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Health Care Premiums: Up, and Rising Again

By M. Anthony Mills      •     RealClearPolitics

Obamacare NeedleIn presidential politics, party professionals on both sides of the aisle live in fear of the dreaded “October surprise” that can compromise their candidates’ chances.

In 2016, the joker in the deck may come the first week of November — and it won’t be a surprise, just a shock: Fueled by the requirements of the Affordable Care Act, Americans’ health insurance premiums are likely to spike.

The policy debates that preoccupy Beltway insiders are often far removed from the concerns of most American voters. The Export-Import Bank, the intricacies of the Dodd-Frank financial regulatory requirements, quantitative easing, and rules promulgated in obscure administrative agencies — this is not the stuff of middle-class anxiety. While such policy and regulatory decisions do affect citizens nationwide, it’s not always immediately obvious how. Not so jobs, wages, schools, and health care — these issues hit home.

There are ample reasons for anxiety in all these areas. The Great Recession hurt middle-class Americans disproportionately, while middle-class wages have stagnated even as the economy has recovered and the price of higher education rises. Meanwhile, a heroin epidemic is sweeping across the country as obesity rates reach new highs — 38 percent of U.S. adults and 17 percent of teenagers are obese — and life expectancy in the U.S. falls behind other countries, with longevity declining among white Americans for the first time in over two decades.

Now rising health care costs are likely to take their place on the list of middle-class grievances.

The 2010 Affordable Care Act, known even by the president who signed it as “Obamacare,” was intended to buttress and expand the social safety net in wake of the greatest economic downturn since the Depression. In 2016, it may end up adding to the burden of the middle class and alienating Americans who are increasingly skeptical of Washington’s policy solutions.

Having survived enormous political pressure in the years after it was signed into law — including presidential and mid-term elections in which health care played an outsized role — as well as a widely publicized roll-out debacle, it’s not surprising that Obamacare remains stubbornly unpopular, with close to 50 percent of the public in opposition, according to the RealClearPolitics average. Many never even signed up.

With another enrollment period beginning November 1, the Obama administration is making a pitch to those Americans who paid the penalty last year rather than pay for coverage — nearly half of whom were under 35. The point is not only to get them coverage but also to guarantee that the health care system as whole — which requires widespread participation — works properly.

To be sure, many Americans who previously did not or could not have insurance do so today — roughly 20 million, according to the Department of Health and Human Services — thanks to the law. And, according to a Rasmussen poll, a growing number — one-in-four — say they’ve benefitted from Obamacare, while the Commonwealth Fund reports that 82 percent of adults with ACA marketplace coverage (or who are newly enrolled in Medicaid) are satisfied.

The Medicaid expansion, in particular — a key part of the Affordable Care Act — appears to be working, at least in states that adopted it. According to recent findings published in the Journal of the American Medical Association, fewer uninsured people are being admitted to hospitals in those states, such as Michigan. Moreover, worries about a possible spike in admittance due to “pent-up demand for care” seem to have been overblown.

Finally, a new study by the Urban Institute and Robert Wood Johnson Foundation projects that health care costs in the United States will be significantly lower than the federal forecast.

But Obamacare is not out of the woods yet.

It’s not the high deductibles, which many costumers say make their plans all but useless. Nor is it the apparently deleterious impact the law has had on the health insurance industry — with “significant losses” among certain carriers causing “marked changes in enterprise-level capital, cost structures, and strategy” and an “aggregate loss of $2.7 billion” in the individual market in 2014. Nor, finally, is it the controversial, if less discussed, Medicare Access and CHIP Reauthorization Act (or Macra) — which, critics say, will “gut” Medicare — but something that hits even closer to home.

Premiums are going up again — this time, by an even larger amount.

According to a new brief from the Henry J. Kaiser Family Foundation, double-digit premium increases are on the horizon — following those that made headlines earlier this year. Americans with the second-lowest-cost silver plan — a popular plan choice, used as the “benchmark” to determine government premium subsidies — can expect rates to go up by 10 percent in 2017 and by as much 26 percent in some places, according to an analysis of publicly available data on the individual market in 13 states and the District of Columbia. This is on top of a 5 percent increase in premiums for that same plan in 2016. (Premiums for the lowest-cost silver plan are projected to increase as well.)

This was not part of the bargain.

Insurers say they are attempting to adjust to higher and unpredictable “risk pools” as the market fluctuates. Critics of Obama’s signature law can point to predictions that this would happen as well as to the losses suffered by the insurance industry. The Obama administration, for its part, blames the insurance companies — calling the rate hikes “unjustified” — and also stresses that any increases will be only temporary. Once more people enroll, the costs will go down.

But many of those who have not yet enrolled have not done so, presumably, because they calculated that the cost of enrolling was too high to justify paying for coverage.

Republicans pounced on President Obama’s promise that “If you like your health care plan, you can keep it” as a Democrat’s answer to George H. W. Bush’s fateful “Read my lips: no new taxes.” Now, Americans are taking the president’s promise that “premiums would go down” to the bank all over again. And it does not look as though they will be happy with their returns.

In response, Republicans have offered to repeal and replace Obamacare. House Republicans just unveiled a new plan, which includes health care tax credits and other measures designed to give consumers and states more flexibility and freedom. The proposal has no shot of becoming anything but that unless the Republicans win the White House. And even then, it’s unclear how a conservative health plan would fare with a Trump administration.

From a political standpoint, more problematic than the projected rates — which, after all, directly affect only those Americans who neither have employer-provided insurance nor qualify for subsidies — might be a sense of betrayal. The Affordable Care Act was pitched as an expansion of affordable care, not a surreptitious tax on the middle class.

The 2016 election may well be remembered as payback time for that class, with Donald Trump as an unlikely weapon of choice for exacting revenge on a political system insufficiently responsive to middle-class concerns. We’ll find out this November whether and to what extent voters judge Obamacare to have been a part of the solution — or just another example of failed policies peddled by elites.