Brookings: The Unaffordable Care Act Lowered Individual Premiums

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Significant premium hikes in the Obamacare exchanges have been in the news lately. A Dallas Morning News article recently proclaimed, ‘When your health insurance is bigger than the mortgage, something’s wrong’. Indeed, insurers are charging premiums that about the size of a car payment on a late model used car. For a family the premiums are sometimes as high as a mortgage payment. Yet, insurers are hemorrhaging money – suffering losses to the tune of billions since Obamacare went into effect.

But apparently my perception is dead wrong. A pair of Brookings scholars argue individual premiums are actually lower than they would have been absent the Affordable Care Act. What???

That’s the argument a couple of Brookings scholars making. The Brookings Institution is a centrist to slightly left-of-center think tank that is well respected for not letting politics cloud its analysis. At least, Brookings didn’t allow politics to influence its research until now. The following is an excerpt by the Brookings scholars that appeared in the Health Affairs blog recently.  Here’s what they had to say about Obamacare in California:

Covered California, that state’s marketplace, just announced premium increases averaging 13.2 percent. But even if premiums increase by the 10 or 15 percent overall that some are predicting for 2017, they will still be far lower than premiums otherwise would have been in the absence of the law.

2014 Premiums In the ACA Marketplaces Were 10-21 Percent Lower Than 2013 Individual Market Premiums (emphasis theirs).

Writing in the Apothecary blog in Forbes, Mercatus Center economist, Brian Blase does a smack down with the Brookings scholars explaining why their results are inaccurate. Dr. Blase methodically builds his argument and carefully explains his reasoning as only an academic researcher can. His desire to present his findings in an understated, unbiased way is hardly necessary. There’s an old saying in literature, “a picture is worth a thousand words.” Blase uses a graphic that shows average monthly per member costs going back to 2008. See if you agree with Brookings that individual premiums after the ACA are lower than they would otherwise have been. (Click on graphic to enlarge).

The way I read the graph below is the average per member per month cost in the individual market was about $200 in March 2008. That sounds about right. When people have to pay their own insurance (blue line), they tend to shop for high-deductible plans. By contrast, large group plans (red line) are considerable higher because benefits are richer and workers cannot be turned down due to pre-existing conditions.

Notice the monthly cost of individual plans did not begin to skyrocket until the fall of 2013. That was about the time insurers had to begin gearing up for the highly regulated plans under Obamacare. By December 2013 some of those more costly plans were beginning to be reflected in the average cost of premiums. From December 2013 to June of 2014, the monthly cost increased from about $275 to $390.  That’s an increase of about $1,380 a year that Brookings doesn’t believe actually happened.  by September of 2014 the cost was almost $420 per month. By December 2015, the monthly cost of an individual policy was about $520.  In about 7.5 years, individual premiums rose from about $200 to more than $500. But Brookings thinks Obamacare actually lowered premiums.

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