The Obamacare Numbers: Difficult to Measure and Subject to Spin

When California announced that individual premiums in its health insurance exchange could be 29% lower than expectedPresident Obama cheered. When Indiana announced premiums might be 72% higher than beforestate officials predicted doom. So who is right? Are health insurance premiums going up or down?

We don’t know, at least in part, because both sides are playing with the numbers. To be sure, natural variation exists in how state insurance markets will be affected, but consumers should also be aware of how premium comparisons are twisted to reach predetermined results. Here are five ways they have been slanted:

  • First, when the math suits your agenda, there is a tendency to conflate premiums for insurance purchased on ObamaCare’s new exchanges with those in the private market. Next year, only about2.5% of us will pay the exchange rates for purchasing our insurance. Since the vast majority of Americans will continue to receive health coverage through their employer, Medicare or Medicaid, the issue is smaller than we’re led to believe.
  • Second, the impact of the Affordable Care Act varies widely for different subsets of the population. Opponents of ObamaCare tend to focus on the demographic least likely to benefit: young, healthy males, many of whom don’t buy insurance now and might pay higher premiums when entering the market next year than they’d pay today. Supporters, on the other hand, concentrate on older individuals and people with chronic conditions who are currently unable to buy insurance or forced to pay exorbitantly high premiums.

  • Third, the estimated cost of purchasing insurance on the exchanges depends greatly on whether you take into account the federal subsidies that many people will receive. When reporting projected premium increases in Indiana, officials chose not to include credits available to individuals making up to 400% of the poverty line. For instance, a family of four earning $80,000 could still receive subsidies.
    • Fourth, whether premiums appear attractive depends on what you compare them with. The health law requires plans sold on the exchanges to cover a certain share of medical expenses. recent study in Health Affairs found that more than half of plans now sold in the individual and small group markets do not meet new minimum requirements. Thus, comparing premiums of generous ObamaCare plans with premiums of less generous plans sold today stacks the deck against the exchanges.

    Conversely, comparing exchange premiums with a pricier baseline yields more favorable results. That’s the knock on California’s recent report. State officials compared next year’s predicted individual premiums rates with current premiums in the state’s more expensive small employer market, making California’s new premiums appear artificially low.

    • Last, the effect of the exchanges depends on how you compare premiums. For example, it makes sense to compare average current premiums to average newpremiums, or lowest premium to lowest premium, which is what last month’s report released by the Department of Health and Human Services did for the individual market. But because of data limitations in the group market analysis, the authors compared average premiums now with the lowest cost premiums next year, exaggerating the savings. At least the report was transparent about it.

    Buyers of health insurance — and news coverage— beware.

    Dhruv Khullar is a fourth year medical student at the Yale School of Medicine and Harvard’s Kennedy School. This piece originally appeared in USA Today on August 8, 2013.

    13 replies »

    1. Our President’s goal for healthcare reform is to “bend the cost curve,” an uninspiring and near meaningless goal. The US healthcare industry will exceed $3 trillion (20% of GDP) this year. Numerous studies have acknowledged that less than half of that amount is actual healthcare. In fact, most studies agree there is at least $1 trillion in waste, inefficiency and fraud – why isn’t that the target? Nothing in the ACA does anything to eliminate that waste and inefficiency. Nothing.

      By allowing the “industry” the opportunity to write this Law, the participants simply enriched and protected themselves. The result will be higher costs and additional taxes – not affordable healthcare.

      Our current healthcare industry is the most expensive in the world, yet we rank 38th in the world. Soon we will pass 20% of GDP and will become wholly unsustainable.

      It concerns me that so many people (for and against) believe the government will reform healthcare – what have they reformed before? Energy? Education? Agriculture? Anything? It’s delusional to believe that the ACA will do anything more than raise revenues for the insurance industry and our government – that’s why it will fail. It shouldn’t be a surprise.

      Unless and until someone presents a real solution, one that saves $1 trillion and delivers more healthcare, it will not be fixed. This conversation is a complete waste of time because there is no point in arguing a Law that only makes the situation worse. The GOP has no plan other than “status quo.” But, there is hope – look for a solution in the coming year as this latest government reform (written by industry participants) derails without ever making a real difference. America can have a fair and equitable healthcare system if it is designed that way. Changing a few rules and mandating insurance coverage does not deliver more or even better healthcare, it just creates a bigger problem.


    2. “There are three kinds of lies: lies, damned lies and statistics”

      “Figures don’t lie, but liars can figure”

    3. “The middle class is the big loser in all this.”

      The middle class has been the big loser since about the mid 1970s and war on it by corporate America. Obamcare will no different in making it harder to keep more of what they earn.

    4. Where I live, a $94,001 family income is upper class, but that is a local issue and not what I want to address.

      The cutoffs for subsidies are going to drive a lot of people crazy, just as the cutoffs for Medicaid have driven people crazy for years. The sheer number of persons who go on and off Medicaid in the same year is astounding.

      I have read that getting rid of the cutoffs and having a ‘slow slide’ out of subsidies would be dramatically expensive for the govt. Can anyone address this?

