In 2019, Obamacare premiums are poised to become even more expensive. New York, Washington state, and Maryland are requesting to raise their rates for the individual market by an average of 24 percent, 19 percent, and 30 percent respectively. Nationwide, the Congressional Budget Office predicts premiums will increase an average of 15 percent for the Obamacare benchmark plan.
But it doesn’t have to be this way.
Earlier this year, we co-authored a study examining how Obamacare regulations raised premiums. We reviewed dozens of prospective and retrospective actuarial analyses of Obamacare’s premium effects on both the state and national levels.
We found that premium increases for Obamacare policies were attributable to a maze of new federal insurance mandates, combined with a flawed subsidy design. That unhappy concoction produced disproportionately older and less healthy insurance pools, requiring insurers to price policies beyond the reach of many families and small businesses.
Our review of dozens of actuarial analyses found that a cluster of popular Obamacare insurance access requirements – specifically those that required insurers to issue policies to all comers, prohibited medical underwriting (i.e., basing premiums on health status) , and required coverage of pre-existing medical conditions – accounted for the largest share of premium increases.
But our study made additional findings, including this: As much as half the increases associated with this complex of regulations could be rolled back if Congress removed certain Obamacare mandates, such as the single risk pool requirement.
We also found that other Obamacare requirements adversely affected premiums. The essential health benefits mandate and the requirement that individual policies provide a minimum actuarial value of 60 percent exerted direct, measurable and substantial effects on premiums.
We further found that regulations requiring insurers to overcharge younger adults had a secondary effect on premiums by producing insurance pools that skew older and sicker.
In short, we found that Congress could make individual health insurance coverage more affordable by exempting states from these requirements.
Last month, a group of conservative policy experts, including us, and grassroots organizations unveiled a proposal that would exempt states from many of the federal requirements that our study found had led to higher premiums. The Health Care Choices proposal would replace Obamacare premium subsidy entitlements and Medicaid expansion with a new program of grants to states. The proposal would reduce premiums and enhance health care choices by allowing states to:
- Eliminate the single risk pool requirement.
Insurers use part of the premiums paid by healthy enrollees to cover the costs of those with more serious medical needs. However, if an insurance plan has too many patients with serious health needs relative to the ones with average medical expenses, that imbalance disproportionately drives up costs and premiums.
Prior to Obamacare’s enactment, states could clearly delineate between the general population, and those with more serious health needs, by using “high-risk pools” to fund the costs of the sickest patients. Most states did. While the general population would stay in one insurance pool, higher-risk patients could go into another, subsidized, insurance pool, which kept premiums for the general population in check. Under that arrangement, everyone could get lower insurance premiums – and coverage that met their needs.
Obamacare eliminated these arrangements by requiring that insurers price coverage on the basis of a single risk pool: everyone in the same pot. That drove up costs for the healthy population, leading many of them to drop their insurance.
Releasing states from the single risk pool requirement, as the Health Care Choices proposal recommends, would free them to adopt policies that would substantially reduce premiums for individual coverage.
- Use a portion of their federal allotments to establish risk-mitigation programs.
The proposal also would require states to use a portion of their allotment to protect those with high medical needs without driving up premiums for people in good health. States would have access to federal funds to help finance risk mitigation efforts like high-risk pools, “invisible high risk pools,” and other premium-cutting arrangements.
Read the full story from The Daily Signal
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