President Obama says there’s no evidence that Obamacare increases insurance premiums

Obama official new“And whenever insurance premiums go up, you’re being told it’s because of Obamacare — even though there’s no evidence that that’s the case.”

—President Barack Obama, May 10, 2013

 

Overview

Perhaps the president misspoke.  The ACA has a number of features that experts agree will raise premium costs.

The Facts

President Obama made his remarks about the ACA in the East room of the White House (bold emphasis added):

 

[T]his is going to be a lot of work.  And obviously, there is still a lot of political bickering over this law.  The same folks who fought tooth and nail four years ago and tried to make political hay out of Obamacare, they’re still telling tall tales about its impact.  Some small businesses are being told their costs are going to go up, even though they’re exempted from the law or they actually stand to benefit from it.  And whenever insurance premiums go up, you’re being told it’s because of Obamacare — even though there’s no evidence that that’s the case.  So right now there are a whole bunch of folks out there, their insurance company decided to jack up rates, and they’re automatically assuming, well, somehow the law had something to do with it.  No, that had to do with a decision the insurance company made.  In some cases, employers may be shifting more costs onto employees because they think that will help their bottom line.  It’s convenient to somehow say, well, it must be the new law.  It’s not the case.

 

Studies find some aspects of the ACA that reduce premiums as well as some that increase premiums.  One obvious increase comes from the ACA’s higher minimum standards for insurance coverage.  Another obvious increase comes from annual fees paid by insurers.

Analyzing the Rhetoric

We have a number of assertions from President Obama about the ACA’s effect on health insurance premiums.

  1. Whenever insurance premiums go up people blame it on Obamacare, but there’s no evidence they’re right.
  2. If premiums go up, people assume that Obamacare had something to do with that.  But those people are wrong.
  3. It’s not the case that if insurance premiums go up then the ACA must have caused it.

Let’s get the third point out of the way quickly.  A rise in insurance premiums does not necessarily mean that the ACA caused the increase.  Insurance premiums may increase for other reasons.  Mr. Obama is correct on that point, but it does nothing to shield from scrutiny his claim that there’s no evidence that the ACA increases health insurance premiums.

Is there evidence that the ACA increases health insurance premiums?

Yes, there’s evidence the ACA increases health insurance premiums.  But the picture, as noted above, is complicated by  other features of the ACA that will exert downward price pressure on premiums, along with some features having the reverse effect.  Further complicating the situation, different age groups will experience different effects on their premiums.  It’s difficult to know whether the net effect of the ACA will increase or decrease insurance premiums.   As the CBO pointed out:

 

All of those considerations serve to emphasize the considerable uncertainty that surrounds any estimate of the impact of any proposal that would make substantial changes in the health insurance or health care sectors, given the size and the complexity of those sectors. That uncertainty applies to the estimated effects of proposals on the federal budget and insurance coverage rates, as well as to their impact on premiums.

 

Still, experts seem to agree on a pair of related predictions for the ACA’s effect on premiums:  The law will tend to decrease premiums in the individual market for older Americans while increasing premiums in that market for young and healthy insurance consumers.  The left-leaning Urban Institute provides a summary of the situation (bold emphasis added):

 

The ACA will significantly reduce the age-related variations in premiums charged to adults and families purchasing the same coverage in the nongroup insurance market. While the ACA will increase costs for young adults and families purchasing such coverage, the out-of pocket implications of this provision have frequently been over-stated. Analysis shows that large majorities of young adults purchasing nongroup insurance today—as well  as those expected to purchase such coverage when the ACA is fully implemented in 2014—will be shielded from the increases brought about by the tighter age rating rules.

 

So non-group market insurance premiums go up for younger consumers.   Actuaries Kurt Giesa and Chris Carlson came up with specific numbers:

 

Our analysis shows that under the ACA, premiums for people aged 21 to 29 with single coverage who are not eligible for premium assistance would increase by 42 percent over premiums absent the ACA. People aged 30 to 39 with single coverage who are not eligible for premium assistance would see an average increase in premiums of 31 percent.

 

Yes, there’s evidence the ACA increases insurance premiums.

The majority receiving a subsidy to help pay for their higher premiums provide additonal evidence of the ACA raising insurance premiums—along with evidence of the ACA’s transfer of wealth from taxpayers to the younger population and then to the older population in the non-group insurance market.

Someone has to pay for the subsidies.  That’s the taxpayer.

Will the ACA result in a net decrease in premiums?  The younger non-group insurance consumer is the wild card, experts say.  If enough of them buy insurance then they will supply the funds needed to pay the medical bills of higher-risk patients.  If younger and healthier people choose to pay penalties instead then there’s less money to pay the medical bills and insurance companies will hike rates to cover the difference.

Will insurance premiums increase on average for the whole American population?

