Health insurance premiums are expected to soar next year, driven both by higher costs across the economy but also by government fueling the fires with massive new subsidies.
The Wall Street Journal reports that “Requested rate increases for the small group market in Florida range from about 4% to almost 12%. In New York, insurers are requesting rate increases for plans that range from 11% to 46%.”
Forty-six percent?! State regulators will have to approve premium rates this fall and are unlikely to agree to such steep increases, but with this base, big hikes are inevitable.
Small business, which have borne the brunt of cruel Covid closures, will be hit hardest because they lack the bargaining power of big companies to negotiate lower rates.
Companies with fewer than 50 employees aren’t forced under Obamacare to provide health insurance, and many will have no choice but to drop coverage. Congress’ more generous subsidies for Obamacare policies add to the incentive for them to drop.
Some small businesses will resist. The Journal quotes Bob Jennings, owner of 3D Color in Cincinnati with 21 employees, as expecting rate increases up to 23%. Dropping coverage in this competitive labor market is tough so he’s planning to ask employees to pay a small premium increase of 3% next year.
For those companies that can’t handle the increases, the Inflation Act gives them an extra incentives to shove costs to taxpayers.
In an email exchange, Galen Senior Fellow Doug Badger explains that “The exchange-based [Obamacare] subsidies are an extremely costly way to subsidize coverage.”
A family of four with an income of about $56,000 a year pays a little over $1,000 a year toward their health insurance policy. Taxpayers pick up about $15,700 of the premiums – or 94%.
“That’s not only pricey, but I would also argue it’s unfair,” he explains. A similarly situated family with employer-sponsored coverage earns the “employer contribution” by exchanging wages for health insurance. “In addition to earning her own coverage, that employee is paying income and payroll taxes to support people on Medicare, Medicaid and that family with the same earnings that is receiving nearly $16,000 in federal premium subsidies.”
There are fewer and fewer checks on the market to put downward pressure on costs. Insurers have figured out that they can increase premium prices and pass the lion’s share of the costs on to taxpayers. This scheme gives new incentives for small firms to drop coverage and send employees to Obamacare exchange policies–and the taxpayer dole.
When Congress passed the Inflation Act in August, it extended the Covid-relief policies that lifted the cap on income eligibility for subsidies and made premium subsidies richer.
This is not a solution to rising health costs. These actions may temporarily protect some consumers from hikes, but they dramatically fuel the inflation the law purportedly was designed to address.
As long as these kind of government “solutions” persist, costs are going to go higher and higher. We have better ideas that rely on market forces and consumer power, but we need a different political environment for those ideas to advance.
For now, we just need politicians to stop making it worse.
