Higher Health Insurance Premiums: The Obamacare Debate We Didn't Have
Let's talk about Obamacare and rate shock—and how we talked about the law's effect on premiums when it was first being debated.
The health law's supporters are now admitting that premiums will go up for some young and health individuals buying health insurance through the exchange. But they say it's not entirely fair to make a comparison between individual plans bought on an exchange and today's plans, because exchange plans offer a far richer set of benefits. Nor should this really come as a shock to anyone, because this is what people were told to expect.
This is a point that The Washington Post's Ezra Klein made on MSNBC last night in a discussion of Obamacare's effect on premiums with The Manhattan Institute's Avik Roy. Roy noted that, when compared with today's rates, individual market premiums bought on an exchange would be dramatically higher for many younger, healthier people—with rates doubling in some cases versus the rates he found online.
Now it's true that those online rates are teasers that don't apply to everyone; 26 percent of the market will either pay more or not get coverage. But that still leaves roughly three quarters of the market who will see far higher rates. Maybe, Roy said last night, that's just fine, because we believe that it's "a good thing for people to pay double for their health insurance because we're now protecting the sick. But that's a debate we didn't have really in 2009."
Except that according to Klein, it is a debate we had: "This is a debate we had," he said. "This is what frustrates me here. I remember doing this debate over and over and over again. So Evan Bayh wrote the Congressional Budget Office—[Bayh] was a senator back then—he said: 'What's going to happen to average premiums?' The CBO came back and said, 'Well, average premiums are going to go up a bunch. And then people like me went in and looked at what they [the CBO] said, and they said, 'Average premiums are going to go up but that's because people are going to have to start buying better health care because they're going to get subsidies, because we're going to make them pay for better health care because now they can afford it.'"
Far higher rates for younger, healthier individuals were to be expected. "This was out there," Klein finished. "And we talked about it a lot."
I'm not so sure. Liberal wonks like Klein may have talked about it—we'll get to that a little later. But the president and his administration did not talk about it much at all. Rather, the overarching message from the White House, and from the law's supporters generally, was that Obamacare would cause health insurance premiums to drop.
Let's go back in time to when President Obama first began to make the case for his health care overhaul. Here's how he touted his health plan in May 2007, early in his run for office. "If you already have health insurance, the only thing that will change for you under this plan is the amount of money you will spend on premiums. That will be less." On the campaign trail in 2008, Obama continued to sell the law as a way to lower health premiums, promising at least 15 times to reduce health premiums for families by $2500 on average. And as Buzzfeed notes, Obama didn't stop pointing to lower premiums when he made it into the White House in 2009. In May of that year, he told C-SPAN that if health industry groups commit to savings—"we end up saving $2 trillion…a lot of those savings can go back into the pockets of American consumers in the form of lower premiums. That's what we are driving for."
From the very beginning, in other words, Obama's message was not that the law would result in higher premiums, but better coverage. It was that the law would lower premiums, end of story.
Now maybe you think that's not fair. After all, these statements were made before the specifics of the law had been drafted, and before experts at the Congressional Budget Office and elsewhere would weigh in.
So let's flash forward a few months, to the end of 2009, in the weeks leading up to the Senate's vote to pass the health care law. What was the White House saying then?
A headline from the White House blog on November 4, 2009 makes it clear that the essential message about premiums hadn't changed: "Word from the White House: Objective Analysis Shows Reform will Help Small Business, Lower Premiums for American Families." [emphasis added] The "objective analysis" in question was a report from Jonathan Gruber, a health economist at the Massachusetts Institute of Technology, and a key architect of both Obamacare and the Massachusetts health care overhaul.
The White House blog post touted Gruber's conclusion that the health care legislation would save individuals anywhere from $500 to $3000 a year, and families even more. And those savings, the post emphasized, would "come in addition to the more generous benefits consumers would receive by purchasing insurance through the newly created exchange"—as well as "in addition to increased protections" for individuals with preexisting conditions. Gruber even claimed that the savings would come for those who did not qualify for subsidies. Low-income individuals eligible for assistance, he said, the savings would be much larger.
This is November of 2009, long after the bulk of the legislative work has been completed. And yet the White House and a prominent Obamacare adviser were still both claiming that premiums would go down, and that benefits would go up, for individual insurance purchased through an exchange. This was the message that the administration was selling. This was the debate they were having, from the time Obama started running for office until well into the first year of his presidency.
