Upon Further Review.....We Were Right

Today's "My Two Cents" was originally going to feature yours truly admitting that perhaps those of us guaranteeing skyrocketing health insurance premiums next year under the Affordable Care Act were wrong.  That admission was going to be based on a Forbes article by Rick Ungar that was Tweeted by thousands and sent directly to my email from several sources (usually with the heading "You Were Wrong!!") that the health care exchanges in California and Oregon were going to offer insurance plans with premiums at the far LOW end of all the predictions.

I was all set to write off the low rates as nothing more than "teasers" offered by the insurance companies to draw all of these new customers in with a super-low, first-year rate--which would get jacked up once they get you in their system--because they know that you won't go through the trouble of comparing rates every year, and that changing anything nowadays is a real hassle.  When was the last time you actually called around for multiple quotes on your car or home insurance?  You probably just get the bill every six months and send in the check.  I was also readying my arguments that the low premiums will be economically impossible once those insurers start handling all of the claims from their new customers--many of whom will be those that employer-based health plans refused to cover due to exceptional expense or risk.

But then another Forbes article hit the internet last night, and order was restored to the Universe.  Avik Roy picked up on the fact that the State of California in its gleeful press release compared the rates paid by people enrolled in existing health plans provided by employers to those offered by the insurers in the exchanges--NOT the premiums currently paid by those buying insurance on their own (as those in the exchanges will actually be doing).  It was a classic apples to oranges comparison.  Once Roy compared the apples to the apples, he found that rates will actually increase for most customers by 64 to 146% next year.  Let's give some credit to folks at Covered California for at least trying to put lipstick on the pig.

One thing that should be kept in mind in discussing whatever percentage of premium increase you want to take as the gospel truth is that the rates quoted by companies in the exchange is NOT what people will actually be paying.  They will be paying less--more than likely substantially less than that all thanks to the FEDERAL SUBSIDY!!  Yes, Joe Taxpayer will be the one covering the vast majority of the premium increases that exchange customers will "experience".  But we should have no problem that right?  Unless the other Forbes article on the expected DOUBLING of premiums in employer-provided insurance plans turns out to be wrong.  Although I doubt it.