Remember when President Barack Obama and Democrat Congresswoman Nancy Pelosi promised in 2012 that we’d all have lower rates thanks to the Affordable Care Act?
Well, that promise may come with a few caveats, according to the Manhattan Institute’s Avik Roy.
“[B]ased on the rates submitted by insurers to date, the average individual-market health insurance premium in 2014 will come in around $420, ‘representing an increase of 88 percent’ relative to 2013,” Roy writes in Forbes, citing the Ohio Department of Insurance.
In short, according to Ohio officials, individual-market health premiums may increase as much as 88 percent thanks to Obamacare.
“We have warned of these increases,” said Lt. Gov. Mary Taylor in a statement. “Consumers will have fewer choices and pay much higher premiums for their health insurance starting in 2014.”
Roy is careful to note that the “rates that Ohio reported are proposed rates; the Department of Insurance still has to formally approve them.”
“A total of 14 companies proposed rates for 214 plans to the Department. Projected costs from the companies for providing coverage for the required [by Obamacare] essential health benefits ranged from $282.51 to $577.40 for individual health insurance plans,” the Ohio department claims.
This, as Roy reminds us, is commonly referred to as “rate shock.”
“[B]ut it’s not shocking to people who understand the economics of health insurance. In August 2011, Milliman, one of the nation’s leading actuarial firms, predicted that Obamacare would increase individual-market premiums in Ohio by 55 to 85 percent,” he writes.
“This past March, the Society of Actuaries projected that the law would increase premiums in that market by 81 percent. Like good players on ‘The Price is Right,’ they both came in just under the Dept. of Insurance’s figure,” he adds.
So what’s driving the increase?
The main drivers, according to Milliman and Roy, are “risk pool composition changes” (such as having a healthy group subsidize a sick group) and the Affordable Care Act’s expansion of insurance benefits (most especially in its mandated reductions in deductibles and co-pay).
“This is a significant concept to understand. Some people have the impression that the main reason that rates are going up under Obamacare is because of the law’s requirement that insurers cover people with pre-existing conditions,” Roy explains.
“But that accounts for only a fraction—around a quarter—of the rate hike. The rest comes from all the other things that Obamacare does, such as forcing people to buy richer insurance benefits; to buy products with all sorts of add-ons they might not need; to pay Obamacare’s premium tax; and to pay a lot more, if they’re young, to subsidize older individuals,” he adds.
The Forbes contributor continues with this careful reminder:
There is an important difference between these analyses and the one I conducted for California last week. Ohio has reported average premiums across the individual market, for everyone; for California, I looked at the lowest-priced individual-market plans for 25- and 40-year-old men, both pre- and post-Obamacare.
“We’ll need to go through Ohio’s individual rate filings, especially after they’ve been approved by the state, to get a more detailed sense of what is going on,” he adds:
Still, based on Roy’s and the Ohio Department of Insurance’s projections, it would appear that, yes, lower-income individuals will have lower premiums — but only because of middle-class funded subsidies.
Click here to read Roy’s full Forbes article.
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Featured image Getty Images. This post has been updated.