ObamaCare premiums are a magical mystery tour

The first is that these prices are not being set based on much claims data. As Laszewski points out, companies began setting these rates just a few months after open enrollment closed, and because so many people bought in the last few weeks, that means they had little meaningful idea of what their expenses would be. The companies that are coming in are looking to gain market share, not make a profit.1

The other reason that we cannot learn much from these data is that right now, and for the next year, insurers are operating under the expectation of large subsidies from the Obama administration via the various reinsurance provisions in Obamacare. Those provisions expire in 2016, and if a Republican takes the White House that year, insurers can also probably forget about getting favorable regulatory rulings.

Right now, it’s just not very risky to write a policy that loses a bunch of money, because your losses are capped at a few percent. Starting in 2017, all that changes. Insurers are going to need to price policies with the expectation of making money and the fear of losing it.