If the ACA works as planned to increase the number of people purchasing health insurance and we count the formerly uninsured as experiencing a hike in the cost of insurance, then insurance premiums will increase on average as a result of the ACA.  But that method misses the meaning that most people probably have in mind regarding increased premiums.  Most people probably have in mind what it costs a person to have the same insurance before and after passage of the law.

Most people have their insurance through a group plan rather than through a non-group plan.  Experts expect few changes in rates for group plans, in part because group plans already largely cover pre-existing conditions.  As a result of the many uncertainties nobody knows for sure whether the average premium will increase or decrease as a result of the ACA, though it will probably decrease.

“And whenever insurance premiums go up, you’re being told it’s because of Obamacare — even though there’s no evidence that that’s the case.”

icon False

We can and should evaluate President Obama’s statement without any special consideration of the average change in insurance premiums resulting from the ACA.  He says “whenever” premiums go up we are told Obamacare is responsible despite the lack of evidence.  Higher premiums for younger and healthier people stemming from the ACA contradict the president’s claim.

“they’re automatically assuming, well, somehow the law had something to do with it.”

True Statement Booby Trap FallacyIcon texas sharpshooter

Doubtless some people are unfairly blaming increased health insurance premiums on the ACA, and the president provided a specific example that fits his claim.  In the context of the president’s earlier claim, however, the example creates a logical trap leading to a form of the Texas sharpshooter fallacy.  His legitimate example does not change the fact that some younger and healthier people will pay higher rates for the same insurance under the ACA.  Some people have good reason for concluding that the ACA raises their health insurance premiums.

 

References

Obama, Barack H. “Remarks by the President on the Affordable Care Act.” The White House. The White House, 10 May 2013. Web. 20 May 2013.

Lieberman, Trudy. “Untangling Obamacare: Rate Shock!?Columbia Journalism Review. Columbia Journalism Review, 1 May 2013. Web. 19 May 2013.

Cost of the Newly Insured Under the Affordable Care Act.” SOA – Society of Actuaries. Society of Actuaries, n.d. Web. 19 May 2013.

Cost of the Future Newly Insured under the Affordable Care Act (ACA).” Society of Actuaries. Society of Actuaries, Mar. 2013. Web. 19 May 2013.

Hancock, Jay. “Maryland Offers Glimpse At Obamacare Insurance Math.” Kaiser Health News. Henry J. Kaiser Family Foundation, 24 Apr. 2013. Web. 19 May 2013.

Report: ACA’s Effect on Insurance Premiums Varies by Income Level.” California Healthline. California HealthCare Foundation, 29 Mar. 2013. Web. 19 May 2013.

Cosway, Robert, and Barbara Abbott. “Factors Affecting Individual Premium Rates in 2014 for California.” Milliman, Inc., 28 Mar. 2013. Web. 19 May 2013.

Nussbaum, Alex. “Obamacare Scare: Double-Digit Premium Hikes?Bloomberg Busnessweek. Bloomberg L.P., 28 Mar. 2013. Web. 19 May 2013.

Roy, Avik. “How Obamacare Dramatically Increases The Cost of Insurance for Young Workers.” Forbes. Forbes Magazine, 22 Mar. 2012. Web. 19 May 2013.

How Will Premiums Change Under the ACA?” American Academy of Actuaries, May 2013. Web. 19 May 2013.

Holtz-Eakin, Douglas. “Insurance Premiums in 2014 and the Affordable Care Act: Survey Evidence.” American Action Forum, Jan. 2013. Web. 19 May 2013.

Blumberg, Linda J., and Matthew Buettgens. “Why the ACA’s Limits on Age-Rating Will Not Cause “Rate Shock”: Distributional Implications of Limited Age Bands in Nongroup Health Insurance.” Robert Wood Johnson Foundation. Urban Institute, 4 Mar. 2013. Web. 19 May 2013.

Blumberg, Linda J., and Matthew Buettgens. “Why the ACA’s Limits on Age-Rating Will Not Cause “Rate Shock”: Distributional Implications of Limited Age Bands in Nongroup Health Insurance.” Robert Wood Johnson Foundation. Urban Institute, 4 Mar. 2013. Web. 19 May 2013.

White House Defends ACA Following Sebelius’ Remarks on Cost Hikes.” California Healthline. California HealthCare Foundation, 28 Mar. 2013. Web. 19 May 2013.

An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act.” CBO. Congressional Budget Office, 30 Nov. 2009. Web. 19 May 2013.

An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act.” CBO. Congressional Budget Office, 30 Nov. 2009. Web. 19 May 2013.

Health Insurance Tax.” AHIP. American’s Health Insurance Plans, n.d. Web. 19 May 2013.

Carlson, Chris. “Estimated Premium Impacts of Annual Fees Assessed on Health Insurance Plans.” AHIP. Oliver Wyman, 31 Oct. 2011. Web. 19 May 2013.

FAQs About Portability Of Health Coverage And HIPAA.” United States Department of Labor. U.S. Department of Labor, n.d. Web. 19 May 2013.

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