ObamaCare Is Raising Insurance Costs

June 7, 2013

California and Oregon recently announced the premiums for the health plans that will be offered through their ObamaCare insurance exchanges in 2014. Supporters of the law are ecstatic. KQED, northern California's largest public radio station, reported that "experts had warned of 'rate shock.' That has not happened." A closer examination of these health plans reveals a less rosy picture. The premiums for the policies that will be offered on the states' exchanges are much higher than analogous plans being sold today, says Daniel P. Kessler, a senior fellow at the Hoover Institution.

  • One of the most important features of any health plan is its "network" (the group of doctors and hospitals that agree to serve the plan's enrollees).
  • Although the California and Oregon networks are not final, there are indications they will be narrow.
  • Even after the networks are made public, it will still be difficult to precisely determine their breadth.
  • That's because a physician who participates in a network does not have to accept an unlimited number of patients enrolled in the plan.

Determining whether premiums for exchange plans are higher or lower than premiums of currently available plans is difficult because the two types of plans are not always directly comparable. However, one firm's exchange plans can be evaluated against its current product line: Kaiser Permanente.

  • A 25-year-old male who lives in San Francisco can purchase a "California 40/4000" policy from Kaiser today that has a $40 copayment for office visits after a $4,000 deductible, with a $5,600 out-of-pocket maximum, for $140 per month.
  • Kaiser's most comparable exchange policy -- a "bronze" plan with the minimum benefits and the highest out-of-pocket costs -- has a $5,000 deductible with a $6,400 out-of-pocket maximum, although it allows three office visits per year that are exempt from the deductible. It costs $227, 62 percent more than its current comparable plan, the California 40/4000.
  • Oregon's exchange policies are about the same. Today, a 25-year-old male who lives in Portland can purchase an "Oregon KP 2000/20%/HSA/Rx" policy from Kaiser that has 20 percent copayments, a $2,000 deductible and a $5,000 out-of-pocket maximum. It costs $129 per month.
  • The most comparable exchange plan, a "silver" plan, has 25 percent copayments, a $1,750 deductible, and a $5,000 out-of-pocket maximum. It costs $229 per month -- 78 percent more.

Source: Daniel P. Kessler, "ObamaCare Is Raising Insurance Costs," Wall Street Journal, June 3, 2013.

 

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