HHS Fudges Estimates on ObamaCare Consumer Savings


In a press release yesterday, the Department of Health and Human Services (HHS) boasted that ObamaCare has already "saved an estimated $2.1 billion for consumers." HHS Secretary Kathleen Sebelius made sure to give the Patient Protection and Affordable Care Act full credit: "Thanks to the law, our health care system is more transparent and more competitive, and that's saving Americans real money," she said. 

But the law doesn't deserve full credit. In the release, HHS points to two provisions it says account for the savings: the Medical Loss Ratio (MLR) rule, which requires insurers to spend 80 or 85 percent of premium revenue on government-defined medical expenses or rebate the difference to customers, and the law's insurance rate review provision, which allows HHS to review but not block health insurance rate increases over 10 percent. The MLR rule supposedly saved $1.1 billion. The review provisions were supposedly responsible for the other billion. Except that, well, they weren't, at least not entirely. As Politico points out today, an HHS official admitted yesterday that the estimates don't attempt to differentiate between savings generated by ObamaCare's federally managed rate review provisions and rate review operations that existed in the states before ObamaCare was passed. And according to the Government Accountability Office, 48 states had some sort of rate review in effect before ObamaCare, and 38 states reviewed all rate hikes. 

As for the MLR provision, it did indeed result in over $1 billion worth of rebates being sent out. But that doesn't necessarily mean that individuals are any better off. For one thing, many of those rebates were paid to employers rather than individuals. And in the long term, the MLR rule will likely generate pressure to increase health insurance premiums: Because insurers are limited in the amount of profit and overhead they can spend from every dollar, they have a strong incentive to increase total premium revenue in order to increase potential profits. Which means that even with the newly required rebates, it's possible that consumers will still be worse off than they would be without the MLR rule. 

One thing ObamaCare may be helping to save, however, is Sebelius' job. Politico also reports that if President Obama wins a second term, Sebelius is likely to stick around, partly because she's already worked on the health law, and partly to avoid what would certainly be a heated confirmation battle.