June 29, 2015
State regulators typically use their power to review health insurance premiums to limit rate hikes. But in Oregon, officials are ordering insurers to raise premiums — in many cases by double digits.
The regulators pointed out that insurers spent over $100 million more than they took in last year. Any more money-losing years like that, and some carriers would surely go bankrupt.
Oregon may be the only place where state leaders are ordering consumers to pay more for health insurance. But virtually everywhere else, insurance premiums are climbing — sometimes by as much as 50 percent.
And in every case, Obamacare’s benefit mandates, taxes, fees, and onerous regulations are to blame. Worse, thanks to the U.S. Supreme Court’s decision last week to deny the latestlegal challenge to Obamacare, the law’s ever-higher premiums are here to stay.
President Obama sold his law as a means to spare people from “double-digit premium increases year after year.”
Instead, his “inartfully” named — and drafted — Patient Protection and Affordable Care Act has made the situation worse, with insurers asking for the double-digit premium increases the president promised to do away with.
Blue Cross Blue Shield of Minnesota, for example, is requesting a 51 percent rate hike after losing more than $135 million on Obamacare last year. It expects its losses to be “ significantly higher” this year.
In Massachusetts, Fallon Community Health Plan wants a 21 percent premium boost to cover “increasing medical costs and the fees and charges” imposed by Obamacare.
Blue Cross Blue Shield of Illinois is asking for a 29 percent increase, citing the fact that “actual claims experience . . . is significantly higher than expected.”
CareFirst in Maryland, which has 80 percent of the state’s Obamacare market, wants a 34 percent increase for its PPO plan.
Increases like these, if approved, will come on top of the average 41 percent hike in rates during Obamacare’s first year.
The only reason the “Affordable” Care Act is even remotely affordable to anyone is because of the tens of billions of dollars in subsidies it hands out to about 6.4 million enrollees.
Obamacare’s backers are quick to point out that these rate requests aren’t final — and that states often dial them back.
But what they don’t say is that these rates are based on hard, historical data — actual claims experience. As insurance industry expert Robert Laszewski said, “A 35 percent rate increase is hardly going to be rolled back to 5 percent.”
Spiraling premiums are precisely what critics said would happen once Obamacare’s benefit mandates, taxes, fees, and regulations took effect.
Those regulations — including “guaranteed issue” and “community rating” — have been the sine qua non of big-government healthcare reformers for years, even after they failed in seven states that tried them. Guaranteed issue forbids insurance companies from turning anyone away for health reasons; community rating restricts their ability to charge folks more according to health status or history. It also prevents insurers from charging premiums that “vary by more than 3 to 1 for adults” — i.e. between the elderly and the young.
To meet these requirements, insurers have had to reduce rates for sicker people and raise them for the young and healthy. But because the young and healthy know they can wait to buy insurance — guaranteed, and at subsidized rates — until they get sick, they have a significant incentive to steer clear of the insurance market altogether.
If they do, the insurance pool will grow older and sicker; premiums will spike. As rates rise, increasing numbers of young and healthy folks may decide that insurance isn’t worth the cost — and leave the market.
Obamacare’s individual mandate, which requires people to obtain health insurance, is supposed to prevent this “death spiral.”
It isn’t working. Millions of Americans are flouting the mandate and remaining uninsured. Just 250,000 people took advantage of a special enrollment period earlier this year to purchase coverage. The law’s boosters envisioned that five times as many might do so.
Meanwhile, the law’s numerous exemptions permit millions more who don’t want to buy insurance to remain uninsured without paying the penalty.
Just as critics expected, the young and healthy are shunning Obamacare. Investor’s Business Daily calculates that enrollment among the coveted 18-34 age bracket fell 2 million — or 40 percent — short of the administration’s goal this year. That shortfall is a big reason why insurers are seeking double-digit rate hikes for 2016.
And things will only get worse. Obamacare perversely gives insurers less incentive to hold rates down, since a big chunk of the people shopping in the exchanges are eligible for subsidized coverage. Even if premiums spike, insurers know that many customers won’t notice much of a difference in their out-of-pocket costs.
And spike they will, now that the Supreme Court has defied basic reading comprehension by authorizing the distribution of subsidies through the federal HealthCare.gov exchange — in direct violation of Obamacare’s text.
The only question now is whether those premium spikes will be ordered or simply green-lit by state insurance regulators. Either way, consumers lose.
This article originally appeared at Forbes.com.