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2017: The Year Obamacare Truly Became the Vampire Law

Sami Jamaleddine signs up for health insurance offered under the Affordable Care Act with insurance agent Michael Khoury, right, Jan. 31, 2017, in Miami. (AP Photo/Lynne Sladky)

If you aren’t sitting down right now, it may be wise to do so. Your wallet could be about to get cleaned out.

Premiums for the most popular Obamacare health insurance plans will jump by a whopping 34 percent next year.

This mess, which in many ways was easy to foresee, shows that in 2017 the program, also known (without irony) as the Affordable Care Act, has become a full-on economic vampire.

The rate-hike news comes from an analysis by Washington, D.C.-based healthcare consulting firm Avalere Health, which detailed that prices for plans on the Obamacare exchanges categorized as silver would rise by just over one-third to cost an average of $743 a month in 2018, up from $554 this year.

It’s worse if you live in Iowa, where premiums will more than double to over $1,000 a month. Similar four-figure-plus monthly rates will apply in Wyoming and Nebraska, the report says.

The rate hikes mean that rather than price increases moderating, they are accelerating. In late 2016, the government announced that the most popular plans for 2017 would increase by an average of 25 percent.

It also means that healthcare insurance bought on the exchanges now competes with monthly housing costs for the highest monthly expense for some Americans.

Avalere says it used rates for a 50-year-old in the individual market to conduct its analysis. The costs do not take account of government subsidies.

What Happened?

One of the critical things that happened was that insurance companies decided that they would pull back from offering some or all insurance on the exchanges.

The result is that the number of counties that had just one insurer offering a marketplace policy more than quadrupled to 31 percent this year from 7 percent in 2016, according to the Henry J. Kaiser Family Foundation.

Yes, that’s right, in this one-sided mess of a law the insurers can decide not to participate in the Obamacare plans, but you must buy insurance or pay the taxman a penalty.

Back in economics 101 class students were, and still are, told that fewer competitors tends to lead to less competition and hence higher prices. It should be clear that is what happened to Obamacare over the past year.

Avalere acknowledges that the retreat by insurers is part of the reason for higher rates and adds some more into the explanation mix. These include “elimination of cost-sharing reduction (CSR) payments, lower than anticipated enrollment in the marketplace […] insufficient action by the government to reimburse plans that cover higher cost enrollees (e.g., via risk corridors), and general volatility around the policies governing the exchanges,” the report states.

Worse to come

Don’t expect too much to get better by next year on any of these items, especially not the lack of enrollment in the plans, which Avalere says could get worse.

“Some unsubsidized consumers who pay the full premium cost may choose not to enroll for 2018 due to premium increases,” the Avalere report states. That likely means anyone who can get by without insurance (aka healthy people) may choose to chance it and go without coverage. At the same time, people who know their healthcare costs will be higher than the premiums will be more likely to sign up.

Or put another way, the costly people will sign up for the plans, hitting the insurance companies with larger bills. At the same time, the fit and inexpensive won’t.

What will insurance companies do for 2019? If nothing changes, they’ll likely raise rates even faster.

All of this makes Obamacare the vampire law. There are three main reasons. First, despite their attempts to do so, the Republicans in Congress just can’t slay it. In case you didn’t know, occult lore shows that vampires are devilishly hard to kill outside of daylight hours and even then magical weapons are required.

Even with the GOP controlling the House of Representatives, the Senate and the White House, this law just won’t bite the dust. There is apparently something mystical going on.

The second reason it is a vampire is that it is sucking the life out of the economy and will continue to do so.

If people are spending an increasing amount of money on premiums each month, then they can’t also spend that money on other things. About two-thirds of the U.S. economy comes from consumer spending. So as insurance rates go up, expect consumer spending to go down and hurt economic growth.

The third reason is that the increased insurance coverage may be causing the cost of healthcare to jump. While the law mandated more insurance coverage, it didn’t mandate more hospitals or more nurses or more doctors. Again, back in economics 101, we should have learned that increased demand when supply doesn’t change leads to higher prices.

Perhaps it might be time to drive a stake through the heart of this law and start again with a clean sheet of paper.