Tag: health premiums

The Hidden Costs of ObamaCare’s Millennial Mandate

Guests mingle during the second annual Future of America gala at the House of Sweden in Washington, D.C., U.S., on Friday, Oct. 3, 2014. "Our guests are not people that are traditionally struggling with unemployment," said David Pattinson, founder of David Pattinson's American Future, a Washington-based nonprofit, which aims to get the millennial generation more fully employed. Photographer: T.J. Kirkpatrick/Bloomberg

There is a current running through the ObamaCare debate that goes something like this:

Every other advanced country provides health insurance to all its citizens for a fraction of what Americans spend on health care. ObamaCare emulates what those countries do. Anyone who complains about ObamaCare increasing premiums or imposing other costs is therefore a right-wing nut who doesn’t understand that universal coverage results in lower spending, not higher spending.

This line of reasoning, so to speak, leads supporters to believe ObamaCare is a free lunch. Their ignorance is not accidental. MIT health economist and ObamaCare architect Jonathan Gruber helpfully explained some years ago that he and his co-architects deliberately designed the law to hide its costs and make the benefits seem like a free lunch.

ObamaCare’s “Millennial mandate”—the requirement that employers who offer health coverage for employees’ dependents continue to offer such coverage until the dependents turn 26 years old—is one of those supposed free lunches. This mandate’s benefits unquestionably come at a cost. Expanding health insurance coverage among adults age 19-26 leads them to consume more medical care. When those people file insurance claims, health-insurance premiums rise. Yet ObamaCare does an amazing job of hiding those costs from voters.

Does ObamaCare impose a special tax that the IRS collects to pay for that extra coverage? No. That would be far too transparent. The cost just gets added to your premiums.

Does ObamaCare require employers to include a line-item on your premium payments, to show you how much this additional coverage is costing you? Absolutely not. That, too, would make the costs dangerously noticeable. The additional cost just gets thrown onto the pile, hidden among the costs of all the other mandated coverage you don’t want, and the coverage you actually do want.

Maybe workers see their premiums rising, and are merely ignorant of the fact that the Millennial mandate is part of the reason? Nope. ObamaCare hides the cost further still. Explaining how requires a little bit of labor economics.

The ACA’s Sixth Anniversary Is A Wake, Not A Birthday Party

Six years ago today, President Barack Obama gave the Affordable Care Act his signature. There is no sense in marking the ACA’s anniversary, however, because the ACA is no longer the law.

Realizing the law he signed was unconstitutional and unworkable. President Obama and the Supreme Court have since made a series of dramatic revisions that effectively replaced the ACA with something we now call “ObamaCare.”

ObamaCare–not the ACA–is the law under which Americans now live.

  • Under ObamaCare, the Supreme Court used Congress’ taxing power–a power Congress declined to use under the ACA–to force Americans to purchase government-approved health-insurance plans.
  • Under ObamaCare, the Supreme Court severed the connection between the (ineffective) Medicaid expansion Congress enacted and the rest of the Medicaid program–a bifurcation Congress never contemplated, much less intended.
  • Under ObamaCare, the president imposed and the Supreme Court green-lighted taxes on nearly 100 million Americans whom Congress clearly exempted.
  • ObamaCare gives members of Congress a special exemption from the ACA. (It’s good to be the king.)
  • Under ObamaCare, the president can tax and subsidize whom he pleases. Even if Congress didn’t provide the funding. Even if Congress says he can’t.

The ACA, in effect, is dead. ObamaCare is the law governing Americans’ health care–even if we don’t know what that law is from one day to the next. The ACA had legitimacy. No legislature ever approved ObamaCare. It has no legitimacy.

Unfortunately, ObamaCare doesn’t work much better than the ACA. ObamaCare is still causing Americans to lose their health plans. As one voter pointedly reminded Hillary Clinton, ObamaCare is still driving premiums higher. It is still causing their coverage to erode.

