Obamacare's California Insurance Premiums Are Soaring - This Is Fact

Obamacare's California Insurance Premiums Are Soaring - This Is Fact
June 7, 2013

Peter Ferrara

Peter Ferrara is senior fellow for entitlement and budget policy at The Heartland Institute, a... (read full bio)

The great American experiment in democracy is currently failing. In proof of that, I give you Exhibit A: We cannot even agree on the basic fact of whether health insurance premiums are rising or falling under Obamacare. Note, this is not a matter even of opinion. It is a matter of simple fact, right or wrong. But if we can’t agree on what the basic facts are, we cannot analyze Obamacare, or even discuss it intelligently.

The problem began with contentious California bureaucrats running the California Obamacare Exchange, named Covered California. They released the rates that insurance companies bid to sell the required insurance to individual purchasers on the California Obamacare Exchange. See if you can immediately spot the dishonest fallacy in the key summary statement in the Covered California press release: “The rates submitted to Covered California for the 2014 individual market ranged from 2 percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions.”

This is like a California Chevy dealer in a year when the price of new Chevys has soared, issuing a press release that says, “The prices for new Chevy autos and trucks this year ranged from 2 percent above to 29 percent below the average price this year for new Cadillac autos and trucks in California’s most populous regions.”

Actually, it is worse even than that. Because the Covered California press release compared the prices of individual insurance to the prices for small business insurance, it is more like a Chevy dealer press release that says, “The prices for new Chevy autos and trucks this year ranged from 2 percent above to 29 percent below the average price this year for new small buses and dump trucks.”

But that misstatement of the basic facts is all it took for media organs of Leftist so-called Progressivism to crank up the celebratory pipes. Peter Lee, Executive Director of the Covered California Exchange kicked off the dishonest, misleading rhetoric, proclaiming regarding the newly announced rates, “This is a home run for consumers in every region of California.” He reached that conclusion by comparing Yankee Stadium home runs to Lambeau Field touchdowns.

Next up to bat at the free throw line was logic arsonist Paul Krugman, whose writing always makes you feel like the First Amendment was a mistake. On the basis of the data comparing apples to Orangutans, he concluded that “the real Obamacare shock will be one of unexpected success,” explaining that the ultimate result of Obamacare will be “millions of Americans will suddenly gain health coverage, and millions more will feel much more secure knowing that such coverage is available if they lose their jobs or suffer other misfortunes. Only a relative handful of people will be hurt at all.”

He overlooks the equal millions of Americans that will suddenly not get health coverage under “universal” Obamacare, the millions more who will choose not to get health insurance “secure knowing that such coverage is available” if they get sick later, the tens of millions who will lose their employer provided health insurance, regardless of whether they like that coverage or not, the millions more who will lose their full time jobs for part time jobs with lower incomes and no benefits, becoming truly middle class in the Obama/Krugman era, where middle class is just another word for declining real incomes, and the millions more who will be denied access to the best health practitioners and facilities, and to the new, innovative, health care breakthroughs that were never financed, under the restrictive Obamacare choices allowed by the social justice of “progressive,” political health care.

Krugman reveals his true “Progressivism,” saying the end result will be that “the sheer meanspiritedness of the Obamacare opponents will become ever more obvious,” argument collapsing into sheer name calling being the hallmark of a truly “progressive” discussion.

The simplest and most direct discussion of the issue, failing to grasp any relevant distinctions at all, was provided by my fellow Forbes contributor Rick Ungar, who reported in one of his columns, echoing of course Krugman, “Upon reviewing the data, I was indeed shocked by the proposed premium rates, but not in the way you might expect. The jolt that I was experiencing was not the result of out-of-control premium costs but the shock of rates far lower than what I expected – even at the lowest end of the age scale.” Either Ungar failed to understand the distinction between Chevys and Cadillacs, or between the family Chevy and a bus, or he decided that the truly progressive course was to play along with the California bureaucrat misrepresentation, rather than disclose the fallacy to his readers. Apple or Orange, Rick?

