Finally Revealed, the Cost of Insurance on the Exchanges

Somehow, someone should riff on the Geico “Hump Day” commercial and come up with a pithy take on October 1, 2013 – the launch of the PPACA aka Obamacare. Please keep me in mind if you run with this suggestion and forward the appropriate share of any royalties my way. In the meantime, let’s all rejoice in the fact that the endless conjecture surrounding the law is about to be subjected to the real world and actually produce some FACTS.

Actually, we have some FACTS courtesy of HHS as of today. They  released a 15 page report on premium costs within the exchanges and pointed out proudly that the costs are on average lower than the 2010 CBO projections. That, of course, tells you nothing since the relevant piece of information you need is how much more or less you’ll have to pay versus the present cost. As you might have guessed HHS didn’t include this in their press release because, well … the news isn’t so good.

Avik Roy covers the details in this article. The view from above is:

Based on a Manhattan Institute analysis of the HHS numbers, Obamacare will increase underlying insurance rates for younger men by an average of 97 to 99 percent, and for younger women by an average of 55 to 62 percent. Worst off is North Carolina, which will see individual-market rates triple for women, and quadruple for men.

His article is chock full of comparisons for age groups, state-by-state breakdowns and some cool interactive tools illustrating among other things the less than dramatic effect of the subsidies. It’s the first look at what’s going to confront the consumer next Tuesday.

In reality it’s going to take months to get any sort of read whatsoever on the public response to this program. Despite the government’s advertising efforts most enrollees have at best a cursory understanding of the program, probably aren’t going to rush to buy in the first few weeks or even months (remember we run into the holidays pretty quickly) and many labor under the impression it involves free heath insurance. Sticker shock is going to be a real phenomenon as is the restrictive nature of some of the plans with respect to doctor and hospital availability. Personally, I think it’s going to be really important to sign up participants at their first look as the “thinking it over crowd” is going to rationalize their way out of a purchase pretty easily. In short, don’t look for data giving a good read on results until we’re a month or two into 2014.

As things unfold, it’s worth keeping in mind that the pricing of the exchange plans was entirely theoretical. It literally involves pricing health insurance premiums for a market that doesn’t exist and relies entirely on projected demographic profiles to arrive at a number. This is going to change in 2015 as the reality of the insured base will dictate pricing. What you see now may be higher, lower, the same or we might see some complete rework of the program. The FACTS we have now just set up the playing field, we have no clue as to how the game is going to unfold.

Addendum: If you must have more PPACA reading, here’s a list of some good stuff.

Adam Garfinkle talks about the potential for haves and sort of have-nots as Obamacare develops. I’m not sure that bifurcated access to health care will fly in this country.

Timothy Taylor takes a look at the PPACA as it relates to the two main arguments for its passage – insuring the uninsured and lowering health care costs – and finds the prospects of success dim for both. He does support the effort though.

Joseph Antos speculates on the future of the PPACA in a four-part series (here, here, here and here). The title of the articles is “Obama Care Destined To Flop?” and it is nicely nonpartisan. I’ll spoil the conclusion by noting that he thinks it’s here to stay, will dramatically change the landscape of health care in ways we haven’t imagined and that we’ve only begun to grapple with the effects of this law.

• Become A Funded Futures Trader