RixPix Loc: Miami, Florida

Here is news about how expensive health care is going to be...really...

Unexpected Health Insurance Rate Shock-California Obamacare Insurance Exchange Announces Premium Rates

English: Barack Obama signing the Patient Prot...
English: Barack Obama signing the Patient Protection and Affordable Care Act at the White House (Photo credit: Wikipedia)

Every now and again, a political pundit is required to stand up and admit to the world that he or she got it wrong.

For me, this would be one of those moments.

For quite some time, I have been predicting that Obamacare would likely mean higher insurance rates in the individual market for the “young immortals” and others under the age of 40. At the same time, my expectation was that those who fall into the older age ranges would benefit greatly as their premium charges would be lowered thanks to the Affordable Care Act.

It is increasingly clear that I had it wrong.

Yesterday, Covered California—the name given to the healthcare exchange created pursuant to the Affordable Care Act that will serve the largest population of insured citizens in the nation—released the premium rates submitted by participating health insurance companies for the three health insurance program categories (bronze, silver and gold) established by the Affordable Care Act, along with the catastrophic policy created for and available to those under the age of 30.

Upon reviewing the data, I was indeed shocked by the proposed premium rates—but not in the way you might expect. The jolt that I was experiencing was not the result of the predicted out-of-control premium costs but the shock of rates far lower than what I expected—even at the lowest end of the age scale.

So, why the all too popular narrative that Obamacare would mean unaffordable healthcare premium costs for so many Americans?

Setting aside the never-ending nonsense peddled by the opponents of healthcare reform, everyone from the Congressional Budget Office to numerous private actuaries have warned that premium shock could be expected to set in once the public began to see the reality of what Obamacare would mean to their pocketbooks. And yet, the only real jolt to the system being felt by these public and private prognosticators today is utter amazement over just how reasonable the California prices have turned out to be.

How did the CBO and the actuaries get it so wrong?

As Jonathan Cohn of The New Republic correctly points out—

“One reason for the misplaced expectations may be that actuaries have been making worst-case assumptions, even as insurers—eyeing the prospects of so many new customers—have been calculating that it’s worth bidding low in order to gobble up market share. This would help explain why premium bids in several other states have proven similarly reasonable. “The premiums and participation in California, Oregon, Washington and other states show that insurers want to compete for the new enrollees in this market,” Gary Claxton, a vice president at the Kaiser Family Foundation, said via e-mail. “The premiums have not skyrocketed and the insurers that serve this market now are continuing. The rates look like what we would expect for decent coverage offered to a standard population.”

Cohn is saying that, despite the political naysayers, the healthcare exchange concept appears to be working very well indeed in states like California, Oregon and Washington—the first states to publish the expected health exchange prices for purchasing coverage. These are also states that are actually committed to seeing the program work as opposed to those states whose leaders have a vested political interest in seeing the Affordable Care Act fail.

Keep in mind that the entire idea of the exchanges is to require health insurance companies to compete openly with one another by offering identical coverage programs in the three created classes—each offering insurance coverage that actually delivers meaningful protection to customers—and then openly disclosing the price each insurance company will charge for that policy. Thus, shoppers can clearly see which company has the best price on an apples-to-apples basis.

For all the negative chatter about how including older and sicker Americans in the health insurance pools would drive up the price for younger participants in the pool less likely to be ill, what we are now seeing in states like California is that the desire on the part of the health insurance companies to increase market share—thanks to the large influx of customers as a result of Obamacare—is driving prices downward.

That is precisely what the President said would happen.

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Sarah Kliff at The Washington Post reveals just far off the prognosticators have been.

“The Congressional Budget Office predicted back in November 2009 that a medium-cost plan on the health exchange – known as a “silver plan” – would have an annual premium of $5,200. A separate report from actuarial firm Milliman projected that, in California, the average silver plan would have a $450 monthly premium.”

The actual costs?

Kliff continues, “On average, the most affordable “silver plan” – which covers 70 percent of the average subscriber’s medical costs – comes with a $276 monthly premium. For the 2.6 million Californians who will receive federal subsidies, the price is a good deal less expensive…”

As you can see, the actuaries missed by a huge percentage.

To see how younger Californians will make out when they shop on the public exchanges, take a look at the graphs Kliff provides here. You may be very surprised to learn that the meaningful insurance that you are now required to purchase is far more reasonably priced than you imagined.

There is a moral to this story for those open to receive the message.

If you are among the many Americans who have bought into the fear and loathing that has been the campaign against Obamacare, you just might wish to reconsider. With every passing day, the various myths, legends and lies put forward by those with a political axe to grind, TV or radio rating to be raised or vote to be purchased, are falling victim to the facts.

