ObamaCare’s Unlimited-Coverage Mandates Will Increase Some Premiums by 7 Percent (or More)

Among the many ways ObamaCare will increase the cost of health insurance, it will require all Americans to purchase unlimited annual and lifetime coverage.  The latter requirement takes effect this September.  The former will require consumers with non-grandfathered health plans (i.e., about half of the market) to purchase coverage with an annual limit on claims of no less than $2 million by 2014, and unlimited annual coverage thereafter.

In interim final regulations and a “fact sheet” released this week, the Obama administration claims that the mandate to purchase unlimited annual coverage will increase the cost of employment-based and individually purchased coverage by an average of about 0.1 percent.  That average glosses over the fact that these mandates will have zero effect on consumers who already purchase the required coverage.  Consumers who are actually affected by the mandates will see larger premium increases.

For example, the regulations indicate that the phased-in mandate to purchase unlimited annual coverage will increase premiums for the 18 million Americans affected by a weighted average of 0.15-0.18 percent.  Even that weighted average hides the fact that this mandate will cause premiums to rise as much as 6.6 percent for 278,000 Americans.  This mandate will increase premiums by even more – and for more people – once it is fully implemented.  But the administration did not include an estimate of the premium impact beyond 2014.

The Obama administration also estimates that the mandate to purchase unlimited lifetime coverage, when spread across all insured workers, will increase premiums by about 0.5 percent.  Yet that requirement would not affect the 40 percent of insured workers who already purchase unlimited lifetime coverage.  When spread across the 93.6 million affected workers, the average premium increase rises to 0.8 percent.  The increase will be greater than that for the 26.5 million workers with lifetime coverage limits at or below $2 million, and greatest for the 1.5 million workers with limits at or below $1 million.  But the administration offers no estimates for these workers.

Spread across the entire individual market, the unlimited-lifetime-coverage mandate would increase premiums by an average of 0.75 percent, according to the administration.  But since the mandate won’t affect 11 percent of that market, the average impact on the 8.7 million people affected will also be 0.8 percent.  Again, the 300,000 consumers in that market with lifetime limits at or below $2 million will face larger premium increases.  And again, the administration provides no estimates specific to these consumers. Which is a shame, because – aside from the uninsured – it is these consumers on whom ObamaCare will place the greatest burdens.

All told, ObamaCare’s unlimited-coverage mandates will increase the premiums of affected consumers by an average of about 1 percent, and as much as 7 percent for some consumers.  Or maybe more: the administration acknowledges that a “paucity of data” about the impact of these mandates means that there is “tremendous,” “substantial,” and “considerable” uncertainty about the mandates’ costs.