When I first read it, I thought this New York Times report from late last night was just late to the party. The Society of Actuaries had already released its analysis of the damage that ObamaCare will do to health-insurance costs, and HHS Secretary Kathleen Sebelius had already admitted that prices would go up as government forced people to buy bigger comprehensive policies. CNN even went so far as to ask whether Barack Obama and his administration had “misled” voters over the costs of ObamaCare.
This study, though, is actually separate from the SoA’s analysis. The state of California commissioned this new study for its state exchange to determine the impact of ObamaCare, and it matches closely to the SoA conclusion:
A study commissioned by the State of California says that the new federal health care law will drive up individual insurance premiums, but that subsidies will offset most of the increase for low-income people.
The study, issued Thursday in the midst of a growing national debate over the impact of the law, is significant because California is far ahead of most states in setting up a competitive marketplace, or exchange, where people can buy insurance this fall.
Premiums could increase by an average of 30 percent for higher-income people in California who are now insured and do not qualify for federal insurance subsidies, the study said.
It’s pretty close on the causes of the problem, too:
The report for the state insurance exchange, known as Covered California, cited several factors contributing to higher premiums: an influx of less healthy people into the individual insurance market, and a requirement for health insurance plans to offer richer benefits and to cover more of the cost of care than is now typical for individual insurance policies.
Another factor, it said, is that federal and state government agencies are imposing new taxes and fees on insurers, which are likely to pass on some of the costs to consumers.
“Health insurance will become relatively less expensive for people with chronic conditions and relatively more expensive for healthier people,” said Robert G. Cosway, an actuary at Milliman, a large consulting firm that prepared the report.
Put demographically, it means that younger workers will end up subsidizing older workers, who are much more likely to have the “chronic conditions” that drive up costs. In terms of economic strata, the impact won’t fall on low-income workers, who will get big federal subsidies to buy plans in the exchanges. It won’t impact the wealthy, who can absorb the higher prices more easily. Who will get hit? Middle-class workers, whose subsidies won’t cover the increases, especially as those subsidies phase out in the 300%-400% poverty-level range.
No one who understands risk pools and the economics that drive them will be surprised by this outcome. The problem is that no one who crafted this “reform” understood risk pools and the economics that drive them.