ObamaCare caused some premiums to nearly double in California

The bad news in California: If you liked your plan and/or your doctor, many of you couldn’t keep either if you had an individual-market plan. The worse news in California: If you liked your premiums, you definitely couldn’t keep those. In the first year of ObamaCare, premiums rose in the Golden State anywhere from 22% to 88% from the previous year — even as insurer networks narrowed so much that consumers had a tough time finding a provider at all:

The cost of health insurance for individuals skyrocketed this year in California, with some paying almost twice what they did last year, the state’s insurance commissioner said. …

For 2014, consumers purchasing individual policies paid between 22% and 88% more for health insurance than they did last year, depending on age, gender, type of policy and where they lived, Jones said Tuesday.

[State Insurance Commissioner Dave Jones] said he has authorized a study of health insurance rates after receiving numerous complaints about rising costs.

“The rate increase from 2013 to 2014, on average, was significantly higher than rate increases in the past,” Jones said in a news conference in Sacramento.

The hardest-hit were young people, he said. In one region of Los Angeles County, people age 25 paid 52% more for a silver plan than they had for a similar plan the year before, while someone age 55 paid 38% more, according to a report that Jones released Tuesday.

Now for the good news in California. Rates won’t go up that much this year, Jones says, because of a ballot measure in this year’s election that will give the state the power to regulate rate increases. Prices won’t go down, Jones predicts, but just not skyrocket like they did for 2014. The threat of government control will force insurers to keep increases lower in order to push back against the referendum. That, however, ignores the economics of risk pools, which react to increased costs by either raising premiums or reducing payments. The next wave of reconciling the costs of ObamaCare in California may not take the form of higher premiums but of reduced coverages or — most likely — even greater reductions in provider networks, reductions which California has tried to reverse after Covered California turned into a nightmare for consumers.

In California, costs skyrocketed while care was made harder to find by ObamaCare, the exact opposite of what Democrats promised from the new law. That’s not the only promise that flopped, either. Remember the “you can keep your plan” promise, which Politifact named the Lie of the Year in 2013? That empty promise didn’t just impact those on the individual market, according to a new Heritage Foundation study, but also nearly two million people previously covered in employer-based plans. That’s three times higher than predicted:

The data show that during the last quarter of 2013, enrollment in individual-market coverage declined by nearly 500,000 individuals, but then increased in the first quarter of 2014 by just over 2.7 million individuals. For the combined six-month period, the result was a net enrollment increase of just over 2.2 million for the individual market. Those figures are consistent with reports of insurers’ non-renewing individual-market policies that did not meet the new coverage requirements, and reported enrollments in individual-market plans offered through the exchanges.

However, the biggest change in the private market during the six-month period was not the expansion in individual-market coverage, but the decline in fully insured employer group coverage. While enrollment in fully insured employer group coverage modestly increased—by just over 175,000 individuals—in Q4 2013, it dropped by nearly 4.2 million individuals in Q1 2014. The result was a net enrollment decrease of 4 million individuals for the combined six-month period.

Only in the employer self-insured group market did enrollment increase in both quarters—by just over 1.8 million in Q4 2013, and by almost 500,000 in Q1 2014—producing a net enrollment increase of nearly 2.3 million for the combined six-month period.

It stands to reason that the increase in self-insured group coverage during this period is almost entirely the result of employers shifting from purchasing fully insured group plans to self-insuring their plans. Few firms offering their workers coverage for the first time will begin with a self-insured plan. It is also possible that some smaller employers shifted to self-insured coverage in order to avoid the added costs of the “essential benefits” requirement that the PPACA imposes on fully insured small group plans. However, employers shifting from fully insured to self-insured plans would explain, at most, 57 percent of the enrollment decline in fully insured group coverage.

The remaining 43 percent of the reduction can only be explained by employers’ discontinuing coverage for some or all of their workers or, in some cases, individuals losing access to such coverage due to employment changes. While it is not possible to determine the subsequent coverage status of individuals who lost group coverage, there are four possibilities: (1) some obtained replacement individual-market coverage (either on or off the exchanges); (2) some enrolled in Medicaid; (3) some enrolled in other coverage for which they are eligible (such as a plan offered by their new employer, a spouse’s plan, a parent’s policy, or Medicare); or (4) some became uninsured. …

As Chart 1 shows, over the six-month period [October 2013 – March 2014], net total enrollment for all three segments of the private coverage market increased by just over 520,000 individuals. Thus, the reduction in employer-sponsored coverage offset 77 percent of the gain in individual-market coverage during the period.

That’s before the enforcement of the employer mandate. For many employers — those with 200 or more employees — the mandate comes into force for 2015, which means those businesses now have to decide whether to pay the rapidly increasing premiums, or opt out and pay fixed-rate fines instead. By HHS’ own calculations, as many as 93 million Americans might find themselves kicked out of group coverage and scrambling for health insurance on the ObamaCare individual-market exchanges. And those exchanges, despite the spin offered a couple of months ago from NPR and the Kaiser Foundation, are a disaster that cost far more than had been originally thought, even with the relatively low utilization in the first round. What happens when 50 million people suddenly need to find health insurance, just to use a mid-range estimate of the impact from the employer mandate?

In my column for The Fiscal Times, I note that the GAO report issued today on the Healthcare.gov fiasco should remind us why government never should have forced a command economy in health insurance in the first place:

The report’s findings show how it all went wrong. Despite having more than three years of lead time, CMS never developed “a coherent plan” for its contractors. Instead, the contractors involved in the project ended up responding to ad hoc instruction and requests. This alone cost the project “tens of millions of dollars,” according to the GAO, as contractors had to bounce between shifting priorities.

This alone should give taxpayers pause. A project should have at its start a well-constructed plan to achieve its particular mission. That’s true on a project of any significant scope, and particularly true when the stakes were as large as they were with Obamacare, which had already suffered from deep public distrust in the federal oversight of health insurance and its mandates.

After taking a political beating over the passage of the ACA (the Obama administration lost the House and some ground in the Senate) one would have presumed that the incentive to ace the launch and build goodwill for the program at the rollout would have pushed noses to the grindstone to get it right. Instead, the GAO’s findings strongly suggest that no one at CMS or HHS understood the necessity of organization, or didn’t care enough about it to plan for success.

Or, for that matter, to follow up to see that it did succeed. Even for the work that CMS did assign to contractors, the agency failed to check whether the contractors actually did the work, and did it according to spec. Granted, the lack of clear instruction may have made quality control a difficult task, but that again reflects on the management rather than the contractors. …

Auto-renewals of policies were supposed to simplify matters by alleviating the need to re-enroll through the exchanges each year, but it now appears that consumers put themselves at risk either way.  “The subsidy scheme created by Congress to keep premiums affordable has so many moving parts that it’s turning out to be difficult for the government to administer,” the AP reported in a line that could have come directly out of F.A. Hayek’s The Road to Serfdom, distilling one of the original conceptual criticisms of the ACA from the beginning.

The GAO report shows a more basic problem with government-run command economies. The massive expansion of bureaucracies needed to handle all of these moving parts, even inadequately, disperses accountability and responsibility so far and wide as to make both evaporate altogether.

It’s becoming increasingly clear that the current approach is not only not working, it’s making things significantly worse than before. If the government couldn’t be bothered to get its central platform of its central domestic policy right, what does that say about the prospects that ObamaCare will work better in the future?