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The Cost of Obamacare’s Regulations

Tuesday April 8th, 2014   •   Posted by Craig Eyermann at 6:37am PDT   •  

6761569_S What happens to the price of a product for consumers when the government imposes new regulatory burdens and taxes on those who provide it?

If the product is health insurance, where new regulatory burdens have been imposed by the Affordable Care Act (a.k.a. “Obamacare”), the answer is that the cost to consumers rises substantially. Brianna Ehley of the Fiscal Times reports:

The price of health insurance premiums on plans purchased outside of the federal and state exchanges are much higher than expected, a survey of brokers found.

A proprietary survey of 148 brokers conducted by Morgan Stanley analysts revealed the largest acceleration in small and individual group rates in the survey’s history, Forbes contributor Scott Gottlieb of the conservative American Enterprise Institute first noted.

The survey found that the prices for off-exchange plans in the small group market increased by an average of 11 percent, while off-exchange plans on the individual market increased by an average of 12 percent. Analysts noted that the prices tended to vary by state, with some states showing increases 10 to 50 times that amount, Gottlieb wrote.

According to the latest Census data, about 14.5 million—or 5 percent of the U.S. population gets health insurance on the private exchange.

The Morgan Stanley report attributed the increases to “changes under the ACA” including the new excise taxes being levied on insurance plans, and the new requirements that plans provide more robust coverage.

Looking to see how the price of health insurance has changed for policies purchased outside of the federal and state-government run “marketplaces” provides one of the best apples-to-apples measure of the effects of the law that is available to us.

The reason for that is very straightforward—regardless of where health insurance policies are purchased by consumers, they are combined into the same risk pools by the insurers, which are governed by the same regulations. We should note that the only reason consumers have to shop for policies on the federal and state-government run exchanges is because that is the only way they might obtain subsidies against their premiums to purchase them.

The difference is that for the policies that are available to be purchased outside of the Affordable Care Act’s government-run marketplaces, the costs of the policies for consumers is fully reflected in the reported premiums, with the differences in the before-and-after cost of insurance policies largely being able to be attributed to the changes imposed upon insurance providers by Obamacare.

Scott Gottlieb provides more numbers:

The average increases are in excess of 11% in the small group market and 12% in the individual market. Some state show increases 10 to 50 times that amount. The analysts conclude that the “increases are largely due to changes under the ACA.”

The analysts conducting the survey attribute the rate increases largely to a combination of four factors set in motion by Obamacare: Commercial underwriting restrictions, the age bands that don’t allow insurers to vary premiums between young and old beneficiaries based on the actual costs of providing the coverage, the new excise taxes being levied on insurance plans, and new benefit designs….

For the individual insurance market (plans sold directly to consumers); among the ten states seeing some of the sharpest average increases are: Delaware at 100%, New Hampshire 90%, Indiana 54%, California 53%, Connecticut 45%, Michigan 36%, Florida 37%, Georgia 29%, Kentucky 29%, and Pennsylvania 28%.

For the small group market, among the ten states seeing the biggest increases are: Washington 588%, Pennsylvania 66%, California 37%, Indiana 34%, Kentucky 30%, Colorado 29%, Michigan 27%, Maryland 25%, Missouri 25%, and Nevada 23%.

Regulations, just like taxes, cost real people real money.

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April 2014