Friday, January 21, 2011

Wasn't Obamacare Supposed to Stop Insurance Rate Hikes?

Cross-posted from Critical Condition on National Review Online.

Supporters of Obamacare often attempt to reassure themselves by claiming that opponents of the law are ignorant and demagogic. The PPACA Pack, on the other hand, is enlightened, cerebral, and compassionate.

In reality, however, Democrats are the ones who speak most demagogically about health care. Like when the Democratic National Committee says that “insurance companies … overcharge for insurance just to boost their profits and CEO bonuses.” Indeed, the DNC went so far as to claim that Obamacare “frees Americans from the fear of insurance companies raising premiums by double digits with no recourse or accountability.” Kathleen Sebelius and the DNC would have you believe that Obamacare prevents rate hikes by cracking down on those demonic, profit-hungry insurance companies, and that repealing the law would allow insurers to once again run amok.

So, then, how to explain the news this month that Blue Shield of California was “seeking cumulative hikes of as much as 59% for tens of thousands of customers” this year? Wasn’t PPACA supposed to stop these supposedly abusive practices?

Unfortunately not. Blue Shield has stated that the new rates “meet the federal requirement that 80 percent of premiums are spent on healthcare expenses,” putting paid to the nonsensical argument that marketing expenses and CEO bonuses are driving premium increases. As Blue Shield detailed in a lengthy statement, the rate hikes correlate directly to increases in the cost of health care, including 4 percent “to cover the costs of enhanced benefits required under healthcare reform.” Despite these increases, Blue Shield expects to lose $10-20 million in 2010 and $20-30 million in 2011 on their individual plans.

New California insurance commissioner Dave Jones, in his first act in office, fired off a letter to Blue Shield, calling on the insurer to suspend its rate hike. “I wish to satisfy myself that all the pending proposed increases have been thoroughly and excessively reviewed.”

But Blue Shield of California is a not-for-profit entity “that has long advocated for universal coverage,” and the company was not cowed by Jones’ posturing. Instead, Blue Shield CEO Bruce Bodaken said the company would have its increases reviewed by an independent actuarial consultant, promising to refund Blue Shield’s policyholders with interest if the company had calculated its rate increases incorrectly.

But neither independent consultants nor press releases from politicians can change the basic facts of health costs. As Jordan Rau recently chronicled in an insightful piece for Kaiser Health News, hospitals are taking advantage of their monopoly status to charge more for their services, and insurers have no choice but to pass those increases onto their policyholders, or they would go out of business.

Indeed, Obamacare is guaranteed to increase, not decrease, underlying health costs. The law subsidizes excessive health spending, and imposes costly mandates on insurance plans that drive costs upward. Those who are genuinely concerned about rising health costs must start by repealing that law.


  1. Private insurance costs were rising as fast or faster than Medicare before the ACA. So, let us look at this.

    "“seeking cumulative hikes of as much as 59% for tens of thousands of customers” this year? "

    Ever gone shopping at a sale where they advertise up to 90% off? This is extremely poor writing for someone of your caliber.

    ", including 4 percent “to cover the costs of enhanced benefits required under healthcare reform.”

    4 out of 59? If you were an insurance exec and you could blame increases on someone else, would you? having practiced for a long time and dealt with billing issues for a long time, I tend to take statements by insurers with a grain of salt. I guess you believe their every word? OTOH, I would agree that requiring changes in coverage before subsidies kick in was dumb.


  2. Hi Steve,

    Notice the quotation marks around the first sentence you cite -- it wasn't written by me but by a reporter for the LA Times. As to I think the point you're getting at -- what is the average increase -- it's a good one, one that those who freak out about rate hikes should keep in mind.

    The point about the 4% is that Obamacare was sold as a way to control costs. I and others have been saying all along that Obamacare contributes to the cost problem, rather than solving it.

  3. Oops. My apologies for missing the quotes.


  4. insurers have no choice but to pass those increases onto their policyholders, or they would go out of business. Vimax Pills Singapore

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  8. Raising tax would raise the cost or price for customers. And if it is about heatlh insurance, then people just have to buy premiums.

    I think it is better if the regulations can at least, reduce monopoly in developing new hospitals etc.

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