A new report claims that Obamacare will cause substantial rate hikes for individuals and small businesses. But its predictions are based off of selective information — and should be taken with several grains of salt.
Milliman, a health care consulting firm with deep ties to the insurance industry, administered the study in question. The report examines Obamacare’s potential effect on premiums in six states’ Obamacare marketplaces and concludes that five of them will experience increases as high as 60 percent, since the law requires participating plans to offer a base level of benefits that exceeds what many individual plans currently offer. New Jersey, which already has stricter standards for insurance plans, would see a significant reduction in premiums, according to the report.
But those top line numbers don’t take the law’s federal insurance subsidies into account. As Jim O’Connor, a top executive with Milliman, admitted during a panel discussion on the study Thursday, “Those [subsidies] could be substantial for some people. For those who are going to be getting federal subsidies, those subsidies can be quite significant if you’re really poor. [People making] under 250 percent of poverty are going to see, more than likely, a big reduction compared with coverage today.”
Furthermore, the report’s projections are based on a very shallow information pool. During a question and answer session with the panelists, one audience member asked O’Connor if Milliman had solicited information on 2014 premiums from every eligible insurer in the states it examined. “We didn’t look at every carrier in the state,” conceded O’Connor.
In fact, Milliman only received data from major insurers such as BlueCross BlueShield. These are the same types of insurers that have requested outlandish premium rate hikes despite decades of soaring profits.
Milliman’s earlier — and largely inaccurate — work in this very field illustrates the dangers of such a selective approach. Covered California, the agency tasked with maintaining California’s Obamacare marketplace, commissioned firm to do a similar study for 2014 Golden State insurance plans. Milliman’s report was dour, predicting rate increases of at least 50 percent over the current average.
But those projections were completely off the mark. Covered California recently released insurers’ opening bids for the marketplace — and the numbers are great news for consumers. Whereas Milliman predicted that average mid-level “Silver” plan would cost $450 a month, the third-lowest average Silver plan for a 40-year-old ended up being $299 per month. That’s a difference of over $1,800 per year. Milliman’s projected cost for Bronze-level plans were similarly off base.
That’s what happens when insurers are forced to compete — which is precisely what the health law forces them to do. Although congressional Republicans and large insurance companies have been fear-mongering over imminent Obamacare “rate shock,” initial numbers from states such as California, Oregon, Washington, and Vermont have proved them wrong — and highlighted the fact that, given the correct regulatory framework and marketplace conditions, many insurers are actively trying to do right by consumers and offering competitive rates for the millions of Americans who will gain health coverage beginning next year.
Another panelist, former Rep. Earl Pomeroy (D-ND), summed it up best. “I don’t think we had a functioning health insurance system [before]… That was a system in which we were all losers.”