Finally! Someone Explains What All Those Obamacare Numbers Mean!

You’re going to hear a lot about Obamacare this fall, especially from Republicans. They’ll try to convince you that it was a bad deal. They’ll throw numbers at you to make you think that the cost of health insurance is spiraling out of control. In all likelihood, those numbers will be wrong, but how will you know? There are so many numbers flying around out there that even the experts are having trouble keeping track.

That’s why it’s time for a math lesson. After reading this article, you’ll know what the numbers mean — and which ones you should trust. No candidate will be able to fool you.

Millian Medical Index

And you won’t even need a calculator.

First of all, you have to understand that we’re only talking about the individual market, where people buy insurance if they’re not covered by their employer or a government program. That means the “individual mandate” and the “government-run exchanges” only affect 7 percent of the population. For the majority of the population covered by their employer, the cost of health insurance rose less in 2014 than it had in any year since the Milliman Medical Index started keeping track. We can probably thank Obamacare’s cost control provisions for some of that achievement, but that’s a conversation for another day.

For now, let’s focus on the individual market. Before Obamacare, insurers charged low rates to healthy people and high rates to sick people, making insurance unaffordable for the people who needed it the most. Obamacare banned discrimination against sick people and mandated that all people must purchase insurance. Without that mandate, insurers would have raised rates to cover the new sick customers, and healthy people would have refused to pay the new high rates, driving rates up even higher as the population became sicker on average.

When the law was passed, the Congressional Budget Office predicted that premiums would increase 10 to 13 percent, but only because people would be receiving more generous coverage. Obamacare required every health insurance plan to meet basic minimum standards. Additionally, by making it more affordable, more people would want to buy more generous coverage. If you compared plans with the same level of coverage, the CBO predicted that premiums would actually go down.

When states started announcing the premiums for their new “exchanges,” you probably started hearing about “sticker shock.” By comparing the new premiums to old quotes from health insurance websites, Obamacare critics claimed that the law had drastically raised prices. The problem with their argument was that the quotes on the old websites were very unreliable. They rarely reflected what insurers would actually charge you, once they factored in your medical history, age, gender, etc. In fact, many Americans would be denied coverage altogether. Anyone who knew anything about health insurance knew that the website quotes were lowballing the cost.

State governments like California countered by making a more reasonable comparison. They argued that the new exchange premiums were actually lower than premiums for small group coverage, for which they had better data. Obamacare critics weren’t satisfied. Small group plans may have been more expensive than the plans on the new exchange, but that’s because they offered more generous coverage.

The Manhattan Institute, led by conservative health expert Avik Roy, tried to find a middle ground by adjusting the quotes on the health insurance websites, raising the estimates for people who were “surcharged” or denied, and finding that Obamacare increased prices by 41 percent.

The problem with Roy’s analysis was that his adjusted numbers didn’t match reality. Before Obamacare, Roy suggested that 27-year-olds — the ones who were being hit the hardest, he argued — paid between $1,596 (men) and $1,980 (women) in average annual premiums. But the Kaiser Family Foundation conducted a survey in 2010 and found that they were actually paying closer to $2,630. Across the board, Roy had underestimated the pre-Obamacare cost of health insurance, and he wasn’t including costs that consumers paid out of their own pockets.

Last month, three Wharton economists used the Current Population Survey to calculate a more accurate estimate of the average pre-Obamacare premium. They found that it was basically identical to the lowest-cost plan available on the Obamacare exchanges. Compared to more expensive plans, of course, it was cheaper, but when they factored in out-of-pocket costs, they found that the new plans were 14 to 28 percent more expensive than the old ones, only slightly higher than the CBO’s original predictions.

Monthly Subsidized Premiums on Federal Exchange

But wait. The Wharton study only counted people who purchased insurance, not people who were denied or who refused because the insurer’s quote was too expensive. We’ll never know what that quote was, but we can assume it would significantly raise our estimate of the average premium. To ignore those people — and there were millions of them — is to say that they don’t matter, even though Obamacare was designed specifically with them in mind.

The Wharton study also doesn’t include the tax credits that the federal government uses to subsidize low-to-middle income buyers on the exchanges. Last month, the government announced that 87 percent of shoppers received a subsidy on the federal exchange, bringing their average monthly premium down from $346 to only $82!

That’s a 76 percent reduction, and it more than makes up for the 14 to 28 percent premium increase, which may not be much of an increase after all if you include people who didn’t buy insurance in the past.

Bottom line: On average, Obamacare clearly lowered the cost of health insurance.

Sure, some people will pay higher rates, but you have to remember that those people only paid low rates in the past because insurers were discriminating against sick people. The new market is much fairer and more affordable for more people — a fact that you might want to point out to Republicans on the campaign trail this fall.

