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April 9, 2018

Federal Report: Obamacare Charges Luxury Premiums For Economy Health Plans

  The Federalist

The federal Centers for Medicare and Medicaid Services (CMS) has released an excellent, detailed summary of the Affordable Care Act’s 2018 health insurance exchange enrollment. It’s not a pretty picture.

President Barack Obama and the Democrats who forced this law on the country promised us it would create a vibrant health insurance market, where individuals who wanted or needed coverage would have a wide range of affordable options regardless of any pre-existing medical conditions. Instead, the exchanges are imploding, multiple insurers have fled, and many people have only one insurance option. It can be very difficult to find a doctor, or even a hospital, willing to take Obamacare. Tens of millions of Americans had their policies canceled. And Americans have never paid so much for such bad coverage.

Obamacare exchanges serve a small and declining number of individuals. According to the paper, as of March 11.8 million enrolled through the federal and state health insurance exchanges. That number is down from 12.2 million in 2017 and 12.7 million in 2016, which marked the peak for exchange enrollment.

These numbers are the high point for the year. Prior to Obamacare, perhaps a third or more of those with individual coverage would drop it during a year. The dropout rate for Obamacare is smaller because taxpayers are subsidizing it. CMS says 83 percent of enrollees receive subsidies, which cover about 86 percent of premiums, on average. The average monthly premium is only $89 after taxpayer-provided subsidies.

The Young and Healthy Flee

But it’s difficult to overstate how disappointing exchange enrollment has been for Obamacare proponents. The exchanges were supposed to be the genius behind the law, the real innovation that would make health insurance competitive and affordable for individuals buying their own. The Obama administration thought perhaps 25 million to 30 million individuals would join the exchanges, demonstrating, once again, how little they understood insurance markets before they tried to reinvent them.

The challenge for any health insurance plan is to enroll enough healthy people to offset the costs of the sick. That’s why health insurers historically would deny coverage or charge a higher premium to applicants with major medical conditions. Obama thought that practice was immoral, when it was standard actuarial practice for any type of insurance. It wasn’t to discriminate; it was to keep the insurance pool viable.

When the government tells insurers they must accept anyone who applies regardless of a medical condition, people with costly medical conditions will rush to join while healthy people, who tend to be younger, will wait until they need coverage.

CMS says the percentage of younger participants (age 18-34) continues to decline while the percentage of older participants (55+) continues to rise. This is what insurers call the “death spiral”—young and healthy people flee higher premiums, so the pool gets increasingly sicker and more expensive until it collapses.

An Economy Car for a Rolls Royce Premium

Health insurance has never been so expensive since Obama decided to make it “affordable.” Monthly premiums for those on the federal exchange rose by 30 percent in 2018 alone, according to CMS. For context, the Department of Health and Human Services warned insurers in 2013 they would be closely scrutinized if they requested an annual premium increase of 10 percent or more.

Here’s an actual example. A friend living in Northern Virginia looked at his family’s health insurance options last fall. A CareFirst BlueCross BlueShield silver-level family HMO plan with a $3,500 deductible would cost my friend $2,179 per month. The BlueCross gold-level HMO with a $1,000 deductible would cost $2,500 per month.

The BlueCross silver-level family PPO plan with a $3,500 deductible would cost $2,729 per month and the gold PPO with a $1,000 deductible was $3,087.

Compare those monthly health insurance premiums to one Connecticut-based company’s advertised monthly lease rates for several ultra-high-end 2017 cars. A Bentley Bentayga was $2,289 per month. An Aston Martin DB11 was $2,371. And the Rolls-Royce Dawn was $2,750.

So my friend could lease a Rolls-Royce for less than a gold-level BlueCross family PPO policy. And those Rolls-Royce lease payments would be the same for three years, while that gold-level policy would likely be 25 percent more for 2019.

Democrats Make ‘Junk Insurance’ The Norm

Health insurers have already taken a number of mostly unpopular steps to keep premiums from being even higher than they are. Without dramatically raising the deductibles and shrinking the provider network, along with other steps, health insurance premiums would be even higher.

The average deductible for a silver plan—the most popular among people receiving taxpayer subsidies that defray the cost—is about $4,000 for 2018. For bronze plans, the average deductible is nearly $6,000. Double those numbers for a couple.

Again, for context, many of us in health policy praised high-deductible plans prior to Obamacare, especially when combined with a health savings account. Even though we generally referred to a $2,500 or $3,000 deductible total for a family, Democrats invariably argued that was junk insurance and accused us of being shills for health insurers.

Under Obamacare, however, millions of Americans couples can face a $6,000 deductible for each adult and Democrats remain silent. In addition, insurers have dramatically reduced the network of care providers in their plans, or ratcheted down reimbursement rates so low that many providers refuse to participate.

For example, the world-famous, Houston-based M.D. Anderson Cancer Center explains on its website: “For 2017, MD Anderson and our physicians are not included as a ‘Participating Provider’ for any ‘Individual’ insurance plans on or off the marketplace in Texas (i.e., ACA plans).”

These latest CMS numbers demonstrate what a complete and disruptive failure Obamacare has been. The only bigger failure was the repeated Republican promise to repeal it.

Dr. Merrill Matthews is a resident scholar with the Institute for Policy Innovation.

 

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