If you want to celebrate something on March 23, celebrate the anniversary of the last time Democrats put the legislative process and political legitimacy ahead of their ideological goal of universal coverage

A Less-Than-Rigorous ObamaCare Fact Check

Kaiser Health News and The Washington Post have posted a piece titled “Campaign Claims: Health Law Myths And Facts,” which examines these common criticisms of ObamaCare:

  1. “The law amounts to a ‘government takeover’ of health insurance and health care.” The article’s conclusion: “it falls far short of a government takeover.”  That conclusion rests largely on the fact that “Medical care will be provided by private hospitals and doctors.”  But as I explain in this study, “it is irrelevant whether we describe medical resources (e.g., hospitals, employees) as ‘public’ or ‘private.’ What matters—what determines real as opposed to nominal ownership—is who controls the resources.”  Obama health official Jeanne Lambrew acknowledges as much: “the government role in socialized medicine systems [can include] public financing of private insurance and providers.”  And as I concluded in this study, “Compulsory ‘private’ health insurance would give government as much control over the nation’s health care sector as a compulsory government program.”  I wonder if the article’s authors spoke to anyone who raised this perspective.
  2. “The law will gut Medicare by cutting more than $500 billion from the program over 10 years; seniors will lose benefits and won’t be able to keep their doctors.” Conclusion: “The gutting of Medicare claim goes too far…What this means for seniors is a bit murkier.”  True enough: even if ObamaCare’s implausible Medicare cuts take effect, they clearly would not “gut” Medicare.  (BTW, click here or here for a politically sustainable way to restrain Medicare spending.)  The authors also note that Medicare Advantage enrollees would lose some benefits.  But when the article claims that ObamaCare will not eliminate any “basic” Medicare benefits, it neglects to mention that Medicare’s chief actuary estimates that the law could cause 15 percent of hospitals, home health agencies, and other providers to stop accepting Medicare patients.  If your hospital no longer accepts your Medicare coverage, is that not a benefit cut?
  3. “The law will cause 87 million Americans to lose their current coverage.” Conclusion: “How true is it?  Partly, at best. But evidence is limited.”  The House Republicans’ Pledge to America claims that ObamaCare “will force some 87 million Americans to drop their current coverage.”  The word drop is a bit strong; it’s more accurate to say that many Americans will have to switch to another plan, even if it’s just a more-expensive version of their current plan.   Indeed, HHS estimates that 69 percent of employer plans will have to do so by 2013.  Yet some people are being dropped from their current health insurance.  When Principal Financial Group leaves the market, its nearly 1 million enrollees will lose their current health plan.  Industry analysts expect more such departures.  Why no mention of that?
  4. “The law is driving up costs and premiums and will continue to do so over the next several years.” Conclusion: “There may be very small increases initially.”  Here the article is kinder to ObamaCare than even ObamaCare’s supporters are.  May be?  Even ObamaCare’s supporters admit the law will increase premiums for some people.  Very small increases?   Even HHS estimates that the requirement that consumers purchase unlimited annual coverage could increase premiums for some by 7 percent.  (There’s no mention of Blue Cross and Blue Shield of Connecticut, which says ObamaCare will increase premiums for some of its customers by nearly 30 percent.)  And why only initially?  Do the authors expect that there will be no premium increases when HHS eventually stops issuing waivers?  Or when HHS sets a minimum level of coverage that Americans must purchase in 2014?  Or that ObamaCare has solved the tragedy of the commons?  For support, the article claims, “the Obama administration, citing [various] estimates…says the law isn’t responsible for any increase greater than 1 to 2 percent.”  Actually, that’s not what the administration says – it’s what they want you to think they’re saying.  Read this letter and other administration utterances carefully.  They say “1-2 percent” when speaking of ObamaCare’s average effect on premiums, and “minimal” when speaking of anything other than the average effect.   (The administration’s threshold for “minimal” is presumably somewhere north of 7 percent.)
  5. “The law’s expansion of Medicaid will put massive pressure on state budgets at a time when many are already in crisis.” Conclusion: “The impact will probably be small, but it’s hard to say for sure.”  The article only cites figures generated by supporters of the law, who say the impact will be small.  Why just mention that there are figures from the other side?  Why not include them?
  6. “The new law uses tax dollars to pay for abortions.” Conclusion: “Open to interpretation.”  This was a missed opportunity to examine two crucial questions.  First, would federal insurance subsidies truly be segregated from the separate premiums that consumers in ObamaCare’s exchanges would have to pay for elective-abortion coverage?  Or would this just be an accounting gimmick?  What would happen, for example, if there were more abortions than an insurer anticipated, and those separate premiums proved insufficient to pay for them?  How would you keep one side of the ledger from spilling over into the other?  Second, would the availability of federal subsidies for health insurance plans that make elective-abortion coverage available as a rider increase enrollment in those plans?  If so, wouldn’t that implicitly subsidize elective abortions?  Rather than examine those questions, the article punted.