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Similar versions of this op-ed were published in today’s South Florida Sun-Sentinel and Huffington Post.

Does Obamacare Infringe on Our Liberty? Or Does It Give Us Even More Freedom?

What right does the government have to make you buy health insurance?

That’s the question that riles Obamacare critics the most. It’s not the premiums or the website or the dropped coverage. It’s the infringement on their liberty.

Does Government Threaten Our Freedom?You hear it all the time: “This is a free country!” That’s what everybody says. But what do they really mean? Do they know what freedom is?

It seems obvious at first. Freedom is lack of coercion. Therefore, anything the government makes you do infringes on your freedom.

But there are different types of coercion, and the government isn’t the only one doing the coercing.

Let’s say that you want your daughter to attend the best school in America. But you can’t afford the tuition. Do you really have freedom of choice? If you choose the school you want, they won’t let you through the front door. If you force your way in, they’ll arrest you.

So you “choose” a more affordable school. You wanted a better school, but they forced you to settle for a different one. Sounds like coercion to me.

Let’s consider another example. You want to retire at the age of 65. You’ve worked hard throughout your entire adult life. Unfortunately, wages haven’t risen, and the bills kept piling up. You saved as much as you could, but it’s only enough to live off for a couple years. Oh, and one more thing: Social Security and Medicare don’t exist.

If you “choose” to retire, you’ll go broke. You’ll go without preventive health care. Your chances of dying early will increase significantly.

So you have a choice: Keep working or die young.

In this case, you actually have less freedom because the government is less involved. Without Social Security and Medicare, you do not have the freedom to choose a long, healthy retirement.

Freedom requires more than the absence of laws and taxes. True freedom of choice requires the capability to make that choice — and the free market doesn’t always give us that capability.

Jobs are scarce. Most of us don’t have the freedom to work anywhere we want. We take what we can get. For many of us, that means working at a company that doesn’t pay for our health insurance. So we “choose” to buy insurance on the individual market.

Before Obamacare, the individual market charged really low rates to healthy people and really high rates to sick people. So the people who needed insurance the most couldn’t afford it. They didn’t have the capability — and therefore the freedom — to buy it.

Obamacare outlaws that kind of discrimination. It requires insurers to charge the same rates to healthy and sick people alike, and that means that healthy people will have to pay higher rates. Some of them won’t want to, so they’ll stop buying insurance. When they drop out, they leave behind the sicker people who are most costly to insure, forcing insurers to raise rates even more. It’s a vicious cycle, a “death spiral,” that results in almost everyone being priced out of the market.

Virtually no one will have the freedom to buy health insurance on the individual market.

And that’s why we have an individual mandate. If the healthy people don’t drop out, there’s no death spiral, and the insurance remains affordable for the people who need it the most.

The government gives them a freedom that the free market cannot. It gives them the capability to purchase health insurance.

If we choose not to buy insurance, we pay a penalty. As Supreme Court Chief Justice John Roberts has written, “it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income.” Those taxes pay for our roads and Army and Navy and Social Security and Medicare — and those things give us the freedom to live a life that we often take for granted. Without those taxes, without those government-funded investments, we could not call ourselves a free country.

In the same way, without Obamacare, without the government making us buy health insurance, we would be condemning millions of Americans to lives without health care. We would be restricting their freedom. And what right do we have to do that?

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This op-ed was published in today’s South Florida Sun-Sentinel and Huffington Post.

Those Obamacare Stories Aren’t as Scary as They Sound

One of Many Plan-Cancellation Letters

‘Tis the season to be scary — and no one is getting in the Halloween spirit more than Obamacare critics. Forget the ghost stories this year, kids. You really want to scare your friends? Tell them some health insurance stories!

Did you hear the one about Dianne Barrette from Winter Haven, Florida? Dianne used to pay $54 a month for health insurance from Blue Cross and Blue Shield. But not anymore. Under Obamacare, her plan has been cancelled…and replaced with a new plan costing $591 a month!

Then there’s the one about Allison Denijs. Allison already pays a lot for insurance. She has a preexisting condition, and her plan covers her husband and one of her two daughters. All told, it costs her $20,000 a year. But Obamacare is cancelling her plan too!

Or maybe you heard the one about Robbie and Tina Robison from Franklin, Tennessee. They too are losing their current plan. In its place, Blue Cross is offering them a new plan that costs over 50 percent more!

And they’re not alone. In Florida alone, 300,000 customers have received letters from Blue Cross and Blue Shield notifying them that they will lose their current plan in 2014. All across the country, millions of Americans are receiving the same news!

But wait. Do you notice anything strange about these scare stories? None of them tell you why they’re losing their plans.

I’ll tell you why: Because the insurance companies wanted to make those plans worse.

