Thursday, November 3, 2016

What Will the 2017 Skyrocketing Obamacare Premiums Unleash on the American People?

It wasn't as if this election cycle wasn't fun enough with Clinton's email scandal or Trump saying the darnedest things. Last week, we find out that the premiums for Obamacare are expected by an average of a whopping 22 percent in 2017. No, these figures do not come from some right-wing, anti-Obama conspiracy. That projection comes straight from a report from the Department of Health and Human Services (HHS). A 22 percent increase sounds terrible, but the HHS downplays that finding by saying that the subsidies will counter that hike, and that more than 70 percent of enrollees in the Market can find a plan for $75 or less. Does this put your mind at ease? I would hope not, and let me explain why:
  • Most states are going to experience a decline in the number of exchange insurers (HHS, p. 27) and the average number of plans offered (HHS, p. 29). This continues the downward trend that we have seen with such providers as Aetna and United Healthcare pulling out of the exchanges. 
  • There will also be less choice of providers. The percent of consumers in the exchange that will have 3 or more providers is going to drop from 88 percent to 56 percent in 2017 (HHS, p. 38). One in five market participants are expected to only have one provider as an option. Here is an example of Obama breaking another promise, this time with regards to there being more choices and competition in the healthcare marketplace as a result of Obamacare. 
  • The best-case scenario is that the subsidies will keep the exchanges afloat. But where does the money for the subsidies come from? That's right, the American taxpayers. Just look at Table 12 (HHS, p. 31) to see how much the plan has to be subsidized to be "affordable."
  • Obamacare proponent Sarah Kliff even admits that the subsidies would still mean a real possibility of having to accept a lower-tier plan. That makes even more sense considering how deductibles have also increased under Obamacare, as a recent report from HealthPocket discovered.
  • Even if the underpricing of premiums were intentional and the 2017 premium hike is a one-time deal, like proponents are opining, it still doesn't negate that healthcare costs have been increasing more substantially since Obamacare came into fruition.

If it were premiums unto itself, then it wouldn't seem so disastrous. But when is one that lucky? And it is not just the spillover effect that it has on the 7 percent of Americans who are in the individual market for health insurance. Sarah Kliff is dismayed by the lower-than-expected enrollment rate, as if she were genuinely surprised that Obamacare would attract the sicker, higher-need individuals, as well as "have the growing pains of a smaller insurance pool." I'm not at all surprised since shortly after the exchanges took into effect, I figured this would end up being an issue. Advocates of Obamacare want to blame it on risk insurance ending, but how about blaming it that insurance companies were making their initial premium estimates based on the initial estimates that there would be about twice the amount of enrollees than there actually are? All of this leads me to be unsurprised by the fact that enrollment for 2017 will only be around 11.4 million, which is slightly up from the 10 million enrollees. While an increase, it is still nowhere near the 27 million figure that the Congressional Budget Office was projecting back in 2013.

We already see how federal subsidies for college loans continue to drive up the costs for a postsecondary education. I don't have a crystal ball or clairvoyance, but if I had to make an educated guess, the premium hikes are not going to be a one-time deal because the subsidies do nothing to address the underlying dynamics causing the premium hikes in the first place. The premium hike is most probably going to make Obamacare even less attractive, especially for those who are younger and/or those who are near the phaseout level. A professor from Georgetown University recently found that the Medicaid expansion was responsible for reducing labor force participation rate by 1.5-3% (Tomas, 2016). And let's not forget the 10 million who will get letters in the mail about how their premiums are going to go up or how their current coverage will discontinue because their current provider is dropping out of the Obamacare exchanges. Unless we get a particularly Republican government in power, this travesty is not going to go anywhere for at least a few years. The two most probable options are to raise taxes to pay for the subsidies or increase the individual mandate penalty. Neither option would solve the fact that Obamacare is financially insolvent. Repealing and replacing Obamacare would be the best path to get us out of this rut. Since we are not going to get that anytime soon, all the American people get is higher taxes and greater socialization of healthcare because "surprise, surprise," the Democrats were unable to deliver the dream of offering middle-class at low prices. Just goes to show what sort of misnomer the "Affordable" Care Act can really be.

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