On the whole, I’d say this fact check may have been very kind to the new law.

KFF/HRET Survey, Part III: Employers Can’t Shift to Workers a Cost that Workers Already Bear

In a previous post, I promised to address the negative spin that the Kaiser Family Foundation put on its annual Employer Health Benefits Survey, released this month.  I do so in an op-ed that ran today at the Daily Caller.  An excerpt:

The Kaiser Family Foundation recently issued its annual survey of employer-sponsored health benefitsdeclaring: “Family Health Premiums Rise 3 Percent to $13,770 in 2010, But Workers’ Share Jumps 14 Percent as Firms Shift Cost Burden.” That’s half-right — but the other half perpetuates a myth about employee health benefits that stands in the way of real health care reform….

[Y]ou pay the full cost of your health benefits: partly through an explicit $4,000 premium and partly because your wages are $9,770 lower than they otherwise would be.

Kaiser therefore claims the impossible when it says that firms are shifting costs to workers.  Employers cannot shift to workers a cost that workers already bear. Yet this year, as in past years, the Associated PressBloombergCNNKaiser Health NewsThe Los Angeles TimesThe New York TimesNPRThe Wall Street Journal, and The Washington Post uncritically repeated the cost-shifting myth.

The bolded sentence is Cannon’s Second Rule of Economic Literacy.  (Click here for the first rule.)

I have also collected a series of excerpts from past Kaiser Family Foundation surveys showing this is a persistent issue.  Here are a few:

1998: “Workers in small firms bear a much larger share of the financial burden for health benefits than employees of larger firms.”

2005: “The average worker paid $2,713 toward premiums for family coverage in 2005 or 26% of the total health premium.”

2007: “Annual Premiums for Family Coverage Now Average $12,106, With Workers Paying $3,281”

The folks at the Kaiser Family Foundation were exceedingly gracious when I approached them to discuss this issue.

‘Health Status Insurance’ Provides Real Alternative to Universal Care

So screams the headline of John Cochrane’s oped in today’s Investor’s Business Daily.  An excerpt:

Markets can provide long-term, secure health insurance while enhancing choice and competition. Given the chance, they will…

This is not pie in the sky. The market for individual health insurance is already innovating to provide better long-term insurance. Well before it was required by law, insurance companies started offering “guaranteed renewable” policies.

Once you buy in, you have the right to continue coverage even if you get sick, and your premiums do not rise if you get sick.

UnitedHealth Group recently announced a product that gives customers the right to buy medical insurance in the future, at a premium that depends only on their current health status.

For a small premium, you can protect yourself against the risk that your health premiums will escalate. This is only a small step away from full health-status insurance.

The oped is based on Cochrane’s recent Cato policy analysis, “Health-Status Insurance: How Markets Can Provide Health Security.”

You can also hear Cochrane and Johns Hopkins University health economist Brad Herring discussing health-status insurance at this Cato policy forum, held today.