Back in 2010, you probably remember President Obama saying, “If you like your health-care plan, you can keep your health-care plan, period.” He was referring to the “grandfather” clause of the Affordable Care Act.

The ACA requires that all health-insurance plans meet minimum standards. For example, they all have to cover prescription drugs, ambulatory services, mental health services, and several other categories that are currently excluded from many plans on the individual market. If you signed up for your insurance plan before the law went into effect on March 23, 2010, however, you’re exempt from this requirement. Your plan is “grandfathered” in.

Unless your plan becomes worse — say, because your insurance company wants to take away some of your coverage or raise your co-payments faster than the medical cost of inflation. In that case, it’s no longer exempt because it’s not the same plan anymore.

So, yes, you can keep your old plan. Unless the insurance company changes it. In which case it isn’t your old plan anymore.

That’s what the President meant.

In every one of those cases, the customers who lost their plans are being offered better plans — either by their current insurance carrier or on the government-run exchange.

What CBS and Fox News didn’t tell you about Dianne Barrette, for example, is that her $54-a-month plan didn’t cover hospital stays or ambulance services or brand-name drugs or…really, most of the things she’d need if she ever got really sick. Under Obamacare, she will receive coverage for all of those things.

Not so scary after all, is it?

But what about those premium increases? Those seem pretty scary…if you take the insurance company’s word for it.

After Allison Denijs appeared on Fox News, Salon reporter Eric Stern contacted her and asked if she’d found a new plan on the Obamacare exchange. She hadn’t looked yet, so Stern did it for her. He found a plan that covers her entire family — including her currently uninsured daughter — for $7,600, less than half of what her old plan cost.

Then Stern called the Robison’s. They refused to shop on the Obamacare exchange, which is a shame because Stern found a plan that they could get that would cost them 63 percent less than their old plan — and it would cover more services.

Of course, that doesn’t mean that everyone will pay less under Obamacare, but the point of the law is to make health insurance affordable for people who need it the most. For young, healthy Americans, it may result in a slight cost increase, but we must remember why their insurance was so cheap before Obamacare came along: Because insurance companies were discriminating against the sick, excluding the most desperate and most costly customers.

Someday, when they’re not so young and healthy anymore, those Americans are going to be thankful that Obamacare is there — and that they can buy affordable health insurance that covers all the healthcare services they need. You might say Obamacare has given them one less thing to be…scared of.

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An abbreviated version of this op-ed was published in today’s South Florida Sun-Sentinel.

What to Read on Implementation of the Affordable Care Act

More Solid Proof That Obamacare Is Working — Rick Ungar

The provision of the law that permits young adults under 26…to remain on their parents’ health insurance program resulted in at least 600,000 newly insured Americans during the first quarter of 2011.

…every one of the young immortals we add to the rolls of the insured is one less young adult who will turn to the emergency room to fix a broken leg and then find themselves unable to pay the bill — leaving it to the rest of us to pay the tab.
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Because the under 26 crowd tends not to get sick, adding them to the insurance pools helps bring the very balance that was intended by the new law. The more healthy people available to pay for those in the pool who are ill (translation: the older people), the better the system works and the lower our premium charges should go.

[And] there has been a significant uptick in small businesses taking advantage of the tax benefits offered by the ACA to provide health insurance to employees where they previously did not do so.

Do Pay-for-Performance Health Programs Really Work? — Jake Marcus

Earlier this month, Medicare finalized the rules of a new program — mandated by the Affordable Care Act — that will pay hospitals based on the quality, not just the quantity, of care they provide.

In general, there are two ways to reward healthcare providers: 1) based on the health outcomes of patients or 2) based on how closely hospitals adhere to recommended processes of care.

Medicare has started relatively small by choosing to redistribute only 1 percent of reimbursements, so it will have the chance to evaluate the effects of a promising program without it having disastrous consequences if it fails.

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How Much Is the Obama Administration Asking You to Pay?

My latest blog post is up at the Sun-Sentinel. My dad gets credit for this idea. He was wondering the answer to this question, so I did a little digging through the research. It isn’t a very rich literature, but the few papers in it (especially the Fama one) are very strong.

The only thing I’d add to this post is to say that financial regulation should function like insurance. It costs money for firms to pay for insurance, and those costs may get passed along to you in the form of higher prices. But you’d probably prefer that than having the company go bankrupt because they get caught in a catastrophe without insurance coverage. Good financial regulation is supposed to prevent crises, but it’s only fair that the firms pay the taxpayers insurance premia in advance. We did, after all, just bail them out quite generously.

I was debating two different conclusions, so here’s an alternate ending:

This is good news for the Obama administration. Of course, it would be better news if that money came out of bankers’ salaries, but don’t worry: They’re working on that.

Don’t forget to read the original post.