Obamacare

Obamacare: Lower Health Insurance Premiums in New York, and Higher Premiums Most Everywhere Else

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credit: Werner Kunz / Foter.com / CC BY-NC-SA

Good news for Obamacare? A new report finds that individual health insurance premiums will drop in New York state. Consultants at Deloitte conclude that the potential for "significant" individual market premium savings within the state in every scenario they examined.

So does this mean that the health law might actually help ease premiums after all? Probably not in most states. We've seen similar estimates for New York before, and we shouldn't expect such savings everywhere. Indeed, one implicit takeaway from the report is that premiums will rise in the majority of states that don't already have New York's strict insurance regulations in place.

Several reports have predicted that New York's individual health insurance market premiums would drop. For example, a Society of Actuaries study last month found that premiums were expected to drop in New York by about 14 percent following the implementation of the health care law. But the same report found that, on average, the cost of insurance claim costs would rise about 32 percent of the law.

Indeed, what the Deloitte report really confirms is that in the relatively few states that already have extremely high individual insurance premiums thanks to regulations governing how insurers can charge based on health history, the institution of a health insurance mandate helps take the edge off the cost increase associated with those regulations. Greater cost savings could be achieved by repealing those regulations entirely. Instead, Obamacare will make similar cost-increasing requirements the law of the land in every state.

New York has an unusual individual insurance environment thanks to a 1993 law requiring insurers to abide by two regulations: guaranteed issue, which forces insurers to sell to all comers, and community rating, which heavily restricts how insurers can charge based on individual health history. The idea behind the law was to force insurers to cover everyone at reasonable prices. But as I noted for The Wall Street Journal back in 2009, the actual outcome was a health insurance "death spiral."

Health premiums went up, and healthy individuals dropped out of the insurance pool—leaving a sicker, smaller pool and causing premiums to rise even higher, which in turn caused more individuals to drop out, and so on and so forth. In the end, New York was left with a very small, very sick, very expensive individual insurance market. Adding Obamacare's health insurance mandate to the existing policy mix will bring more relatively healthy people back into the insurance pool, lowering average premiums costs, (while also, of course, requiring many people to pay premiums they didn't pay before).

We saw the same effect in Massachusetts after Romneycare passed. The state already had community rating and guaranteed issue requirements on the books, so when the mandate went into effect, and more healthy people started paying into the insurance system, premiums went down.

All this really tells us, though, is that in the handful of states that already have highly regulated, highly expensive individual insurance environments, adding a mandate—requiring healthy individuals to pay for insurance that they had previously chosen not to buy—reduces the cost of insurance somewhat.

But not as much as getting rid of the initial regulations entirely. Repealing community rating and guaranteed issue could achieve substantially larger cost savings than adding a mandate: In 2009, the Manhattan Institute estimated that getting rid of the community rating and guaranteed issue requirements would reduce average individual premiums in New York state by 42 percent. In comparison, the Society of Actuaries and the Urban Institute have both estimated that the mandate will reduce average Empire State premiums by about 14 percent.

The vast majority of states don't have New York's insurance market regulations now. But they will once Obamacare is fully implemented: The health law will enforce versions of community rating and guaranteed issue in every state. And when that happens, overall claims costs will rise—by an average of about 32 percent nationally, according to the Society of Actuaries study. And while a few states, like New York, will see reductions, others will feel outsized impact: Ohio and Wisconsin are projected to see spikes of 81 and 80 percent, respectively, while Alabama and Indiana are estimated to rise by 60 and 67 percent. 

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  1. http://www.bbc.co.uk/news/world-europe-22427976

    Is it just me, or this starting to resemble a witch hunt?

    1. Better late than never?

    2. He is 93. It happened 60 years ago. They searched his house. What did they expect to find? His old uniform?

    3. Someone should tell Germany that the world, at large, doesn’t really care about WWII or the Holocaust anymore. We know they aren’t Nazis anymore. They can just let it rest.

      1. What difference, at this point, does it make?

  2. Obamacare was designed from the start to destroy the existing healthcare system so people would have no choice but to embrace the single payer system these marxists-statists really want to implement.