Of course, we still haven't talked about the Congressional Budget Office report that Klein mentioned—the one responding to Sen. Evan Bayh's query about how the health law would affect insurance premiums. That came out shortly after Gruber's report. The White House wrote up that report on its official blog too. And once again, the primary message is crystal clear. The headline to that post reads: "CBO Confirms Families Will Save Money Under Health Reform." The second paragraph says that the health law "will mean lower premiums for American families." And the very first bullet point in the list of highlights says that "Americans buying comparable health plans to what they have today in the individual market would see premiums fall by 14 to 20 percent."
The only hint that higher premiums might be on the horizon if the health law passes comes a little later, when the post says that "where the CBO does see premiums rising, it's not because Americans are paying more for the same coverage – it's that they're making a choice to purchase better plans that weren't previously available to them." And it downplays this point by suggesting that the CBO may have understated the cost-savings the law will produce.
Yet even the admission that CBO does see some premiums rising turns out to have missed the mark. Part of the reason we're now seeing some higher premiums in the exchanges is because of the coverage requirements exchange-based plans have to meet. It's not that individuals are making their own choices to buy more expansive and thus more expensive coverage. It's that insurers are being told by regulators that more expansive coverage is what they must sell.
Even by the time the CBO report arrives, there's still no mistaking the message that the Obama White House was selling to anyone who would listen: that premiums would go down, that benefits would go up, and that if premiums did happen to go up, it would only be as a result of an individual choice to buy more robust coverage.
But what about the wonks, like Klein? What kind of conversation were they having at the end of 2009? If you take Klein as representative, you find that it was somewhat more nuanced than what was coming out of the White House, and that the higher cost of individual premiums was mentioned. But the emphasis was still on lower premiums, not on the tradeoffs made to get more robust coverage.
At the beginning of November 2009, for example, Klein quoted and linked to Gruber's paper with no commentary, under the headline "Massachusetts provides evidence that health-care reform lowers insurance premiums."
Later that month, Klein looked at the CBO analysis requested by Bayh. In the third paragraph, he notes that in the individual market, "average premiums are expected to rise by 10 to 12 percent." His post goes on to explain that, according to the CBO, this is because the average insurance policy purchased through the exchange will cover a much larger share of an individual's costs and a slightly wider range of benefits. In the end, what we're looking at, he says, is "a 10 to 12 percent increase in premiums for insurance that's about 30 percent better than what people are getting now. It's a steal."
So this is the discussion that Klein was having: Yes, average premiums increase somewhat, but benefits increase even more. But what about others? Not Paul Krugman; one of his posts referenced the CBO's report and conclude that "premiums would stay about the same for people with group coverage, while falling significantly for most of those in the small-group or individual markets."
Whether Klein's discussion of individual market premium hikes in the exchanges would have led a typical reader to expect the kind of rate increases we're seeing in California is another question. The percentage increases he wrote up were just 10 or 12 percent, not the 100 percent hikes Avik Roy has pointed out. On the other hand, Klein was talking about averages, and the biggest hikes are concentrated amongst the young and healthy demographic. It's not possible say with certainty what most people would have taken away from his discussion of trade-offs.
But we do have some sense of what Klein wanted people to take away. First because in Klein's initial write up of the CBO report, he goes on to emphasize that the individual market hikes occur before the application of subsidies, which he notes will be available to about 57 percent of the market. "So in the final analysis," he wrotes, "the effect of reform on your typical individual market purchasers is to give them insurance that's about 30 percent better but only 10 to 12 percent more expensive, and then assure them subsidies that will lower their payments by more than 50 percent." Yes, we're still talking about averages. But it looks fairly plain that his message is first and foremost about lower premiums, not the tradeoff of better benefits for higher premiums.
Finally, we have an idea of what Klein wanted readers to take away from his analysis of the health law's effect on premiums, because a few days later, he followed up with another post. The concluding paragraph of that post reiterates the key points from this original. "The individual market sees costs go up, as people can purchase better insurance at a lower cost," he wrote. "And after subsidies, most people are paying less and getting more than they would absent reform." Indeed, "most Americans will see their premiums go down even if you account for the better insurance plans they'll be purchasing." The headline he wrote for his post emphasizes the main point: "To repeat, the CBO found that premiums go down under health care reform."
This is the debate that even those relatively few Americans who follow wonky policy pundits were hearing—not one that emphasized tradeoffs, but one that repeatedly emphasized that Obamacare would have mostly positive impacts on premiums, and that any negative impacts would be modest. So it's worth asking: Was this the sort of debate that effectively prepared people for the sort of rates we're seeing in California, and that we're likely to see in many other states as well? Or was it, as Roy said, a debate we didn't really have in 2009? Decide for yourself. But when you do, know when it comes to the discussion of Obamacare and premiums that people were having in 2009, this is what was out there. And this is what the law's administration backers and other supporters talked about a lot.
