More Good News on Obamacare: Some May See Rates Double
February 17, 2013 - 8:48 am
The so-called “young invincibles” — those between the ages of 18 and 29 who don’t have health insurance — may find themselves priced out of the market once Obamacare kicks in.
Others may see rate increases from 50-100% as Obamacare demands more comprehensive and expensive coverages than current plans do.
Insurers point to several reasons that premiums will rise. They will soon be required to offer more-comprehensive coverage than many currently provide. Also, their costs will increase because they will be barred from rejecting the sick, and they will no longer be allowed to charge older customers sharply higher premiums than younger ones.
Supporters of the law counter that concerns about price hikes are overstated, partly because federal subsidies will cushion the blow.
The insurers’ public relations blitz is being propelled by a growing cast of executives, lobbyists, conservative activists and state health officials. They increasingly use the same catchphrase — “rate shock” — to warn about the potential for price surges.
Aetna chief executive Mark T. Bertolini invoked the term at his company’s recent annual investor conference, cautioning that premiums for plans sold to individuals could rise as much as 50 percent on average and could more than double for particular groups such as the young and healthy.
The danger of rate shock has also become the favored weapon of conservative opponents of the law, repeated in a drumbeat of op-eds and policy papers in recent weeks.
The argument is a powerful one because the success of the law, which was the signature domestic accomplishment of Obama’s first term, depends on enough people signing up for insurance, particularly healthy people. The issue is surfacing as the most recent significant challenge in implementing the health-care overhaul.
Supporters of the law complain that the warnings amount to a smear attack by special interests and political partisans, akin to earlier claims that the law would allow bureaucrats to deny life-saving care to save money.
Still unknown and perhaps unknowable until it happens: how many companies will drop their employee insurance plans, preferring to pay a fine rather than cover their workers?
Glenn Reynolds shares an email with a high-powered ERISA (Employee Retirement Income Security Act) lawyer who is advising big companies about the consequences of Obamacare:
I am deeply into studying the impact of Obamacare on employers, and I have been communicating with highly sophisticated ERISA lawyers who are advising employers, from Fortune 50 companies to small firms under 50 employees, on whether to keep or drop or modify their employer group health plans.
It has become very clear to everyone involved who is analytical and not ideological that the rational strategy, for both large and small firms, is to cease providing health care insurance to employees.
No company wants to admit that they are considering eliminating health insurance as an option, or be the first one to drop their health insurance plan, but once a competitor does so, the preference cascade will begin. The clear sentiment is “We will not be the first one to drop our health insurance plan, but we would be a close second.”
The coming preference cascade for employer group health plans is what the Democrats fear the most, because Obamacare was sold to the masses as “if you like your health insurance plan, you can keep it.”
The people who really know the law, and who have been following the avalanche of regulations, have already figured this out. It will take a while for this specialized knowledge to seep downward, because right now only $800+ an hour ERISA attorneys and the most sophisticated HR people understand how Obamacare really works.
Not a bug, a feature.
My post yesterday on the political consequences of Obamacare elicited several interesting comments from readers, including the notion that I was naive to believe that the GOP wouldn’t be blamed for the fiasco. This WaPo article would seem to indicate that a full-court press is underway to blame somebody — anybody — except the president and the Democratic Party for the chaos and confusion that are going to result from implementing the ACA.
If they don’t blame Republicans, they will blame greedy capitalist businessmen who will be making common-sense decisions on profit and loss. Smaller businesses may make their decisions on whether to drop their health insurance for employees based on life or death. Some will almost certainly not be able to afford the increased costs and will face a decision that includes bankruptcy or no insurance.
If this “preference cascade” results in millions of workers losing their employer-based coverage, they will be thrown on to the exchanges, thus massively increasing the cost of subsidies.
Perhaps I am naive in thinking that people will take out their frustrations over Obamacare on the Democrats. But even low-information voters have a sense of how the world works. Seeing their premiums go up, having to wait months for a doctor’s appointment because of the physician shortages, and wrestling with the complex state exchanges or Medicaid applications — all are hard to blame on anyone but the authors of Obamacare.
Also, the GOP won’t act like a boiling frog and sit there waiting to be blamed. They will hit back with the most effective political weapon at their disposal: “I told ya so.” The warnings by Republicans of what would happen if Obamacare was passed are on record and would make extremely effective campaign commercials.
The bottom line is that the transition to Obamacare is going to be painful, confusing, and, for many citizens, shocking. Whom they take out their frustrations on will tell the tale of the 2014 and 2016 elections.