This column by ACRU General Counsel Peter Ferrara was published October 28, 2013 on Forbes.com.
Obamacare was sold to credulous “Progressives” on the grounds that it was the way to achieve universal health insurance coverage for all Americans. But the Congressional Budget Office scored the legislation as leaving 30 million uninsured 10 years after full implementation! That is more than half the nation’s uninsured pre-Obamacare.
But just one month after Obamacare went into effect, the number of uninsured Americans has gone up rather than down. Just last week, Florida Blue announced it was issuing termination notices for 300,000 policies, about 80 percent of its individual policies in the state. Kaiser Permanente in California cancelled 160,000 policies, about half of its individual policies in the state. Insurer Highmark in Pittsburgh dropped 20 percent of its individual policies. In Philadelphia, Independence Blue Cross nixed 45% of its individual policies. CareFirst Blue Cross Blue Shield cancelled 76,000 individual plans in Virginia, Maryland and Washington, DC, over 40 percent of its individual policies in those states.
But didn’t President Obama tell us that if you liked your health plan, you could keep it? Current policies were supposed to be “grandfathered” in under Obamacare. But the HHS regulations implementing that provision are so restrictive that few current policies qualify under it. The Weekly Standard estimates that as a result 16 million current individual policies, in a nationwide market of 19 million, would be cancelled because they do not meet the new regulatory requirements of Obamacare. That is 85 percent of the individual health insurance market, which involves health coverage individuals buy outside of employer provided insurance.
This is just the beginning, however, of the Obamacare collapse in health insurance coverage. CBO estimates that as many as 20 million will lose their employer provided health insurance under Obamacare. Former CBO Director Douglas-Holtz-Eakin estimated in a study for the American Action Forum that the number will be 40 million.
The individual and employer mandates were supposed to force most Americans to buy the health insurance that the Obama Administration specifies they must buy. But in most cases, the penalty for failing to comply is only a small fraction of the cost of the required health insurance. Moreover, employers can give their workers a raise now by dropping costly Obamacare coverage, and most workers can get Obamacare subsidies on the Exchanges as well, which will further induce employers to drop their coverage. Workers on their own can evade the individual mandate, and rely on Obamacare’s guaranteed issue and community rating regulatory requirements to buy coverage at standard prices if they get sick with costly illnesses.
And with the soaring costs of Obamacare health insurance for these workers, that is what many will do. Avik Roy of the Manhattan Institute estimated based on market data that Obamacare is increasing insurance premiums by 99 percent for men, and 62 percent for women. But last week, that was superceded by a new study from the American Action Forum that calculated the Obamacare increases for individual health insurance policies to be 193 percent for women on average, and 260 percent for men.
Those increases result directly from all of the regulatory requirements of Obamacare. That includes all the Obamacare mandated benefits for “free” check ups, “free” preventive care, “free” contraceptives, and prescription drugs, mental health treatments, and maternity care, among others. As a comedian once famously said, if you think health care costs a lot now, wait till you see how much it costs when it is free.
Then there are the Obamacare regulatory requirements of guaranteed issue and community rating, which require insurers to issue policies to everyone at the same standard rates, no matter how sick and costly they are when they first apply. That is like requiring fire insurance companies to issue policies for houses that have already caught fire, at the same standard rates as for everyone else. That is a sure fire way to cause standard prices for such coverage to soar.
Obama promised us that Obamacare would reduce the cost of health insurance by $2,500 per family on average. But it is already doing just the opposite. Those commentators, like Paul Krugman who tried to tell us that the rates insurance companies were posting on the Exchanges were coming in far lower than was expected deserve professional punishment for so misleading us.
The bottom line result of this developing Obamacare chaos is going to be “death spirals” for the private health insurance industry. Obama was counting on millions of healthy, low cost, young workers signing up to be badly overcharged to finance health care for older workers and reirees. But when has that ever happened in economic history? These younger low cost workers are not showing up now, and they are not going to suddenly turn around and show up later.
But the sicker, higher cost workers and individuals can be counted on to prevail to get on the Obamacare gravy train. That will leave the insurance companies without the funds to pay all their promised benefits to these older, sicker and more costly customers. The only alternative for the insurers will be to raise their premiums still more, which only will drive away the lower cost, younger customers still more.
The coming Obamacare issue will consequently be federal bailouts for health insurance companies suffering ruinous losses due to costly Obamacare overregulation. Such bailouts would be no more fair to taxpayers and working people then the financial industry bailouts of 2008, and no more popular.
Senator Cruz was trying desperately to shut down this Obamacare chaos just a couple of weeks ago. But the Washington Establishment shouted him down and laughed him off. President Obama, the Democrats and that Washington Establishment owe him an apology today.