Middle-Income Americans Take The Biggest Hit With ObamaCare

The October Surprise really isn’t much of a surprise:  We have been expecting to learn the magnitude of ObamaCare premiums increases just before Open Enrollment begins November 1—and just before Election day.

But the size of the increases is a shock, averaging nearly 25% across 38 federal exchange states, and with some increases in triple digits. The highest AVERAGE premium increases are in Arizona, 116%; Oklahoma, 69%; Tennessee, 63%; and Minnesota, 59%.

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Interactive Map

Millions of people in other states will find premiums for their current plans spiking at least as high. Freedom Partners has created an interactive map showing the average and highest premium increases for ACA-compliant individual market plans for 2017 in all 50 states.

And at least one state is challenging the administration’s overly-optimistic numbers.  Indiana says it is wrong in claiming its benchmark plan will be 3% cheaper than last year.

“The health insurance rates in the Indiana Marketplace are going to increase. In fact, many Hoosiers will see a double digit increase in rates.,” said Stephen W. Robertson, Commissioner of Indiana Department of Insurance in a news release.  Next year, based upon current enrollment, the average rate will increase by 18.7% over the 2016 rates for the Indiana Marketplace.

The 40-page report issued by the Department of Health and Human Services on Monday tries to paint a friendly face on the disastrous premium news by saying we shouldn’t worry since the hikes will be offset by subsidies.  The report estimates the average premium increase for 2017 for a 27-year-old enrolling in a benchmark Silver plan through the Healthcare.gov exchange.

More than 70% of consumers in states using the federal exchange will be able to find a premium that is less than $75 a month once financial assistance is factored in, according to the report.  That’s because 85% of enrollees in the ObamaCare exchanges receive subsidies to offset the cost of the premium increases and, for many, the costs of the deductible and copayments as well.

But someone has to make up the difference, and it is, of course, middle-income taxpayers.

Douglas Holtz-Eakin, former director of the Congressional Budget Office and current president of the American Action Forum, estimates that taxpayers will fork over $32 billion in ACA subsidies this year and up to $50 billion next year.  “The taxpayer is being left holding the bag,” he says.

This is a double hit on middle-income Americans.  They must foot the bill for the subsidies, and then they face the full impact of the premium increases.  Only about 44% of people purchasing insurance in the individual market receive subsidies, leaving 56% to pay entire bill for themselves and their families. They face premiums that may cost as much as their mortgage and still face annual deductibles of $12,000 or more.

A colleague shared his story about the cost of health insurance in Virginia where his family’s Bronze-tier Carefirst plan is being discontinued. The premium for the couple and their three young children is $750 a month this year, with a $13,100 deductible/out-of-pocket maximum.

After selecting for their preferred in-network physicians and an HSA-qualified plan, he has two plans to choose from for next year:

1. Carefirst $1,500 HSA Silver. $3,000 deductible, $13,100 OOP max. Premiums are $1,500 per month, double what he is paying now.

2. United Healthcare $2,800 HSA Silver. $5,600 deductible, $13,100 OOP max. Premiums are $1,125 per month, a 50% increase over this year.

“So, if I want to keep my doctors and my ability to retain an HSA-qualified plan, my choice is between a 50% and a 100% premium increase,” he says. “Under no plan would I have avoided even a 25% premium increase, the best case scenario.”

He is not alone. Millions of Americans are facing soaring premiums—one of the reasons ObamaCare continues to be a major issue in U.S. Senate and congressional seats.  It is finally getting some attention in the presidential race as well, with Hillary Clinton announcing she wants to spend even more taxpayer dollars on subsidies. Further, she would expand government control over the health sector via a “public option” plan that would have unlimited calls on taxpayer dollars and that would be in direct competition with private health insurers.

Donald Trump recently released more details on his plans to repeal and replace ObamaCare—proposals that are mostly in alignment with the House Better Way health reform plan that would provide more uniform subsidies, give patients more choices of more affordable plans, lighten the regulatory burden, and put states rather than the feds in charge of overseeing insurers.

ObamaCare can’t be fixed:  The problems with the law are structural and have been worsened by the sloppy regulations issued to try to patch it.  People are figuring out that they can go without health insurance and wait until they are sick to sign up, get their expensive care, and then drop coverage – and re-enroll when they need care again with no penalty.  That is not a sustainable “insurance” system.

Young people also are refusing to be used:  They are forced to pay 75% more for coverage so older people can pay less in premiums. So what are they doing?  Walking away from the plans, leaving the resulting pools older and sicker and ever more expensive.

President Obama and his liberal allies promised they could make coverage more affordable even as they were mandating a slew of expensive health insurance services that must be covered by all plans to be ACA-compliant.  They promised that the average family would save $2,500 a year on premiums. That if we liked our doctor, we could keep our doctor. And that we would be able to keep our plans. And on and on…

Millions of people have lost their health plans and their doctors.  They have felt the brunt of these broken promises very personally.  Family coverage costs more than $4,400 more today than before the health law was passed in 2010.” (The calculation is the difference between the 2016 premium estimate of $18,142 and the Kaiser Family Foundation estimates from 2010 of $13,770  or $4,372.)

Those same politicians now want us to believe that ObamaCare can be fixed with only “minor tweaks.”

Nothing could be more wrong!

The law is structurally unsound, but Democrats are arguing that Republicans should agree next year to tighten the noose on the individual mandate with higher penalties and pour even more subsidy dollars into ObamaCare.

Not going to happen. House Speaker Paul Ryan said last week that the law “can’t be fixed.” If Republicans control even one house of Congress—and they appear likely to hold at least the House—they will have a say in what is done to repair the mess.  More government spending, another big government program, and tighter regulations will not be on their agenda.

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About the author

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that she founded in 1995 to promote an informed debate over free-market ideas for health reform. Full biography