    5. The middle class is the big loser in all this. They will pay a higher percentage of income for health coverage than both the rich and the poor. It gets worse if you are unluckily enough to land just over the 400% Federal poverty level, where you will receive no subsidies, but will pay the increased cost of the new premiums. An example is that a typical family of 4, owning a “Silver Plan” (Total Plan Cost: $12,887) that makes $93,999 next year will pay $8,835 (9.5% of Income) for premiums with the remaining $4,052 is covered by the subsidy, but if they earn $94,001, then they will have to pay the full $12,887 (13.6% of Income).Regardless of the coverage received for better or worse, I don’t see how something like that is good for anyone. I would guess that a LOT of people that are at that income level will be claiming less than the $94,000 limit just so they don’t get killed trying to pay the premiums for that extra $1 of income.

    6. Patrick Pine, I agree that there is too much emphasis on premiums, which certainly do not paint a full picture of the total cost of or services provided by a given insurance plan. This is likely because monthly premiums are easily digestible, and make for easy talking points. But as you correctly point out, there are many other aspects to take into consideration. Just because an individual’s monthly premiums are higher, does not necessarily mean they will pay more for healthcare over the course of a year. Higher premiums generally buy coverage of higher actuarial value (i.e., the total percentage of healthcare costs covered by the insurer for the average enrollee in that plan). Thus, higher premiums may be offset by lower co-pays, deductibles, out-of-pocket maximums, as well as a wider array of covered services and provider networks.

      Nonetheless, premium comparisons may be more meaningful now than they were before because insurers can no longer offer plans with very high deductibles or out-of-pocket maximums (max OOP for individuals plans likely around $6,500), and because plans of similar actuarial value will be scored and lumped together (bronze, silver, etc).

      I also agree that an often-overlooked dimension is how the number and type of insurance plans may vary greatly between urban and rural locations. It will be interesting to see how this unfolds in the coming months as we get more information about what plans will be available where, and start to think about how to ensure everyone has a range of quality, affordable options.

      And the implementation of the law has certainly been complicated by resistance on of some states to set up exchanges – and reach out to uninsured populations to make sure they sign up – as well as the Supreme Court decision on state Medicaid expansions. Regardless, legislation of this magnitude is bound to have some kinks as it is being implemented, and it’s probably not fair to judge its success or failure so early on. It may take years to evaluate whether the ACA is actually working the way it was designed to – and hopefully thoughtful adjustments will continue to be made over time as results come in.

    7. “I don’t believe the authors and proponents of the law and many in the Administration truly anticipated that there would be so many states that would not cooperate and in fact actively undermine implementation, that so many would not expand Medicaid, that so few insurers would propose plans in so few states/regions, and that funding would be so difficult.”

      You got it.

      And, going forward, the Goopers are going to continue to throw sand in the PPACA gears at every turn, so they can say “SEE?! We told this was a failure!”

    8. It may make some sense to compare the exchange premiums (either with or without lawful or unlawful subsidies) to what the potential exchangee is paying now. For several 10 million of the sought after younger males, that premium would be zero, since they are not buying insurance now.

    9. The other two items that seem to have been overlooked in nearly any general media discussion are (1) the out of pocket maximums and how they apply in different situations and (2) the presumption of choices available in large urban markets vs. rural markets. While the subsidy may reduce effective premiums to zero for low income – for a bronze or silver plan the copays and deductibles and out of pocket amounts will be difficult for the lower income to handle. In larger states, there are multiple plan areas/regions – California has 19 different geographic areas as one example. In the urban areas there are multiple plans – but in some regions the choices are limited. We have yet to learn what will be available in the federally facilitated exchange states. We have yet to learn what multistate option will be available and in which states. And as Frugal Nurse notes, the economic impacts will vary widely.
      While I believe the Obama Administration is doing its best to make a very complex law work and has made some understandable pragmatic decisions, I don’t believe the authors and proponents of the law and many in the Administration truly anticipated that there would be so many states that would not cooperate and in fact actively undermine implementation, that so many would not expand Medicaid, that so few insurers would propose plans in so few states/regions, and that funding would be so difficult.
      Finally, the assumption that past experience implementing CHIP and Medicare Part D has given many in federal government involved with this implementation a false confidence – this is much more difficult by several orders of magnitude than either of those initiatives.

    10. Total costs, premiums and cost sharing, are important to any family trying to purchase affordable health insurance. I agree the media skews one way or the other depending where they fall on the Obamacare debate. All I can do is look at the numbers that affect me and my family. Because we can no longer purchase a high-deductible catastrophic plan, our premiums will increase 62%-89%, depending on which of the new plans we buy. Our out-of-pocket max will be higher as well–$12,700 for a family rather than $10,000. We will not qualify for a subsidy, and we are healthy and don’t use much health care, so the more comprehensive plan is not really a good value for us. Overall, we will be paying significantly more for health care. Some people, I know, will benefit from Obamacare, but we won’t.

    11. My contention is that there is entirely too much emphasis on the premiums – and not nearly enough on copays/deductibles. That is true of both proponents and opponents.