An MIT economist says that past increases in government-provided insurance have raised health costs far more than expected.
The Milliman consulting and actuarial firm discusses how an ineffective individual mandate — one that leads many people to defy the requirement that they buy insurance — combined with a mandate that insurers cover all comers without charging any additional premiums for those with preexisting conditions, would likely raise health insurance premiums dramatically.
As this chart visually demonstrates, the Congressional Budget Office projects that the total costs of the Senate health-care bill, which eventually became law (in tandem with the Reconciliation Act), are about $2.5 trillion — more than double the tally that the Democrats cite.
In perhaps the most authoritative study to date on ObamaCare’s likely impact on insurance premiums, the Oliver Wyman consulting firm spent eight months developing a model to gauge the legislation’s effects, drawing on a database of actual insurance information for nearly 6 million people. The firm’s analysis of the Senate bill (which, in connection with the Reconciliation Act, became law) concludes that its weak individual mandate wouldn’t coax high participation among younger and healthier people; that its other mandates (requiring more expensive coverage and not allowing insurers to charge applicants based on the likely costs of their care) would encourage high participation among older and less-healthy people; that adverse selection would result; and that premiums would therefore rise dramatically. Within five years, the average family’s insurance premiums would be $3,341 higher with ObamaCare than without it, the average individual’s premiums would be $1,576 higher, and overall insurance costs would be 54 percent higher — above and beyond the impact of medical inflation.
As this slide-show depicts, subsidies provided through ObamaCare for lower- and middle-class workers who receive health-care through the government-run exchanges would be much greater than the tax-breaks provided to lower- or middle-class workers who receive employer-provided health insurance. This would lead employers to drop these workers’ insurance and let them be covered through the exchanges, at taxpayer expense. Thus, ObamaCare is not only a new health-care system but a new welfare and tax system, which would lead to the segregation of the labor market: upper-income workers would continue to get insurance through their employers; lower- and middle-class workers would eventually get it through the government.
WellPoint estimates that, under ObamaCare, insurance premiums for younger, healthier people would more than double in the individual markets in California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Ohio, Virginia, and Wisconsin.
Richard Epstein examines Supreme Court precedent in rate-making cases and concludes that, even apart from the question of whether the health-care overhaul is an unconstitutional extension of Congress’s power to regulate interstate commerce, it is unconstitutional under the takings and due process clauses of the Fifth Amendment. According to Epstein, the Supreme Court’s “basic constitutional requirement” in this realm is that “any firm in a regulated market must be allowed to recover a risk-adjusted competitive rate of return.” Because the Reid bill (which, in connection with the Reconciliation Act, became law) sharply limits health insurers’ ability to raise premiums or deny applicants, it “emphatically fails this test” — as there is a “near mathematical certainty” that it would drive insurers out of the individual and small-group markets.
ObamaCare would impose higher implicit marginal tax-rates on lower- and middle-class workers than on millionaires, thereby penalizing work and providing a barrier to upward mobility. Under the Senate bill (which, along with the Reconciliation Act, became law) those making $14,560, who make another $560, would be $200 worse off than if they hadn’t made that extra money at all; those making $12,000 would pay implicit marginal tax-rates of 66 percent on the next $5,000 earned; and people who make between $30,000 and $100,000 would pay implicit marginal tax rates of over 50 percent. Disincentives for work would be coupled with rewards for dropping insurance, as those who drop insurance, picking it up again only when sick or injured, could save as much as $8,000 a year.
Under Obamacare, getting married would cause couples to lose large amounts in insurance exchange subsidies. Depending on their ages and incomes, married couples would lose up to three-quarters of their exchange subsidies and up $10,425 a year that would be available to couples who simply live together.
The actual 10-year costs of Obamacare are about two-and-a-half times the tally that the Democrats are claiming.