Insurance Market Requiring Gov't Handouts Is Dysfunctional

 This week marks the beginning of open enrollment on the health insurance exchanges created by the Affordable Care Act. According to one recent analysis of 72 exchange insurers, premiums are likely to increase by an average of 10%. In some cases, rate hikes could exceed 25%.

Most consumers won't feel these price increases, thanks to the generous premium subsidies provided by the recently passed Inflation Reduction Act. But spending billions of dollars to obscure premium hikes indicates that the Affordable Care Act is failing to deliver on its eponymous promise.

Between 2013 — the year before the exchanges opened for business — and 2019, average monthly premiums on the individual insurance market more than doubled, from $244 to $588. So the latest round of rate hikes is not out of the ordinary.

The ever-increasing cost of health insurance is a function of Obamacare's many regulations. For instance, the law requires insurers to sell to all comers, regardless of health status or history.

It prohibits them from charging the old any more than three times what they charge the young, even though older people cost much more to insure. And it required that all health plans cover 10 "essential health benefits," regardless of whether consumers wanted or needed them.

Rules such as these simultaneously eliminated some of the insurance industry's most useful strategies for containing costs while effectively banning minimalist, lower-cost health plans. Their predictable consequence has been a steady increase in premiums that continues to this day.

Democrats are shrewd enough to realize that yearly premium hikes are a recipe for losses at the ballot box. Hence, bigger federal premium subsidies.

The Inflation Reduction Act's enhanced subsidies significantly increase the amount of assistance available to patients earning between 100% and 400% of the poverty level. They also guarantee that no household pays more than 8.5% of their income for exchange coverage — regardless of how much money they earn.

These enhanced subsidies became a political necessity because even middle-class and relatively well-off families are finding health coverage unaffordable under Obamacare's rules. In 2019, for instance, half of households making between four and six times the poverty level faced the prospect of paying at least 11.3% of their income for the least expensive bronze exchange plan.

And picking up an ever greater share of consumers' premiums has understandably boosted enrollment. This year, 14.5 million people signed up for coverage through the exchanges, compared to 8 million in 2014, their first year in operation.

It would be far better for taxpayers — not to mention the inflation outlook — if Democrats took steps to actually make health insurance more affordable, rather than hiding its rising cost with subsidies.

Rolling back Obamacare's insurance market regulations would go a long way to reducing premiums for most Americans. Failing that, expanding access to short-term, limited duration health plans would help.

As their name suggests, short-term health insurance policies were originally intended to fill unexpected gaps in coverage. But since they're exempt from Obamacare's insurance rules, they have emerged as an affordable alternative to exchange coverage.

Federal rules allow insurers to renew short-term plans up to two times. So a person could rely on a short-term policy for up to three years of coverage, unless their state has more stringent rules.

Recognizing short-term plans as a threat to exchange enrollment, Democrats have done their best to condemn these policies as "junk insurance." Earlier this month, Rep. Lloyd Doggett, D-Texas, complained that the "Biden administration’s failure to react swiftly to junk insurance only puts more consumers at risk."

Several states, including California and New York, have banned short-term plans or effectively regulated them out of existence.

But for many consumers — even older ones in less-than-perfect health — short-term plans can provide coverage that is comparable in quality to exchange plans, sometimes at nearly half the price. They're also less likely to feature the narrow provider networks characteristic of marketplace coverage.

The real threat to consumers is the out-of-control growth in the cost of health insurance brought on by Obamacare. More generous exchange subsidies might temporarily take some of the sting out of this affordability crisis. But an insurance market that requires endless government handouts isn't functional.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020).

https://www.newsmax.com/sallypipes/health-insurance-government-premiums/2022/10/27/id/1093738/