  3. So, this is a win for Democrats, right? Or is it a win for both parties?

    Democrat to constituents: See, we told you Obamacare would bring your premiums down and we were right.

    Republican to constituents: See, we told you Obamacare would drive your premiums up and we were right.

    1. Media talking head: “My premiums will fall; what else do you need to know?”

  4. All this really tells us, though, is that in the handful of states that already have highly regulated, highly expensive individual insurance environments, adding a mandate?requiring healthy individuals to pay for insurance that they had previously chosen not to buy?reduces the cost of insurance somewhat.

    But not as much as getting rid of the initial regulations entirely. Repealing community rating and guaranteed issue could achieve substantially larger cost savings than adding a mandate

    But then insurers could DISCRIMINATE against SICK PEOPLE!!!

  5. All this really tells us, though, is that in the handful of states that already have highly regulated, highly expensive individual insurance environments, adding a mandate?requiring healthy individuals to pay for insurance that they had previously chosen not to buy?reduces the cost of insurance somewhat.

    In a 2009 thread on health insurance, I had the opportunity to be shocked by the insanity of the individual health insurance market:

    Going to ehealthinsurance.com and trying a 35-year-old male in California, I find a nice $3500 deductible 0% coinsurance plan from Anthem for $108 per month. There are 113 other choices that get you down toward $73 per month but cost you some coinsurance.

    Trying the same person in Albany, New York, a grand total of 3 plans show up. The cheapest of them that isn’t hospitalization only is $425 per month.

    Now if you got the $108 per month California policy for a year and were unlucky enough to spend the whole deductible, it would cost you $4796 for the year. The New York policy, on the other hand, would cost you $5100 for the year even if you never saw a doctor.

    1. Now everyone will have the pleasure of paying $5100 a year even if they never see a doctor. Equality of outcome achieved.

      1. How anyone could think this wasn’t a sop to the insurance companies is beyond me.

        1. Hey, figuring out premiums and deductibles for actual insurance — i.e., financial protection — is hard! You might have to actually compete with someone who does it better.

          Do you know how many actuaries the insurance companies can let go once the application is simply:

          Are you alive? _ YES _ NO

          1. Is there a ‘slightly alive’ option?

        2. It’s not a sop to the insurance companies, it’s a sop to the baby boomers. They get cheaper premiums, younger generations get more expensive premiums. Younger people are forced to buy into the same comprehensive coverage plans that 60 year olds have.
          The idea being that somehow all of the “free” preventive care is going to reduce health care costs enough to make up for forcing everyone to purchase overpriced insurance.

    2. Yes, New York’s individual market has devolved into a pre-paid health maintainance plan. It’s not “insurance” if it costs you the same thing as if you got sick. The New York plan is essentially priced assuming you’re going to spend the whole deductible. This is the case because there’s nobody left in New York’s insurance pool who aren’t already sick enough to spend the whole deductible, every year.

      In general though, comprehensive health insurance is a bad idea financially. It doesn’t make sense to “insure” against costs that you (a) know are highly likely to happen, or (b) can afford to pay for. Everything you insure against has a small markup that goes to the insurance company. That’s how they turn a profit. If you run the same numbers on comprehensive insurance policies vs. high deductibles, and do it over a 5 year period, you would save so much money on the insurance premiums that you could afford to pay the deductible for one major illness every few years.

      Unfortunately, because lots of people have their insurance premiums paid for by others, they are incentivized to insure against stupid things like birth control pills.

  6. You can’t fool me, that’s a casino in Vegas! Or is that supposed to be some kind of metaphor?

  7. If we think it is expensive now, wait until the free part kicks in.

  8. I find this odd as my premiums have only been going up since our insurance was restructured to be “ACA Compliant”. Oh wait, I’m in a ‘community’ of 200,000 employees so we already had the forced redistribution from the people who didn’t need coverage to those who sopped it up.

  9. So New York and California are fucking over the “flyover states”, color me thoroughly unsurprised.

  10. A new report finds that individual health insurance premiums will drop in New York state.

    Bet they won’t…particularly in the long term.

  11. Yes…ew York has an unusual individual insurance environment thanks to a 1993 law requiring insurers to abide by two regulations:

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