Americans should prepare themselves for severe sticker shock when health-insurance premiums rise dramatically later this year thanks to the Affordable Care Act, otherwise known as Obamacare. Do not expect the president to reach into his own pockets to bale you out. He spends most of his waking time rooting into the pockets of other Americans, including yours’. That is the name of the presidential game.
When writing and passing Obamacare into law, President Obama and the Democratic members of Congress – there were no Republicans involved – ignored virtually every actuarial principle governing rational insurance pricing. Preiums will inevitably reflect that disregard.
Specifically, central to Obamaracare mandates are requirements that insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more on the basis of serious medical conditions (modified community rating),and (3) include numerous coverage mandates that force insurers to pay for often uncovered medical conditions. Insurance companies that do not wish to end up in the bankruptcy courts will have to find reimbursements for such additional outgoings by increasing average premiums to all customers.
Evidence already exists that these premium advances will be huge for many Americans. Eight states – New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts – enacted guaranteed issue and community rating in the mid-1990s and wrecked their non-group health-insurance markets. Premiums increased so much in Kentucky that the state repealed its law in 2000, and several of the other afflicted states modified their community-rating provisions. At this time, consumers in New Jersey, New York and Vermont already pay well over twice what citizens in non-afflicted states pay.
Actuaries calculate that the premium hike associated with Obamacare will average 50 per cent across the United States. This will not be evenly distributed. Large groups will be impacted less, at least initially, because the law grandfathers in employers that self-insure. Small employers will see a significant increase – and many will abandon coverage, pushing employees into the individual exchanges. The individual market will be hit hardest. Citizens of prudent states, outside the listed eight, will be hit especially hard, with individual premiums rising well in excess of 100 per cent.
Expect a lot of arm-twisting and anti-insurance-company rhetoric from the White House as Obamacare premiums soar. At risk for the Democrats will be the 2016 elections, when Americans will be fully aware of the fraud that Obamacare has perpetrated upon them, as they confront much higher premiums for much less effective medical services.
Hat Tip: Merrill Matthews and Mark E. Litow, ‘Obamacare’s Health-Insurance Sticker Shock’, The Wall Street Journal, January 14, 2013