Surprise! Affordable Care Act Actually Making Health Care More Affordable

The hair-on-fire Left and the seething Right had a lot in common during the health care debate in 2009 and 2010. One of commonalities was the agreement that the reform President Obama was pushing, despite being named the Affordable Care had, didn't have a prayer of making health insurance premiums affordable. They further agreed that it would have the opposite effect, increasing premiums faster - to the Right because Obama was regulating the health insurance industry too much, and to the Left because he failed to stomp his feet and pound enough podiums to extract their favorite pony, a public option.

At the time, I used logic to argue that both side's doomsayers were wrong. Now, we have actual data to prove them wrong. With the release of data from 11 representative states yesterday, that reality just began knocking on the naysayers' door. Now that some states have released data on what plans on their exchanges are going to actually cost, the ACA seems to be outperforming even the estimates of those in charge of implementing the law. Department of Health and Human Services just released a comprehensive analysis, showing the average premiums of those 11 states to be lower than even the previous HHS estimate.


Oops. All in all, the analysis of the data finds that the cost of the premium of the least expensive plan in the exchanges will be 18% lower than earlier estimates. For the states that have small business health plans data available, the difference between the new and the earlier estimates is even starker, at 24%. Remember, all these rates are before applying the premium subsidies under ACA, which those under 400% of poverty are eligible for on a sliding scale.

And how does this compare to .. ahem... "industry estimates?" Well, the industry never actually put out average cost estimates in the fear of being ridiculed - oh, about now - but here's what the health insurance lobby, AHIP, said would happen should the devil's plan, I mean Obamacare, be allowed to take effect. An AHIP funded and publicized "study" estimated the premium of a 27-year-old healthy male to grow by 169% - almost tripling, and they estimated the cost of monthly premium of a 57-year-old unhealthy female to grow by 12% due to the horrible ACA. Another study by AHIP found that average individual premiums would increase by as much as 80% under ACA.

The industry and its lemmings in the media (particularly Avik Roy of Forbes - why do so many Indo-Americans on the political stage seem to exist for the sole purpose of embarrassing me?) will tell you that Obamacare is still increasing premiums in the individual market. And they're right, only if you compare low cost, high deductible and won't-be-there-when-you-need-it junk insurance (heck, in the example above, AHIP assumed insurance plans for the 27 and 55 year olds that paid, on average, only 55% of their expenses). But if you compare apples to apples - that is, good coverage to ACA's good coverage, you have to compare essentially the price of covering an individual in a group plan currently, since ACA guarantees individual plans that are at least as good and not junk insurance.

Going by that apples-to-apples comparison, rates are actually down from 2012. The Kaiser Foundation reports last year's group average premium at $468 a month for each individual. The new data from the 11 representative states show individual market premium rates averaging $352 - fully 25% lower. For the same quality coverage, of course, the current rates for the individual market are higher than small group rates, so the drop in cost is in fact larger.

The data for the small groups market has that rate averaging at $370, or 21% below 2012 rates.

It seems that common sense regulations - such as guaranteed coverage, community rating, restricting administrative spending by insurance companies (the president just pointed out yesterday that 8 million Americans will be getting rebate checks from their insurance companies in the next months, after 13 million checks last year), and a marketplace for shopping for insurance are good cost control measures as well. I also suspect part of this rate drop is due to the upcoming massive expansion of Medicaid (ahem... the real public option), which dramatically reduces uncompensated care, so that cost does not have to be distributed to the premiums for those who do carry insurance.

There is a side benefit to these lower rates, too: when the rates overall are lower, the government spends less money on subsidies, and that means both an even more positive impact on the deficit than previously thought, as well as the death of the GOP talking point of cost overruns.

I would say that the success of the Affordable Care Act is beyond prediction, but some of us who carefully saw what was going on back in 2009 and 2010 instead of being busy turning up the scream meter to 11 predicted exactly this was going to happen. Nonetheless, this success is phenomenal, and it should teach everyone some lessons. First, the role of regulations on business is essential to protecting consumers. Public regulation of private industry isn't just an essential part of good government, it is beneficial to the average consumer.

Second, and importantly for the liberals among us, market forces, combined with regulations that create a fair playing field and consumer protection, do work. The market and liberal policy are not inherently mutually exclusive; in fact, with the right regulatory framework, they can be quite complementary.

With the above piece, I do not expect to quell the far Right who think that the government is coming to get their guns and give free health care to blaaahhh people. Nor am I going to satisfy the screaming Left who will cling to their mantra that the president is merely delivering new business by the force of legal mandate that insurance companies couldn't otherwise get. I will never be able to stop the uber Right from being furious with the president because they think he's a communist, or the fringe Left from being furious with the president because he isn't one.

I can't convince them with facts because they aren't interested in facts. They never really feared that the ACA wouldn't work. In truth, their worst nightmare is that it will work, and when it does, it will speak well of pragmatism and ill of ideological rigidity. Well, ideologues, your worst nightmare is coming true.