Obamacare breaks promises in California, and supporters would prefer you not point it out

You may have heard tell of some good news about health care premiums out of California recently.

Depends on what the meaning of good is. If good is better than “worst-case gloom-and-doom scenarios,” or premium hikes slightly smaller than catastrophic rate shock predictions, then sure, maybe. If you’re one of the millions of Americans who was promised they could keep their insurance if they liked it, and their health insurance premiums would go down, the news may not qualify as good for you.

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President Barack Obama and his supporters sold Obamacare as a plan to cover everyone while bringing down health insurance premiums and government health care spending. Anyone who expressed skepticism that the bill could offer more coverage to more people for less money or pointed out possible unintended consequences was maligned as a partisan liar. Now that it turns out, yes, more coverage for more people requires many people to pay more money, Obamacare supporters are simply asserting this is a great trade-off and they shouldn’t be held to the promises they made about Obamacare’s outcomes.

But the bill would never have come close to passing if it had been pitched as a giant overhaul of a system some most Americans were mostly happy with, imperfect though it was, to cover a sliver more people for a bunch more money. Hey, great trade-off!

Here’s the “good” news:

Amid anxiety over rising costs from the federal healthcare law, California received better-than-expected insurance rates for a new state-run marketplace, but many consumers still won’t be spared from sharply higher premiums.

Developments in California are being watched carefully around the country as an important indicator of whether the healthcare law can deliver on its promise to expand health coverage at an affordable price. Many Republicans, insurance executives and other critics of the law have been warning that consumers are in for a shock next year when insurance companies raise rates to comply with the law’s many new requirements.

Supporters were upbeat after an initial look at the proposed premiums, while critics remain unimpressed.

“These rates are way below the worst-case gloom-and-doom scenarios we have heard,” said Peter Lee, executive director of Covered California, the state agency implementing the healthcare law. “But let’s be clear, some consumers will have prices that go up. There may be some sticker shock.”

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Liberal pundits were quick to cheer this news because anything shy of a “third-world experience” or a “train wreck” qualifies as victory for this piece of legislation.

But Avik Roy went all precipitation on the parade by pointing out the actual rate increases for individuals, which look suspiciously like rate shock:

If you’re a 25 year old male non-smoker, buying insurance for yourself, the cheapest plan on Obamacare’s exchanges is the catastrophic plan, which costs an average of $184 a month. (By “average,” I mean the median monthly premium across California’s 19 insurance rating regions.)

The next cheapest plan, the “bronze” comprehensive plan, costs $205 a month. But in 2013, on eHealthInsurance.com (NASDAQ:EHTH), the median cost of the five cheapest plans was only $92.

In other words, for the typical 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent.

Under Obamacare, only people under the age of 30 can participate in the slightly cheaper catastrophic plan. So if you’re 40, your cheapest option is the bronze plan. In California, the median price of a bronze plan for a 40-year-old male non-smoker will be $261.

But on eHealthInsurance, the median cost of the five cheapest plans was $121. That is, Obamacare will increase individual-market premiums by an average of 116 percent.

Jonathan Cohn and Ezra Klein say it’s unfair to point out these particular instances of rate shock because other parts of the law are great —remember the trade-off argument that conveniently materialized mostly post-passage of the bill— and there will be subsidies, anyway. But that wasn’t the tune they were whistling in 2009:

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The key thing to remember is that back when Obamacare was being debated in Congress, Democrats claimed that it was right-wing nonsense that premiums would go up under Obamacare. “What we know for sure,” Obamacare architect Jonathan Gruber told Ezra Klein in 2009, “is that [the bill] will lower the cost of buying non-group health insurance.” For sure.

In 2009, was Ezra saying that it’s ok that premiums will double for the average person, because a minority of people will pre-existing conditions will benefit? No.

Earlier that year, AHIP, the private insurer trade group, commissioned a report from PriceWaterhouseCoopers to analyze the impact of Obamacare on health insurance premiums in the individual market. That report, which I reviewed here and elsewhere, found that the version of Obamacare then being considered by the Senate Finance Committee would increase premiums by 14 to 32 percent, depending on the year you looked at. In retrospect, the PwC report was a bit optimistic.

But Ezra described the PwC analysis as “the insurance industry’s deceptive report,” comparing it to sham research put out by the tobacco industry and Big Oil.

Megan McArdle noticed the same shift in tone, writing in April of this year.

The briefings from pro-Obamacare groups did not suggest that it would achieve some fairly trivial cost reductions, with the bulk of the work on cuts still to be done in some successor bill. They emphasized the historic achievement and presented 10- or 15- year estimates that made the reductions sound very large. An average reader who did not spend all day steeped in these debates–and I include Congressmen in that group–could be forgiven for coming away with the impression that Obamacare was going to deliver a twofer: coverage expansion and a permanent solution to the nation’s health care cost problem.

Many a company has ended up in a disastrous merger the same way.

So it’s a shame that we only started hearing about the need for further, much more drastic action on spending after Obamacare had passed. Unfortunately, we apparently had to pass the bill in order to find out what wasn’t in it.

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McArdle also cataloged some of the more outlandish positive claims about Obamacare the day after it passed, and offered her own less sanguine, more accurate predictions.

I’ve written about the goalpost moving, here.

Peter Suderman outlines the trade-off we’re going to be hearing so much about:

Lower-income individuals, meanwhile, will be insulated from the full impact of those new rates thanks to the law’s premium subsidies. Yet as health policy consultant Robert Laszewski points out, what that really means is that a big chunk of Obamacare’s cost increases will fall on taxpayers. (And remember, an estimated 40 percent of people buying insurance through the exchanges won’t get subsidies.)

There are other trade-offs too: As Laszewski also points out, health insurers are attempting to mitigate the costs imposed by the benefit requirements by offering narrow-network plans that limit the scope of providers covered. There’s nothing wrong with those sorts of offerings, if insurers want to sell them and consumers want to buy them, but what Obamacare appears to be doing is giving both consumers and insurers a rather big push toward those sorts of provider-limited plans. Essentially, it’s making the choice for them.

Fundamentally, that’s a big part of what Obamacare is about: making choices for individuals, for businesses, and for the health care sector. And so under Obamacare we’ll probably get more coverage (though perhaps not as much as supporters hope, especially at first), more insurance benefits (at least on paper), and (at least in theory) more accessible coverage. But don’t be fooled into thinking it won’t come without higher costs—for individuals, for businesses, and for the public. Obamacare both makes those choices and expects people to pay for them.

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If only we’d heard about it three years ago. Obamacare supporters now argue that critics’ arguments against it focus too much on the downsides, abandoning the nuance and caveat necessary to show the law’s progress in its proper light. The problem is they sold a bill, without allowance for nuance or caveat, on the claim that it had no downsides. Now they have to answer for them.

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