A couple weeks ago, I linked to an article talking about the PPACA’s Exchanges – the mechanism by which those with pre-existing conditions will be insurable. Rick Ungar said:
Upon reviewing the data, I was indeed shocked by the proposed premium rates—but not in the way you might expect. The jolt that I was experiencing was not the result of the predicted out-of-control premium costs but the shock of rates far lower than what I expected—even at the lowest end of the age scale.
Not just that. Claims were being made that rates would be lowered. And for some, they might. Mike Schilling commented:
My company just had our annual health-care enrollment meeting, and it was the usual: less coverage at a higher cost. But with a possible silver lining: since we’re demographically unfortunate (a small company with a high proportion of older employees), moving over to the exchanges might help us a lot.
This all left me feeling great. Even though I came down against PPACA, it was a relatively close call and the exchanges were one of the aspects that I had hope for. I wasn’t stunned to read that costs were coming in below expectations (though I wouldn’t have been stunned the other way, either).
Why do the exchanges matter so much? Because if the exchanges work, it’s game over for the health care debate as far as I am concerned. We have our health care system, and it’s only a matter of figuring out how to transition from employer-subsidy to government-subsidy. Then, bam! We’re done.
So it was a real let-down to read Avik Roy’s piece, pointing out that the numbers suggesting savings were based on faulty comparisons:
[F]or the typical 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent.
Under Obamacare, only people under the age of 30 can participate in the slightly cheaper catastrophic plan. So if you’re 40, your cheapest option is the bronze plan. In California, the median price of a bronze plan for a 40-year-old male non-smoker will be $261.
But on eHealthInsurance, the median cost of the five cheapest plans was $121. That is, Obamacare will increase individual-market premiums by an average of 116 percent.
For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double.
Now, Roy’s comparisons themselves are imperfect. Twenty-five year old, non-smoking men, are not the best basis from which to judge. And for the 40 year old, he’s not clear but it appears he is comparing the cheapest available plan and not comparable plans. On the one hand, the sudden unavailability of inexpensive plans is significant, but on the other it’s not a true apples-to-apples comparison (if I am reading Roy correctly).
But it was enough to convince me that, except for various cases of PECs and cases like Mr. Schilling’s, rates will go up for most people. This was confirmed by the many responses to Roy, which despite their criticisms (and in some cases calling him names) did not contest his central point.
Ezra Klein argued that stated rates were misleading because some people paid more and some couldn’t get coverage, and that people will get subsidies. He seemed to concede the point that rates will go up for most people, but that this is a necessary sacrifice. Whether that’s true or not is a value judgment. There’s nothing at all wrong, in my view, taking the view that higher premiums are worth it for more consistent coverage.
But that wasn’t what we were hoping for, that wasn’t what was sold to us, and that wasn’t what the initial reports had lead me to believe. So I remain disappointed.
Roy responded, pointing out that the subsidies won’t take care of it. He further argues, along with Will Wilkinson, that the rates for the young and the healthy actually matter a great deal. Because if it’s not considered affordable, they won’t sign up. And if they don’t sign up, we don’t avoid the death spiral that the mandate was put in place to prevent.
Now, that the exchanges didn’t work as well as I had hoped is not really an indictment of PPACA. It may negatively affect my opinion of the law, but I wasn’t a supporter anyway. And that the exchanges didn’t work in this context doesn’t actually mean that we couldn’t try to run a system off a similarly market-based idea. It’s possible that if we put all the healthy working people that are currently on employer plans into the general market, that rates could go down.
Unfortunately, the confirmation of that I was hoping for did not materialize.