'Obamacare Premiums are Lower than You Think' ... NOT! | Citizens Against Government Waste

'Obamacare Premiums are Lower than You Think' ... NOT!

The WasteWatcher

On July 21, the Health Affairs blog published a study by the Brookings Institute, entitled, “Obamacare Premiums Are Lower Than You Think.”  The study starts off stating, “Since the Affordable Care Act’s (ACA) health insurance marketplaces first took effect in 2014, news story after story has focused on premium increases for certain plans, in certain cities, or for certain individuals.  Based on preliminary reports, premiums now appear set to rise by a substantial amount in 2017.”

That is certainly true and many Americans have seen price increases, not only in their premiums, but with their deductibles too.  But then the authors write, “What these individual data points miss, however, is that average premiums in the individual market actually dropped significantly upon implementation of the ACA, according to our new analysis, even while consumers got better coverage.  In other words, people are getting more for less under the ACA.”  They state, “even if premiums increase by the 10 or 15 percent overall that some are predicting for 2017, they will still be far lower than premiums otherwise would have been in the absence of the law.”  The authors admit that, “many of the ACA’s new rules do have the anticipated effect of increasing premiums,” because of the law’s 10 essential benefits and other mandates, such as capping out-of pocket costs, restrictions on charging different premiums for individuals (except for age and smoking habits), and guaranteed issue. 

Of course, in spite of these whiz-bang benefits that Americans are supposed to be happy about and therefore should be pleased to pay much more for their health insurance, most people remember President Obama’s promise that if ACA was signed into law, premiums would be lowered for families on average by $2,500 per year. 

The Brookings’ paper received some news coverage in various financial and policy news sources so it was pleasing to read Mercatus Center Senior Research Fellow Brian Blase’s rebuttal published in the July 28 Forbes.  He notes the new Brookings' study, “contrasts with a plethora of evidence, including a rigorous 2014 Brookings study, showing that the ACA significantly increased premiums.”  Blase goes on to discuss “methodological concerns” he has with the Brookings’ report and provides “evidence that leads most scholars to reach a very different conclusion.”

His analysis reaffirms what many health policy experts have been stating ever since 2014 and that was insurers had priced ACA premiums too low to cover their expenses and that comparing those premiums to pre-ACA premiums in the individual market was “problematic.”  He also points out the Brookings study’s authors failed “to account for the ACA’s reinsurance program – a program that allowed insurers to reduce premiums since it compensated them for a large share of the cost of their most expensive enrollees.”

Taxpayers should pay close attention to what is going on with ACA’s risk insurance sharing plans, such as the reinsurance program mentioned above.  The risk-sharing plans were discussed in Citizens Against Government Waste’s December 2015 Waste Watcher, entitled “The Other Three Rs” and a February, 2016 Swineline, “Breaking the Law – Again.”  These plans are at the heart of ACA’s ongoing failure and several insurers are in the process of suing the federal government (that means taxpayers) to cover their losses.  Healthcare policy expert Doug Badger lays this issue out neatly in a July 26 National Review article, “The Health-insurance Industry is Lawyering Up.”

What’s the bottom line of the Blase rebuttal?  If the ACA improved insurance coverage and lowered costs as the Brookings’ study claims, then the health insurance exchanges would not be in serious trouble and insurers would not be dropping out of them or suing the federal government to recover their losses.

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