But Ungar went on to explain, “what we are now seeing in states like California is that the desire on the part of the health insurance companies to increase market share – thanks to the large influx of customers as a result of Obamacare – is driving prices downward.” We will see about that large influx of customers. Personally, I am not buying an Obamacare policy until I am sick, and I am already well over 40 years old. And I don’t expect to be paying any penalty for that decision either.

It took Avik Roy to explain the real story in his column, also at Forbes. He examined health insurance policies currently offered on the unofficial, private sector, non-political ehealthinsurance exchange and concluded, “Obamacare, in fact, will increase individual-market premiums by as much as 146 percent.”

“[F]or the typical 25 year old male non-smoking Californian,” Roy added, “Obamacare will drive premiums up by between 100 and 123 percent.” For a 40 year old male non-smoker” Obamacare will increase individual-market premiums by an average of 116 percent.” Roy summarized, “For both 25-year-olds and 40-year-olds, then, Californians under Obamacare who buy insurance for themselves will see their insurance premiums double.” That is a conservative understatement of his actual results.

But Ungar responded in his next column, objecting to Roy’s methodology with Alinskyite ridicule: “my first reaction was to laugh. eHealthinsurance.com? Seriously?” Ungar’s complaint was that Roy’s comparisons were based on so-called “teaser rates” on the eHealthinsurance website, explaining “I mean, you don’t have to be a healthcare policy expert to know that websites like eHealthinsurance.com always flash low rates in front of you—prices that maybe one person in a thousand might actually hope to achieve—to tickle the interest of a potential customer.” That “knowledge” is based on what?

Ungar continued, “It’s not that the flashing low prices are necessarily false as there is always going to be someone who can qualify for the exceptionally low rate.” But “have you ever suffered a migraine headache? If you have, be prepared for a substantial increase over the teaser price stated on a website like eHealthinsurance.com. Ever experience a summer of hay fever? Your rate will skyrocket as a result. Did you have acne as a teenager? Uh-oh…price is going up.”

My first reaction is to laugh. Seriously? What is the source that insurance rates “skyrocket” for “a summer of hay fever,” or teenage acne? I just filled out a health insurance application. They didn’t ask me any of Ungar’s questions. Ungar has shifted at this critical point in the debate from opinion journalism to fabricated fablism, as I will show below.

The real data is provided in a more serious response from another “progressive” warrior, Ezra Klein. He shows more of an intellectual grasp in trying to argue that the real data is actually irrelevant, but that argument reveals the actual progressive economic fallacy at the root of the argument.

Klein searches on eHealthinsurance for policies offered in his hometown of Irvine, California, finding a bestseller policy listed for $109 a month. He at first starts off with similar fablistic fantasy, saying that rate is dependent on such questions as whether you have ever had a headache, “Do you feel sad when it rains? When it doesn’t rain? Is there a history of cardiovascular disease in your family? Have you ever known anyone who had the flu?” For the record, no health insurance company adjusts rates for the disease history of anyone but the applicant.

But then Klein gets more serious, and reveals the truth. “According to HealthCare.gov, 14 percent of people who try to buy that plan are turned away outright. Another 12 percent are told they have to pay more than $109.” That means three-fourths of people get the health insurance for the $109 quoted! Mathematically, that is universes apart from Rick Ungar’s “one person in a thousand.”

But Klein tries to argue that the one fourth who don’t get the coverage for $109 “are the people who need health insurance the most—they are sick, or were sick, or are likely to get sick.” Klein concludes that to judge Obamacare “from a baseline that leaves them out—a baseline that asks only what the wealthy and healthy would pay and ignores the benefits to the poor, the sick, the old, and women—well, that is a bit shocking.”

In other words, as others have argued more simply, you pay more for Obamacare health insurance, but you get more. You get a Cadillac instead of a Chevy. But if that is unambiguously a good thing, why doesn’t everyone buy a Cadillac? The modern economic understanding that Progressives miss is that only an individual consumer can decide if it is worth it to devote the extra money to buying a Cadillac instead of a Chevy, or to devote the extra money that would cost to something else. But being true “Progressives,” they are certain they know how to spend your money better than you do. So they will decide whether it is desirable for you to spend the extra funds on Obamacare Cadillac health insurance.

