This may seem redundant, given all of the attention to huge price spikes in the ObamaCare exchanges in states like Minnesota (between 34-50% for most plans) and Mississippi (over 60%). Even CBS News has begun to wake up to the rapidly escalating costs of insurance in the so-called Affordable Care Act exchanges. Yet ObamaCare advocates argue that these price explosions are localized and not indicative of the overall direction of premium prices in 2016.
A new study shows that the price hikes are not just localized or anecdotal. Megan McArdle picks up on an analysis by Avalere that shows an average 13% increase in the cheapest plans for subsidized mandatory coverage. McArdle writes that this may not be the “death spiral” that critics predicted, but it’s an indication that the assumptions made by ObamaCare’s architects turned out to be dead wrong (via Guy Benson):
This data, which showed premiums rising an average of 7.5 percent, is useful. But it is limited. We’d like to think that this tells us “how much premiums went up,” but it’s not that simple.
First of all, while the subsidies are pegged to the benchmark plan, not everyone buys that plan. Some people buy the cheapest Silver plan. Some people buy a more expensive one. Some people buy an even cheaper Bronze plan, and some people spring for Gold or Platinum coverage. Knowing how the price of the benchmark has changed tells us a great deal about how the subsidies will be calculated in 2016, but not nearly as much as we’d like to know about what people are experiencing in the marketplace. …
But a consulting company, Avalere Health, has provided at least slightly more data than we had before, supplementing the administration’s release of the information on benchmark plans by looking at the cost of the cheapest Bronze and Silver policies. It’s still far more limited than one would like, but looking at those rates does give us additional information.
The biggest thing they tell us is that, as I suspected when I wrote about the CMS release, the whole bottom of the market is undergoing a fairly massive repricing. In most states, the cost of the cheapest Silver plan, relative to the cheapest one last year, rose even more than the benchmark rate. And in most states, the cost of the cheapest Bronze plan went up by more than the cost of the cheapest Silver plan. (The average increase was 13 percent, but it looks as if it’s unweighted, while the government used a weighted average. As Inoted last week, the weighted average is usually the most meaningful national metric, but the unweighted can be revealing as well.)
It’s also worth pointing out that these are the plans usually purchased by those of modest means or healthier individuals who don’t plan to utilize insurance as often as others. The major price escalation hits these consumers hardest, which makes the “affordable” tag on the ACA a little ironic.
McArdle believes that the premium price spikes alone don’t indicate the beginning of a death spiral in ObamaCare. The ongoing collapse of ObamaCare co-ops tell a different tale. Twelve of the 23 co-ops funded by HHS to replace the “public option” and supposedly provide low-cost choice for consumers have failed this year, and nine of those have stopped selling insurance in just the past six weeks. In my column for The Fiscal Times, I argue that this is a harbinger of a broader disaster:
Eventually, the Obama administration managed to get 23 co-ops in operation by the time of the October 2013 rollout of the Obamacare exchanges. Thanks to the risk corridor and reinsurance provisions within the ACA, those co-ops survived the first two full years of the program, albeit with the same premium pricing issues that other insurers experienced. However, the so-called “cromnibus” bill that resolved the FY2015 budget restricted HHS’ risk-corridor funding only to monies collected for that purpose, rather than through the agency’s budget or other revenue sources. And that is when the house of cards began to tumble.
Predictably, the financial model that critics warned would lead to a death spiral for insurers hit the co-ops first.
As it turns out, the non-profit co-op model for health insurance turns out to be unsustainable without government subsidies.More than half of the co-ops have been shut down this year, and nine of the 12 have shut down since October 1, either by HHS or by the states in which they operate. Over a billion dollars in loans and and backstop payments have been lost. The latest failure to be announced was in Michigan, where Consumers Mutual Insurance announced Tuesday that it would not sell insurance for 2016. The failure of these dozen co-ops has left nearly 750,000 consumers in the cold, looking for a plan from a traditional insurer at a higher price.
What happened? Predictably, the financial model that critics warned would lead to a death spiral for insurers hit the co-ops first. “They were low-cost alternatives,” Kaiser Health’s Mary Agnes Carey told PBS anchor Judy Woodruff. “If they were the lower price point, that tended to attract sicker beneficiaries. That would drive up their costs.” …
This disaster isn’t limited to the co-ops, though. The same model has forced premium prices on other plans to skyrocket three years in a row, and deductibles to rise to the level where many of these plans are nothing more than overpriced catastrophic coverage. Had the Democrats gotten their way, the public option would have covered up those issues and pushed the insurers out of business.
Make no mistake — this is a death spiral. It’s just that it took out the government operations before it took out the private insurers.