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No, Obamacare Has Not Reduced Insurance Costs

August 06, 2014

By Paul Howard

Has Obamacare reduced the cost of insurance? Pundits, analysts, and academics have pored over this question relentlessly. While people on different sides of the political spectrum place value on different things (liberal-progressives value equity much more than libertarians), it's difficult to make the claim that insurance costs have fallen under the health care law, something that even liberal analysts have had to concede. As Vox's Adrianna McIntyre conceded, “Obamacare's sticker shock is real, but it's not as bad as advertised.”

Various elements of the law, including guaranteed issue, limited age-rating, and a more comprehensive benefits package, all contribute to higher underlying insurance costs. Of course results will vary depending on the methodology used to analyze costs. But nevertheless, costs have moved in an upward, not downward, trajectory.

Some aren't content, however, with acknowledging that health care reform may have costs. In a piece for the Sun Sentinel, Anthony Orlando dismisses claims of increased premiums under Obamacare, arguing instead that “[o]n average, Obamacare clearly lowered the cost of health insurance.”

Orlando cites both a study conducted by myself and my Manhattan Institute colleagues Avik Roy and Paul Howard (which found a 49 percent increase in costs), as well as a study published in NBER by Wharton School economists Mark Pauly, Scott Harrington, and Adam Leive, which found smaller increases in total projected expenditures of between 14 and 28 percent. Orlando claims that our study's findings, which examined the effect of Obamacare on individual market premiums, “didn't match reality,” and dismisses the Wharton study for failing to take into account premiums subsidies. While there are valid criticisms of rate shock rhetoric, Mr. Orlando misrepresents the evidence and ignores other analysis that contradicts his findings, misleading his readers.

First, Orlando cites the Kaiser Family Foundation, arguing that our pre-ACA premiums for young men ($1,596) and women ($1,953) are significantly below Kaiser's 2010 estimate ($2,580). This is true, but not for the reasons that he claims. The data that Orlando cites from Kaiser pertains to the individual market across all ages, while our premiums are grouped by age cohorts. While this error may not have been intentional, the onus is upon writers to verify that they are making appropriate comparisons – Orlando was not.

But more egregiously, he ignores additional competing evidence. Our analysis and Pauly's was not alone in findings that health insurance costs have increased., a leading broker for individual market insurance, found that average premiums have increased 38 percent in 2014. Actuarial projections prior to the start of open enrollment expected similar increases. For example, a 2013 analysis from the Society of Actuaries projected that in 2016, Obamacare would increase costs by 32 percent for equal benefit packages.

The only sensible argument that Orlando puts forward is one that deals with subsidies – indeed, according to HHS, premium subsidies have reduced the premiums that people pay by about 76 percent. Great! But this deals with affordability rather than actual cost. While subsidies make insurance more affordable at the front end, the full cost of insurance has still increased – for taxpayers Undoubtedly, reform of our antiquated health care system will require some to pay more – indeed, the current tax treatment of health insurance disproportionately benefits higher income families! But costs need not increase as much as they do under Obamacare – and claiming that costs have fallen is deeply disingenuous.

Original Source:



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