Opinion

Obamacare’s ‘benefits’ are gradually becoming apparent

Photo of Michael Tanner
Michael Tanner
Senior Fellow, Cato Institute
  • See All Articles
  • Subscribe to RSS
  • Bio

      Michael Tanner

      Michael Tanner heads research into a variety of domestic policies with a particular emphasis on health care reform, social welfare policy, and Social Security. His most recent book, Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution (2007), chronicles the demise of the Republican party as it has shifted away from its limited government roots and warns that reform is necessary to avoid continual electoral defeat.

      Under Tanner's direction, Cato launched the Project on Social Security Choice, which is widely considered the leading impetus for transforming the soon-to-be-bankrupt system into a private savings program. Time Magazine calls Tanner, "one of the architects of the private accounts movement," and Congressional Quarterly named him one of the nation's five most influential experts on Social Security.

      His other books include, Healthy Competition: What's Holding Back Health Care and How to Free It (Second Edition, 2007), The Poverty of Welfare: Helping Others in Civil Society (2003), and A New Deal for Social Security (1998). Tanner's writings have appeared in nearly every major American newspaper, including the New York Times, Washington Post, Los Angeles Times, Wall Street Journal, and USA Today. A prolific writer and frequent guest lecturer, Tanner appears regularly on network and cable news programs. Before joining Cato in 1993, Tanner served as director of research of the Georgia Public Policy Foundation and as legislative director for the American Legislative Exchange Council.

At his press conference Tuesday, President Obama assured Americans that, “To the 85-90 percent of Americans who already have health insurance: They’re already experiencing most of the benefits of the Affordable Care Act even if they don’t know it.”

Those benefits apparently include higher premiums. According to the Wall Street Journal, insurers are warning that premiums in the individual and small-group markets could double in the next few years. Already, they are well on their way. For example, California health insurers are proposing increases for some customers of 20 percent or more: 26 percent by Blue Cross, 22 percent by Aetna, and 20 percent by Blue Shield. In Maryland, Care First, the state’s largest insurer, has proposed a 25 percent increase for next year.

Younger and healthier Americans can expect to pay even more. According to a survey by the American Action Forum, healthy young people in the individual or small-group insurance markets can look forward to rate increases averaging as much as 169 percent.

While it is always difficult to pin down the exact reason for premium increases, a large portion is traceable to the new health care law. According to a recent study by the American Society of Actuaries, Obamacare will increase health insurance claims costs by 32 percent because of increased adverse selection in the insurance pool. That is, the law’s prohibition on medical underwriting will bring more older and sicker people into the insurance pool, while higher premiums will encourage the young and healthy to forgo insurance until they get sick. (The penalty under Obamacare’s individual mandate is low enough so that it will generally be cheaper for healthy people to “pay,” rather than “play.”)

In addition, Obamacare requires all health insurance plans to provide more benefits and have lower deductibles and co-payments than they do today. Not to worry, say the law’s supporters, people may be paying more but they will have better insurance — whether they like it or not. As Secretary Sebelius puts it, “These folks will be moving into a really fully insured product for the first time, and so there may be a higher cost associated with getting into that market.” In fact, a recent study of more than 11,000 plans on the individual market found that less than 2 percent of existing plans are fully in compliance with the law’s benefit requirements.