Imagine that your health insurance had a $25,000 deductible. Or imagine that it did not include most office visits, had no prescription coverage, and left you on the hook for up to $13,000 in out-of-pocket expenses for the services it did cover.
Would you consider that a decent policy? Would you even call that insurance? Those are the questions you need to ask yourself this week, as the latest reports of Obamacare “rate shock” circulate.
The reports are coming from Ohio—where, last Thursday, the state Department of Insurance announced that Ohioans buying insurance on their own, rather than through an employer, should brace for premium increases that will average 88 percent next year. It was a much more discouraging report than the one California officials had made two weeks before. And Ohio Lt. Governor Mary Taylor made sure lots of people heard about it. “We have warned of these increases,” Taylor, who also oversees the state Department of Insurance, said. “The Department’s initial analysis of the proposed rates show consumers will have fewer choices and pay much higher premiums for their health insurance starting in 2014.”
In an accompanying fact sheet for the press, the department described the many ways that the affordable Care Act would “negatively impact” Ohio’s non-group insurance market. It would force insurers to cover all people, the release said, without varying prices for people with different health status: “Under the ACA, all Ohioans will be lumped together for the purposes of pricing, thereby eliminating the benefits of healthier choices.” In addition, the department release pointed out, the health care law would force insurers to cover more benefits than they frequently do now. “With more than 60 health insurance companies selling products in Ohio and few mandated benefits, Ohio has a competitive insurance market. Starting in 2014, those benefit choices and options are drastically limited by the ACA and insurance costs will increase as a result.”
There’s some truth to this. Obamacare’s requirements really will make insurance more expensive relative to what it would cost otherwise. As a result, some people really will pay more for insurance next year than they are paying today. But Taylor is a conservative Republican whose opposition to Obamacare is a matter of public record. And while every politician talking about Obamacare these days has an agenda, Taylor's might explain why her department’s release left out some pretty important facts.
For starters, the release neglected to point out how those regulations on insurance companies, the ones making coverage more expensive, will also allow people with pre-existing conditions to get comprehensive coverage. Many cannot do that now. (If Taylor thinks staying free of cancer is simply a matter of making “healthier choices,” she needs to brush up on her medical facts.) Likewise, the release never mentioned that many Ohioans will end up paying less for insurance than they are paying today, thanks to Obamacare’s federal tax credits, which will be worth thousands of dollars a year for the people who would struggle most with medical bills.1 "Because the Department cannot project the impact of subsidies and because not all consumers will even qualify for a subsidy," Chris Brock, Taylor's communication director, said via e-mail, "no analysis was compiled."
Then there is the matter of the benefits. It’s true that Obamacare restricts the kind of plans that insurers can offer. But there's a reason for that. Next year, when you go to buy coverage in an Obamacare exchange, you will know that your plan will include a set of “essential health benefits.” You’ll have a choice over how much financial protection you want: You can go for a “bronze” plan, which will have high co-payments and deductibles, or you can pay more to get a “silver,” “gold,” or “platinum” plan that would leave you paying less out of pocket once you get care. But even if you opt for a bronze plan, the law will limit what you pay in out-of-pocket expenses to $6,350 for an individual. Your exposure will be lower if, because of your low income, you qualify for additional financial protection from the government.
A $6,350 deductible is still quite big. It’s one reason liberals (like me) keep saying Obamacare doesn’t guarantee as much coverage as it should. But compare that to one of the policies available in Ohio today—the Saver 80, from UnitedHealth. The Saver 80 will pay for periodic preventative visits and childhood immunizations, all without co-pays. But if you need any of the other services included in the policy, you’ll pay for them out-of-pocket until you’ve reached a $10,000 deductible. At that point, you’ll generally pay 20 percent of your bills until you’ve spent another $3,000, at which point full insurance coverage will finally kick in. Yes, that’s maximum out-of-pocket spending of $13,000.
And that’s just for the "covered services." The insurance does not include office visits, aside from the periodic exam. So if you go to your primary care doctor for a sore throat or a rash, or if you need to see a specialist for any reason, you’ll pay for the visit on your own—and the spending won’t even count toward your deductible. The same goes for prescription drug coverage. The Saver 80 offers a discount card, which you can use to knock down the price of whatever you buy, but there’s no real prescription drug coverage.
Oh—and don’t even think about maternity, vision, and mental health care. They’re not covered, either.
Saver 80 doesn't appear to be the skimpiest plan available in Ohio. As Stephen Koff, of the Cleveland Plain Dealer, discovered in his reporting, a different plan available in Ohio comes with a $25,000 deductible. I thought it might be a misprint, so I checked with Koff. The article was correct, he assured me. In fact, the Insurance Department confirmed that it was one of the two plans it had highlighted in its analysis. (An official subsequently confirmed the same thing to me, as well.)
Today that plan is available for $29 a month. That’s less than the price of a decent cell phone plan—quite a deal! But you have to be 25 to get this bargain, you have to be in good health, and you can’t have female body parts. (Ohio, like most states, presently allows insurers to charge women more.) Also, it helps if you have $25,000 in cash lying around—just in case you get really sick or end up in a car accident, and up paying down that deductible.
By the way, plans like these help explain why the 88 percent figure is so useless. To come up with the figure, the Insurance Department literally took an average of the different bids that carriers submitted. Officials paid no attention to how many people might enroll in different plans, nor did they account for the varying benefit levels. “We don’t know how many people buy this coverage today and how many of them actually get the very low premium that is being cited,” says Sarah Lueck, a health policy analyst at the Center on Budget and Policy Priorities who went through the Ohio filings. “I question how valid this is as a basis for comparison.”2
To be clear, there’s an honest, legitimate debate over whether it’s appropriate to prevent people willing to take the risks that go with policies more minimalist than what Obamacare allows, but more generous than the two I've listed above. (Megan McArdle has argued for similar schemes before.) And there’s an equally legitimate debate over whether forcing some young, healthy, and non-poor people to pay more for insurance will alienate enough of them to destabilize the system. (Ross Douthat mentioned this the other day.) The former is more a philosophical question, the latter more an empirical one. Each deserves its own, separate discussion.
But to engage in this debate, all of the trade-offs should be clear. And that includes the ones Taylor declined to highlight. Rate shock, which will ultimately affect only a small portion of the overall population, doesn’t simply reflect the extra premiums these people will pay while they are healthy. It also reflects the savings these people will realize while they are sick.
Jonathan Cohn is a senior editor at the New Republic. Follow him on twitter @CitizenCohn.
As many readers know, there's been a lot of debate over how many people will pay more and how many will pay less. For yet another take on that question, here's an entry at "Project Millennial" by Adrianna McIntyre and Josh Fangmeier. I can't vouch for the specifics of the calculations, because I haven't had time to go through them, and a lot depends on the availability of Medicaid. But the takeaway is that the majority of people will end up paying less for insurance, with only a minority paying more. That's what many of us have been saying for a while.
Among the other potential problems with the Department's calculation: It doesn't account for federal "reinsurance," which might lower rates, and it's based on insurance estimates of the overall cost of covered benefits, which don't necessarily correspond to premiums.