Obamacare’s Rising Premiums Could Spell Big Political Trouble for Democrats

President Obama’s signature policy achievement, now known as Obamacare, has long been a political sore spot for Democrats. Voter antipathy toward the law played a large part in the substantial midterm losses Democrats suffered in 2010 and 2014. The combination of a trillion dollar price-tag, broken promises and upward pressure on health insurance prices combined to make a potent anti-Democrat brew. But recently the anti-Obamacare momentum seems to have stalled, the result of apparent fatigue on the part of opponents and resignation and/or confusion on the part of voters.

Democrats have long predicted that voters’ opposition to the law would soften.

“As that bill is enacted, it’s going to become more and more popular. So I predict . . . by November those who voted for healthcarewill find it an asset, those who voted against it will find it a liability,” Sen. Charles Schumer said on Meet the Press in 2010

“I think that [the law] over time is going to become more popular,” David Axelrod, then a senior advisor to President Obama, predicted the same year.

Similarly, then-Senate Majority Leader Harry Reid predicted it would be a “net positive” in 2012, then-House Minority Leader Nancy Pelosi called it “a winner,” and Rep. Debbie Wasserman Schultz, the chairwoman of the Democratic National Committee, said that “Democrats will run on the Affordable Care Act and win.”

None of that panned out. At the height of Obamacare’s unpopularity, which happened as late as July of 2014, 53 percent of Americans had an unfavorable view of the law and 37 percent had a favorable view. That played into Democrats’ loss of 69 House seats and 13 Senate seats since 2008, both of which put them into the minority.

But public opinion has shifted substantially in recent months. The most current Kaiser Family Foundation poll finds that adults are now split, with 42 percent have a favorable opinion and 42 percent having an unfavorable one. So will Democrats’ predictions that Obamacare will tilt in their political favor finally pan out?

We can safely say it won’t happen this year. Megan McArdle writes for Bloomberg View:

If you buy insurance on the exchanges, your premiums are probably going up. How much will depend on what state you live in. New data released by the government indicate that the lucky citizens of four states will see the price of their two cheapest options fall (by significant amounts, in Indiana and Mississippi).  On the other hand, citizens of 19 states, almost 3 million people, will see increases of more than 10 percent, and four states will see increases of more than 25 percent. On average, the premiums of the benchmark plans (the second-lowest silver plan offered in the market) are set to rise about 7.5 percent.

Even the 7.5 percent increase that McArdle mentions doesn’t fully get at just how fast prices are increasing in the marketplace. That’s because insurers who raised their prices the most are unlikely to remain “benchmark” plans, which are defined as the second cheapest Silver plans. In other words, for the 7.5 percent average to hold true, many people will have to switch their plans, which can also lead to disgruntled Americans who may no longer be able to go to their preferred doctor.

The reason for the increases is simple: Insurers were forced to guess at what their “risk pool” – their portfolio of customers – would look like. As it turns out, it was older, sicker, and thus more expensive to insure than most insurers thought. Part of the problem is that people between the ages of 18 and 34 haven’t signed up in nearly the numbers that actuaries anticipated. And why should they? After all, the law purposefully inflated prices for younger, healthier adults in order to cross-subsidize everyone else. They overcharged a generation that is poorer on average than others in order to make the politics and the numbers work.

The Wall Street Journal’s editorial board explains just how big of a problem this is for the law:

The law’s failure to appeal to the young and rising middle class is already cascading through the insurance markets. Researchers at the Robert Wood Johnson Foundation and Urban Institute recently published a remarkable study of the industry barometer called medical loss ratios, or MLRs, and the pressure is building fast.

MLRs measure the share of premium revenue that flows to reimbursing medical claims. ObamaCare sets an MLR floor of 80% for patient care, with one-fifth left over for overhead like administration and profits, and the pre-ObamaCare 2010-13 historical trend for the individual market ranged from 79% to 86%.

The researchers found that in 2014—the first full year of claims experience in ObamaCare—average MLRs across all health plans sold on 16 state exchanges roamed from 90% to 99%. Average MLRs in 11 states climbed to 100% or more, reaching as high as 121% in Massachusetts. A business can’t stay solvent for long spending $1.21 for every $1 that comes in.

Spending more than you take in is a pretty good way to go out of business, which is why you see insurers rushing to raise their rates. They’re not doing it to rake in profits, they’re doing it to break even. And until the facts on the ground change, insurance costs will only keep rising, in many cases even faster than health care inflation generally.

So good luck Democrats. You’re going to need it.