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HOLTZ-EAKIN: On the brink of Obamacare
Question of the Day
Less than a week before Obamacare is to go live, the administration finally showed its hand — sort of — on the premiums in the 36 federally run exchanges — places where insurance exchanges are run in whole or part by the federal government. Even a cursory glance at the numbers reveals several noteworthy shortcomings.
First, there are literally no comparisons to current rates. The report asserts that "Premiums before tax credits will be more than 16 percent lower than projected." However, the Department of Health and Human Services has chosen to dodge the question: Whose rates are going up in 2014, and by how much? Instead, it tries to distract with a comparison to hypothetical "previously projected" numbers that have nothing to do with pocketbooks of real people. The report refers to the "expected" premiums in a Health and Human Services report from August that, in turn, used a 2012 Congressional Budget Office projection for the cost of family coverage in 2016 and then massaged it to be comparable to 2014 rates.
The public will not judge Obamacare by its performance relative to abstract budget projections. Instead, the public will judge the law based on whether their monthly insurance premiums increase or decrease, and whether that insurance delivers the benefits they need and covers the physicians and hospitals they want. There is no sign of that kind of information in the report.
In other "good" news, the report states that 95 percent of individuals will be able to choose from two or more insurers. In other words, the enormous government expansion into the health care market has ended up offering nothing more than a private monopoly for 5 percent of consumers in these 36 states. Not exactly overachieving.
The analysis overstates the number of options available to consumers, claiming there is an average of 53 qualified health plans in a given rating area. Averages mislead.
The number of plans in a particular rating area ranges from as low as six to as high as 169. Some people will face limited options — people who live in rating areas with single-digit plan availability or only one insurance company. We don't know the cost of their premiums, but we know that less competition means higher rates.
There is a similar problem when discussing the number of insurers. Health and Human Services claims there is an average of eight different insurers in each state. However, the range is a low of one company to as many as 13.
Misleading averages is a theme of the report. "Young adults" will have an average of 57 qualified health plans to choose from, including catastrophic plans. However, catastrophic plans are available only to those under 30, are not long-term policies, and are significantly more expensive than they were pre-Obamacare. For example, Colorado saw a premium jump in catastrophic plans from $56 per month to $135 monthly. No data are shown for the range of available plans across all states. For all we know, the range of plans available to "young adults" could be anywhere from one to 114.
Obamacare's success hinges on the numbers of young and healthy individuals that enter the exchanges and purchase expensive insurance. Even after accounting for subsidies, many young people will find that their premiums have risen dramatically.
As an aside, the report repeats the administration's flawed claim that 56 percent of the uninsured population could pay $100 or less monthly for insurance premiums beginning in 2014. As American Action Forum policy analyst Sam Cappellanti wrote recently, "of the 56 percent of uninsured that the administration claims will be able to purchase insurance for under $100, nearly 54 percent (12.4 million people) are actually newly eligible Medicaid enrollees, and will not receive coverage through the new exchanges." Also glossed over is the fact that the $100 per month refers to each person in a household, and that this only applies to the states opting in to Obamacare's Medicaid expansion.
Finally, on the whole, the premiums in the federal exchanges don't appear to be noticeably different than those in the state exchanges. With all the market power at its disposal, Health and Human Services doesn't seem to have negotiated much of a deal.
The White House spin is admirable, but the lipstick just draws attention to the underlying pig. With numbers like these, it's not surprising it held them until the last minute.
Douglas Holtz-Eakin, a former director of the Congressional Budget Office, is president of the American Action Forum.
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