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Obamacare: Nothing to Brag About

February 20, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

During last week’s State of the Union address, one item curiously went almost unmentioned. We heard all about President Obama’s past triumphs and future plans, but his health-care-reform law was strangely missing. Sure, there was one throwaway line about how Obamacare was reducing health-care costs, but the seminal achievement of the president’s first term was almost ignored.

Perhaps that is because the Patient Protection and Affordable Care Act has brought little good news of late.

Insurance premiums are set to explode. Already health insurers, citing the increased cost of various Obamacare provisions, are seeking and winning double-digit premium hikes. For example, California health insurers are proposing increases for some customers of 20 percent or more: 26 percent by Blue Cross, 22 percent by Aetna, and 20 percent by Blue Shield.

Young people are especially likely to face higher premiums. Obamacare’s “community rating” provisions prohibit changing premiums based on health status and limit the degree to which insurers can charge based on age. Thus, premiums will rise more slowly for older and sicker individuals, but will shoot up for young people. According to a survey by the American Action Forum, healthy young people in the individual or small-group insurance markets can look forward to rate increases averaging 169 percent.

The president’s health-care law increasingly does less and costs more.”

Further, a study in the American Academy of Actuaries’ magazine found that 80 percent of young adults aged 18–29 not eligible for Medicaid will face higher costs, and that 20- to 29-year-olds on the individual market not eligible for subsidies will see their premiums increase 42 percent.

New federal subsidies will offset rising premiums to some degree. But that will only further drive up the law’s already rising price tag. The cost of the average exchange subsidy per person is now projected to be $5,510 in 2014, $700 more than it was projected to be last year.

And those subsidies might not exactly make exchange plans affordable. The IRS recently estimated that in 2016, for a family of five, a policy available through the exchange would cost roughly $20,000. At the same time, the IRS has decided that subsidy eligibility will be based whether one’s employer offers an “affordable” individual plan (meaning the employee-paid premium is less than 9.5 percent of his income), whatever the cost of a family plan might be.

That’s become a theme for Obamacare: costs more, does less.

For example, the Congressional Budget Office …read more
Source: OP-EDS

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