April 5, 2013

Estimated ObamaCare Individual Plan Premium Increases: Ohio Is Number One

Filed under: Economy,Health Care,Taxes & Government — Tom @ 11:59 pm

And that’s no cause for joy.

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This column went up under a different title at Watchdog.org after some editing on Thursday.

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In Ohio, “We’re Number One.” But in this case, it stinks.

Usually, it’s really nice to be number one in something. The Ohio State Buckeyes, who lost badly to Florida in the 2007 BCS Championship Game, certainly would have preferred winning that game and ending the year as intercollegiate football’s national champions. Ditto the basketball Buckeyes of 2006-2007, who also lost to Florida in that sport’s national championship game just four months later.

But being number one in a recently released report from the Society of Actuaries about the projected impact of ObamaCare on the individual insurance market is not a good thing. That’s because the SOA’s list has Ohio, with a breathtaking 80.9 percent, leading all states in expected individual plan premium increases between now and 2017.

Only Wisconsin, at 80 percent, was close to the Buckeye State’s expected increase. While the SOA expects a few states to experience decreases, the anticipated average increase across the entire nation is 32 percent.

What was that ObamaCare’s proponents were saying about “bending the cost curve“?

The SOA’s detailed report (large PDF) shows that Ohio will move from being the second-least expensive market for individual plans, with a current average of $223 per month, to a middle of the pack $403.

Why? First, the number of those looking for individual plans will increase, partially because many employers will drop their employee coverage, and partially because many of the formerly uninsured and those currently in state and federal high-risk pools will seek out individual coverage. If Governor John Kasich gets his way and Ohio expands its Medicaid coverage to families earning up to 138% of the federal poverty line, the SOA anticipates that enrollment in individual plans will increase from its current level of 415,000 to 804,000. The actuaries estimate that if legislators resisting Kasich’s arm-twisting prevail, enrollment will instead reach 1 million.

Well, increases in enrollment won’t necessarily drive premium increases, will they? Oh yes they will, at least in most states. SOA’s report chose to present in detail what would happen in Wisconsin. It’s clear that the same factors at work in the Badger State will produce Ohio’s even more astronomical cost increases.

The Wisconsin model shows that new individual market entrants who get into the pool with those who currently have such coverage will have far greater “morbidity.” In plain English, that means they will be far more costly to cover. Those who come in from employers large and small who terminated their plans will do so because their companies’ cost experience was so high that it made more sense for those firms to abandon health care coverage and, where applicable, simply pay ObamaCare’s mandated relatively small fines for doing so. SOA’s Wisconsin model shows the average monthly cost of someone moving from an employer plan will be $846, with, perhaps surprisingly, the highest-cost new entrants, at $1,061 per month, coming from large employers. Other more costly individuals who get into the pool will come from the aforementioned individual state and federal high-risk pools, and to a lesser extent from Medicaid.

So given what most states are facing, why does SOA estimate that average costs will go down in Massachusetts, New Jersey, New York, Rhode Island, and Vermont? Those five states currently have the highest individual plan premium structures, ranging from $481 per month in New Jersey to a ridiculous $619 per month in New York, and have smaller portions of residents who are uninsured. The effect of ObamaCare’s individual mandate, which forces lower-cost younger people into buying inordinately expensive coverage for themselves, will be to lower overall costs to levels that will still be much higher than the estimated national average of $413 if all states choose to expand their Medicaid programs as Washington wishes.

Oh, and one more thing, lest anyone in any state get too comfortable: Those who are attempting to poke holes in SOA’s work, which only dealt with anticipated costs and justifiably ignored ObamaCare’s Rube Goldberg subsidy structure, fail to understand that it was quite conservative in its cost increase estimates, because it “does not include an increase in utilization due to pent up demand” on the part of those who leave the ranks of the uninsured, or who move from catastrophic plans to more comprehensive ones.

Based on the experience of other nations and to a lesser extent certain U.S. states which have established government-controlled, top-down health care regimes, I don’t think the question is whether or not there will be an increase in average utilization. Instead, it’s whether the increase will be dramatic, or explosive.

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