The Truth About Rising Health Premiums
Obamacare isn’t the reason they’re going up. It’s state policies.
In the debate over repealing and replacing the Affordable Care Act (ACA), no argument has been more incendiary than charges that rates are out of control. President Trump, for example, has pointed to an increase in premiums of 116 percent in Arizona from 2013 to 2017, and 203 percent in Alaska. “It is a catastrophe,” he has said.
Reports late last year of premium spikes reinforced the sense that the program wasn’t working. If a family’s rates weren’t shooting up by triple digits this year, the thinking went, then they could next year. Without this specter, the 2016 presidential campaign would have been very different -- and it would have been far harder for Republicans to stoke last year’s repeal and replace battle.
It is indeed true that premiums have shot up in many places. The U.S. Department of Health and Human Services documented the big increases in Alaska and Arizona, along with hikes of 153 percent in Nebraska, 176 percent in North Carolina and 201 percent in Oklahoma. In Alabama, the increase was even higher: 223 percent. The numbers were terrifying -- and they made for great tweets.
But those scary rates aren’t what families actually pay. The ACA comes with subsidies for low- and moderate-income families who sign up for low-cost plans. The subsidies, in effect, cover rate hikes. Roughly 80 percent of those in the health marketplace qualify for subsidies, which shrink the out-of-pocket increases to zero for those in Arizona. And in Alaska, where 93 percent of the market is covered by subsidies, participants actually saw a 1 percent decrease in out-of-pocket expenses.
The story of huge rate spikes was so compelling that it drowned out the role subsidies play -- a role that is too complex to reduce to a few simple sentences. The whole program, in fact, is so complicated that the subtleties evaporate behind the headlines. That’s why Republicans were able to capitalize on news about the premium spikes and Democrats were never able to find a reassuring rebuttal. That fundamental difference is what has stoked the entire anti-ACA campaign.
In short, the Democrats fell victim to the complexity of the program they had created, a program designed to avoid a mega-role for the federal government. The Obama administration wanted to provide health care for everyone, but many Americans didn’t want the federal government doing that job. So the administration focused on making health insurance available to everyone, including imposing a mandate that all individuals have it through their employers or buy it through state-based exchanges.
Republicans slammed this plan as a massive federal takeover of medicine. But that’s the one thing the ACA was not. Rather, it was a massive shift of responsibility to the states. And now, with the Republicans intent on unraveling the ACA wherever they can find a loose thread, the role of the states is likely to get even bigger.
Here are the pieces in play: There’s December’s repeal of the individual mandate, which removes the penalty for individuals who don’t sign up for insurance coverage. That puts on the states the burden of figuring out how to manage high-risk pools. There’s the next option of pushing the program into block grants. That would dramatically increase the responsibilities of states in designing the health insurance system, determining what health conditions to cover and undertaking closer scrutiny of the way insurance companies behave. But even without block grants, the states will have the challenge of stabilizing the insurance marketplaces and managing volatile premium jumps in some places.
Consider, for example, the cities of Philadelphia, Pa., and Wilmington, Del. They are just 30 miles apart. There aren’t big differences between them in the health of citizens or the quality of health services. But according to a Kaiser Family Foundation analysis, premiums in 2018 for a 40-year-old making $30,000 a year will rise 49 percent in Wilmington, to $631 a month. In Philadelphia, premiums will rise only 23 percent, to $515. Or look at Seattle, where premiums will rise 29 percent, compared with a 12 percent increase in the nearest big city, Portland, Ore.
Why the big disparities? It’s the state insurance markets, not the insured individuals, that are different. In all the next steps, the states will be increasingly in charge. And the more we put state governments in charge, the more we’re likely to have big and growing differences between them -- even those right next to each other.
Big differences between the states fueled the repeal and replace debate. The variations gave the Republicans ammunition the Democrats couldn’t deflect -- and left Democrats stumbling for explanations that might counter the Republican attacks. One way or another, the next round will put even more reliance on the states, especially their insurance regulators. And this is going to raise a nasty question: Just how much state-to-state difference in health insurance -- and health outcomes -- are we willing to tolerate?
If the answer is “not much,” then in a compelling plot twist, the Republicans might find themselves arguing for more federal involvement. The Democrats’ strategy set the stage for the Republican campaign to unravel the ACA; the Republicans’ own assault might ultimately build the case for pulling more decisions from the states back to Washington.