Obamacare’s “Rate Shock” Rears Its Head in California

Late last week Obamacare’s supporters (the few it has left) sent out a universal cheer. Insurance companies in California, a crucial test state for the massive health bill’s implementation, issued rates for the individual market. Conservatives expected a “sticker shock” as prices were driven upwards by community rating, banning underwriting and implementing stringent regulations on minimum benefits, among other things. Liberals were expecting…where they weren’t really expecting anything, they just had their fingers crossed hoping against hope that the news wouldn’t be too terrible.

Then the seemingly amazing happened – the premiums rates appeared to be significantly less expensive than what forecasters, including the Congressional Budget Office, ever predicted. Unsurprisingly, liberals everywhere uncritically applauded.

“The California bids are in . . . ,” writes the New York Times’ Paul Krugman. “And the prices, it turns out, are surprisingly low. A handful of health people may find themselves paying more for coverage, but it looks as if Obamacare’s first year in California is going to be an overwhelmingly positive experience.”

In a press release Covered California, who is running the state’s Obamacare exchange, called the rates “ a home run for consumers in every region of California.” Chad Terhune of the Los Angeles Times was more tepid, saying “California received better-than-expected insurance rates.” And Nancy Pelosi, true to form, thought this was definitive proof that the law was a success, saying in a press release that Californians learned that Obamacare will “deliver on a central promise” and can live “without the fear of higher premiums.”

Unfortunately, everyone was apparently so quick to jump on any seeming bit of good news that they forgot to actually look into whether it was true or not. Surprise, surprise, things weren’t as rosy as Democrats wanted everyone to believe.

The problem rested in a faulty comparison used by the state’s exchange. “The rates submitted to Covered California for the 2014 individual market,” the state’s press release said, “ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions.”

But that comparison is based on next year’s individual market rates versus this year’s small-employer plans. That’s like comparing apples and orangutans. It’s not even in the same phylum.

The better comparison is with this year’s individual market premiums. And when you do that, the whole illusion vanishes faster than Ashley Judd’s political aspirations. Avik Roy writes for Forbes:

“If you’re a 25 year old male non-smoker, buying insurance for yourself, the cheapest plan on Obamacare’s exchanges is the catastrophic plan, which costs an average of $184 a month. (By “average,” I mean the median monthly premium across California’s 19 insurance rating regions.)

The next cheapest plan, the “bronze” comprehensive plan, costs $205 a month. But in 2013, on eHealthInsurance.com the median cost of the five cheapest plans was only $92.

In other words, for the typical 25-year-old male non-smoking Californian, Obamacare will drive premiums up by between 100 and 123 percent.”

Things aren’t any better for a 40-year-old male since, unlike the under 30 set, can’t take advantage of so-called catastrophic plans. Under the figures released by California the median bronze plan will cost $261, whereas the current median plan on eHealthInsurance is $121. That comes to a cool 116 percent rate hike.

And before I get a rash of Obamacare defenders arguing that the rate increases are acceptable because insurance plans will be forced to offer more conference coverage, let me just stop you right there. Lanhee Chen of Bloomberg View crunched some numbers to get a true apples-to-apples comparisons of plans with similar benefit levels and found that Obamacare will lead to a 25-year-old male paying 38 percent to 53 percent more.

Not exactly something you want to cheer about. Something tells me that won’t stop Democrats from trying.