Insurance “rate shock” under Obamacare

Insurance “rate shock” under Obamacare February 20, 2013

The cost of health insurance will go up dramatically under Obamacare, people are starting to realize.  This will be true especially for the young healthy types that aren’t buying insurance now but will soon have to; that is to say, the currently uninsured, the ones Obamacare is supposed to help!

What a surprise!  Who knew?  Who could have guessed that would happen?  How could forcing insurance companies to take everybody, charge everyone the same, and provide free services possibly raise insurance rates?  I thought Obamacare was the way we were going to rein in health care costs.  After all, the program is called “The Affordable Health Care Act”!

Yet more reason to wonder, how can Obamacare possibly–even theoretically– work?

From N.C. Aizenman in the Washington Post:

Many young, healthy Americans could soon see a jump in their health insurance costs, and insurance companies are saying: It’s not our fault.

The nation’s insurers are engaged in an all-out, last-ditch effort to shield themselves from blame for what they predict will be rate increases on policies they must unveil this spring to comply with President Obama’s health-care law.

Insurers point to several reasons that premiums will rise. They will soon be required to offer more-comprehensive coverage than many currently provide. Also, their costs will increase because they will be barred from rejecting the sick, and they will no longer be allowed to charge older customers sharply higher premiums than younger ones. . . .

Supporters of the law counter that concerns about price hikes are overstated, partly because federal subsidies will cushion the blow.

The insurers’ public relations blitz is being propelled by a growing cast of executives, lobbyists, conservative activists and state health officials. They increasingly use the same catchphrase — “rate shock” — to warn about the potential for price surges.

Aetna chief executive Mark T. Bertolini invoked the term at his company’s recent annual investor conference, cautioning that premiums for plans sold to individuals could rise as much as 50 percent on average and could more than double for particular groups such as the young and healthy.

The danger of rate shock has also become the favored weapon of conservative opponents of the law, repeated in a drumbeat of op-eds and policy papers in recent weeks.

The argument is a powerful one because the success of the law, which was the signature domestic accomplishment of Obama’s first term, depends on enough people signing up for insurance, particularly healthy people. The issue is surfacing as the most recent significant challenge in implementing the health-care overhaul. . . .

Yet even analysts who favor the law concede that it will result in higher costs for some young, healthy people.

Most of the new rules that could push up premiums will not apply to plans sponsored by large employers, only to those sold to individuals and small businesses. These policies will be available on insurance marketplaces, or “exchanges,” that the law sets up in each state beginning in 2014, and that are ultimately expected to serve about 26 million people.

The law will require insurers to offer a generous package of benefits for exchange plans, including coverage of maternity care, prescription drugs and treatment for mental illness. It also caps customers’ out-of-pocket expenses.

Many 20-somethings who buy their own insurance have plans that are considerably skimpier. So, under the new rule, they will be getting and paying for more, whether they want the added coverage or not.Another key driver of higher prices: Insurers will no longer be able to turn away or charge more to people with preexisting conditions. Perhaps most significantly, insurers will be allowed to charge their oldest customers only three times as much as their youngest. In most states, older customers are paying at least five times as much.
The result: Older, sicker people will pay lower premiums. Younger, healthier people will pay higher ones to make up the difference.The price of a policy for a young, healthy man in, for instance, Milwaukee, could triple from $58 per month to $175, according to a survey of insurers released by Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank, and a former director of the Congressional Budget Office.Insurers argue that such increases could prompt many healthy young adults to opt out of coverage, skewing the insurance market so heavily toward the old and sick that it implode

via Will young adults face ‘rate shock’ because of the health-care law? – The Washington Post.

Plus, if you smoke, your rates will add a surcharge of 50%.  Even though what constitutes smoking–actually the regulation refers to “using tobacco”–so as to trigger the surcharge has not been defined (a pack-a-day habit?  an occasional cigar? or, as one criterion states, using tobacco sometime during the last 12 months?

And smokers tend to be poorer than non-smokers.  So poor people who can’t afford insurance are going to get hammered by the law making them get insurance and making it even more expensive than it is now.  True, the government will pay a subsidy if your income is low enough, but that just spreads the cost to all taxpayers.

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