Progressives lapse into childish fantasy when they argue, wait, after accounting for the Obamacare taxpayer subsidies, many people will not be paying more. The childlike Progressive Principle here is that taxpayer financed subsidies are free and not a cost. Here we have departed from the realm of Aristotelian logic, and are dealing in New Age, stoner illogic.

Roy, in his very next column, returns the debate to classical logic, from Klein’s sophist emotionalism. Roy recognized that Klein had shifted the debate from arguing that the Obamacare rates were shockingly low, to what Roy called the “Democrats’ New Argument: It’s A Good Thing That Obamacare Doubles Individual Health Insurance Premiums.” Roy explained, “What’s new is that liberal columnists, facing reality, are conceding that premiums will go up for most people in the individual market. But they’re justifying it by saying that ‘rate shock’ will help a tiny minority of people who can’t get insurance today. If they had said that in 2009, would Obamacare have passed?”

Roy continued that what the California Exchange rates now showed “is how much more the healthy will have to pay for that insurance, under Obamacare.” In Klein’s Irvine, California, premiums for the lowest cost comprehensive plan (the catastrophic plan is available only for those under 30) would more than double, skyrocketing by 130 percent.

Roy adds,

“The key thing to remember is that back when Obamacare was being debated in Congress, Democrats claimed that it was right-wing nonsense that premiums would go up under Obamacare. ‘What we know for sure,’ Obamacare architect Jonathon Gruber told Ezra Klein in 2009, ‘is that [the bill] will lower the cost of buying non-group health insurance.’ For sure. In 2009, was Ezra saying that its ok that premiums will double for the average person, because a minority of people with pre-existing conditions will benefit? No.”

Roy says it would benefit a tiny minority because, “Based on enrollment in Obamacare’s high-risk pool program, the number of people in America who are truly uninsurable is closer to 150,000. That’s a pretty small number in a nation of 300 million.”

But what is really most important is that it is not the conservative or Republican position that it is ok for this small minority to be left uninsured without essential health care!!!! Roy has his own plan for universal health care in a free market. I am sure that mine that I co-authored last October with John Goodman, President of the National Center for Policy Analysis, “Health Care for All Without the Affordable Care Act,” NCPA Policy Brief No. 116, is better. Our reform plan provides for health care for all with no individual mandate and no employer mandate, at a savings of $2 trillion over the next 10 years alone, as compared to current law. Sounds too good to be true? Read the paper, and tell us where we are wrong. I expect that plan to be formally introduced in Congress shortly, and to provide the foundation for ultimately repealing Obamacare, helping in the process to return the Che Guevara Democrats to the private sector fever swamps.

Barack Obama campaigned for President not on the intellectually honest position that “Obamacare will cost more, but it would be worth it,” but instead on the intellectually dishonest position that it would reduce the cost of health insurance, while covering everyone. Peter Suderman correctly reported on MSNBC on June 4 that during Obama’s first campaign, the candidate’s position was that under his health reform plan, “If you already have health insurance, the only thing that will change for you under the plan is the amount of money you will spend on premiums. That will be less.” Suderman added, “On the campaign trail in 2008, Obama continued to sell the [reform] as a way to lower health premiums, promising at least 15 times to reduce health premiums for families by $2,500 on average.”

I have used the term “Calculated Deception” to refer to Obama’s strategy of rhetorical deception, taking advantage of what Obama shrewdly perceives that the average person will not understand, and what the “mainstream” Democrat Party controlled media will not tell him. That pledge to reduce the cost of health insurance by $2,500 per family was calculated deception that is being exposed as such right now.

But such Calculated Deception amplified in the Democrat controlled media echo chamber just renders our democracy confused and dysfunctional. How many people can even feel their way through the confusion smokescreen I just stumbled though? A solution for this dysfunction remains to be found, perhaps in the forces of honest logic gaining greater control over more commanding media institutions.

[First Published by Forbes.com]

Peter Ferrara

Peter Ferrara is senior fellow for entitlement and budget policy at The Heartland Institute, a... (read full bio)