, Medical Device Tax, Medical Insurance, Obamacare, Premium, Prices, Socialism

Medical premiums will continue to rise as Obamacare is implemented

The Wall Street Journal explains what will happen to medical insurance premiums as more of Obamacare is implemented in 2014.

Excerpt:

Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions.

[...]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%.

While ObamaCare won’t take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. There are newly imposed mandates, such as the coverage for children up to age 26, and what qualifies as coverage is much more comprehensive and expensive. Consolidation in the hospital system has been accelerated by ObamaCare and its push for Accountable Care Organizations. This means insurers must negotiate in a less competitive hospital market.

Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher—a spread of about $5,500 per family.

The big concern I have about all of these socialist schemes is that the public will not connect rising prices to Obama’s policies. We have been printing money (inflation), running huge deficits, imposing taxes and regulations on businesses, and so on. All of this will causes the prices that consumers pay for goods and services to go higher.

When the prices of goods and services go higher, the people who voted for Obama won’t make the connection between his policies and the rising prices. We have reached a point where a majority of the American public is as ignorant of basic economics as the peasant populations that elect communist governments. We are ready for government-controlled economy and central planning, because we can’t make the connection between cause and effect.

Filed under: News, Costs, Coverage, Employee, Employer, Health Insurance, Health-care, Inflation, Insurance, Medical Insurance, Obamacare, Premium, Prices

When health insurance is forced to cover more, insurance premiums go up

Investors Business Daily explains how Obamacare forces insurance companies to provide coverage for more stuff in their health care plans, and how that raises the cost of health insurance for you.

Excerpt:

In a recent New York Times article, chiropractors and acupuncturists bragged about how they’re getting their services mandated under ObamaCare’s “essential benefits” rule. That part of the law says all insurance — which the government forces everyone to buy — has to cover certain basic benefits and leaves it up to the states to fill in a lot of the blanks.

[...]Other coverage mandates that various states have announced they plan to require under ObamaCare include weight-loss surgery and infertility treatment. These are on top of the federal mandates the Obama administration has already announced, including things like “free” preventive service and contraception coverage.

Since health care dollars don’t fall from trees, each of those mandates will end up adding to the cost of insurance. Worse, these mandates will only grow over time.

[...]Other coverage mandates that various states have announced they plan to require under ObamaCare include weight-loss surgery and infertility treatment. These are on top of the federal mandates the Obama administration has already announced, including things like “free” preventive service and contraception coverage.

[...]States currently impose 2,262 benefit mandates, up from 2,156 the year before, according to the Council for Affordable Health Insurance. There were just 850 mandates in 1992, when CAHI first started tracking them.

Among the more ridiculous are requirements that insurance cover breast implant removal, circumcision, wigs for chemotherapy patients, smoking-cessation service and varicose vein removal.

CAHI figures state mandates add 10% to 50% to the cost of insurance. A report from the Maryland Health Care Commission figures that around 20% of premiums in that state are the result of its 45 benefit mandates.

In addition to preventive-care rules, ObamaCare bans lifetime limits on coverage and puts caps on out-of-pocket costs, each of which will drive up premiums. Its requirement that insurers cover “children” up to 26 years old has already added as much as 3% to premiums, according to Towers Watson.

Along with mandated benefits, ObamaCare declares war on high-deductible health plans proved to hold costs down.

Individual plans won’t be allowed to have a deductible higher than $2,000. This rule will mean that 1-in-7 workers will be forced to take a lower deductible, then pay higher insurance costs as a result.

When insurance companies have to cover more stuff, then premiums increase to be able to pay the claims.

Previously, I blogged about how health insurance premiums had already gone up $3,000 during Obama’s first four years. And now you know why.

Filed under: News, Costs, Coverage, Employee, Employer, Health Insurance, Health-care, Inflation, Insurance, Mandate, Medical Insurance, Obamacare, Premium, Prices