If It Sounds Too Good to Be True… Obamacare Premium Shock May Lead Administration to Reach Beyond Legal Authority

January 15, 2013

WASHINGTON, DC - We are all familiar with the age-old saying, “if something sounds too good to be true, it probably is.” Surely, the notion of more health care spending for a lower cost sounds a little too good, so it’s no surprise that this central premise of Obamcare is being proven not to be true – not even close. In fact, many health care experts and insurers are concerned that, far from reducing costs, the law will lead to huge premium increases across the country. 

Politico yesterday reported that the mandate included in the health care law may not attract enough healthy young people to cover the extraordinary costs of the law's various coverage expansions and prescriptive mandates. The story explains, "The individual mandate penalties will be pretty weak as they are phased in over two years — only $95 when they start in 2014, way less than it costs to buy insurance.  And yet, everyone with pre-existing conditions will have to be accepted for coverage right away."

An opinion piece in The Wall Street Journal offers specific projections of how high the president's health care law may be driving prices in various states.

"States won't experience equal increases in their premiums under ObamaCare. Ironically, citizens in states that have acted responsibly over the years by adhering to standard actuarial principles and limiting the (often politically motivated) mandates will see the biggest increases, because their premiums have typically been the lowest. …

"We compared the average premiums in states that already have ObamaCare-like provisions in their laws and found that consumers in New Jersey, New York and Vermont already pay well over twice what citizens in many other states pay. Consumers in Maine and Massachusetts aren't far behind. Those states will likely see a small increase.

By contrast, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases—somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.

"While ObamaCare won't take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. …”

Opposition to Obamacare’s individual mandate included two key objections: A belief that it is wrong to force Americans to purchase Washington-approved coverage, and an expectation that doing so would not achieve the intended outcome. On its “sounds too good to be true” promise to lower costs, the health care law is panning out just as opponents predicted. To date, premiums have continued to grow and are set to jump dramatically this year.

In the face of rapidly rising premiums, many young and healthy individuals will likely opt to pay the new Obamacare "tax" imposed on individuals who fail to obey the new mandate. After all, the tax will cost far less than buying more expensive health insurance, and individuals can always sign up for coverage in the event they need it. That may be why some in the health care sector are exploring extralegal opportunities to reverse these perverse incentives. Politico reported that health insurance companies “want more incentives — such as a late enrollment fee — to get healthy people to sign up quickly.” However, such a fee, which is not authorized in the law, would be yet another expense for Americans already struggling in a weak economy.

When offered the opportunity to reject this proposal, the administration offered no comment.

"Affordable" Care Act via government mandates? If something sounds too good to be true, it probably is.