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.
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.
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.