Of course, if you continue to find it more useful to hate the Affordable Care Act than to recognize the benefit of what this program offers to you and your family, nothing I can say is likely to change your mind.

But, accept it or not, the reality is that the early report card on Obamacare—at least in those states willing to give the law a chance to succeed—is looking pretty darn good. So good, in fact, that the data reveals that even a supporter such as myself was off the mark when predicting significantly higher rates for the youngest among us.

This is one time that I could not be happier to be proven wrong.

UPDATE: A number of readers have responded to this article by asking the question, “If the California exchange is so good, why have United Healthcare, Aetna and Cigna decided not to participate?”

It is true that these companies are not going to participate in the CA healthcare exchange. And while this makes a great meme for the opponents of healthcare reform, there is something they are not telling you —these three companies have never been players in the California individual insurance market so there was never any expectation that they would participate. While each of these companies are a major factor in group health insurance-both large and small- their combined participation in the individual market in CA has not been more than 8 percent for a great many years. Meanwhile, the other large insurance companies that have participated in the individual policy business in California have comprised 85 percent of the market. Each of these insurers are participating on the exchange. So, things are not always as they may seem which is why it is so important to read beyond the headline.

Contact Rick at thepolicypage@gmail.com and follow me on Twitter and Facebook. To view original article as published on Forbes.com...click download

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rpavich Loc: West Virginia

Are you actually trying to say that health care premiums went DOWN?

If so...you don't live in the real world...lol...NOBODY that I've talked to or know had a decrease...all have AT LEAST DOUBLED or TRIPLED and mine TRIPLED A BIT plus some.

ole sarg Loc: south florida

If the premiums went up I would complain to the insurance companies because OBamacare does not go into effect until 2014!

rpavich Loc: West Virginia

You mean "full effect" because the health care regulations under Obummer-care HAVE gone into effect.

Bangee5 Loc: Louisiana

You have to get it now before Obamacare goes into effect so that you will have it when it does go into effect... Duh! Do you do your christmas shopping after christmas?

Rbode Loc: Ft lauderdale, Fla

The latest 0buma Gospel; the drunk and drugged shall inherit the planet. It's pie in the sky, again.

MagicFad Loc: Clermont, FL

Did you write this article? It is very well stated and may make me rethink my stand on ObamaCare.
PS. I am especially grateful that you did not insult anyone nor call anyone names as seem to be the case most times when a hot political subject is discussed. My hat is off to you.

TimS Loc: GA

So the silver plan is $276 per month? Is that the total cost for that plan per month or just the insured's cost per month? How much is the state paying per month? If CA has to pay a few hundred dollars per month then where do they get that money?

My health insurance premiums have gone up along with my copays and coinsurance for various procedures. I now have copays for things that were included in the past. Prescriptions have gone up for me too.

But I guess I should ignore the reality of my situation and believe that my healthcare rates have actually dropped because some fruitcake said they did.

MyPharo Loc: New Jersey

I always say .. you can lead stupid people to the river of knowledge but you can not make them drink. You need a few sips my friend .. READ it again ..

travelwp Loc: New Jersey

I hope you are right about the Obamacare costs; however, I always feel uncomfortable when California is part of the financial calculations. One California city is bankrupt and 10 others are in trouble. They have trouble calculating the the real cost of things in California.

Huey Driver Loc: Texas

I've been in the business of selling healthcare for about 30 years. All I can say about Obamacare is give it 3 - 5 years and then let's hear your opinion?

MyPharo Loc: New Jersey

Like, most new ideas... Remember when US Social Security was introduced ... in the beginning it was all doom and gloom .. People are willing to spend trillions to go to war to kill people and that's ok .. But try to get some Affordable Health Care for the citizens of this country .. Special interest groups will spend millions telling us "We can not afford it".. Funny thing is . It is the Wealthy that fund this crap and scream the loudest. And Yet always some how end up on the money making side of it in the end ..

ole sarg Loc: south florida

You are assuming that Obamacare has something to do with the increase in rates. The rates increased prior to the passage of the act and continued after the passage of the act. One is not related to the other.


What you are saying is that the rooster crows when the sun comes up therefore the crowing of the rooster causes the sun to come up.

ole sarg Loc: south florida

You are assuming that Obamacare has something to do with the increase in rates. The rates increased prior to the passage of the act and continued after the passage of the act. One is not related to the other.


What you are saying is that the rooster crows when the sun comes up therefore the crowing of the rooster causes the sun to come up.

TimS Loc: GA

Assuming you are referring to my post, I can tell you that my rates did go up a little each year. A little. $5 per month or so but coverage remained the same. After Obamacare was introduced, there has been a step increase in premiums and a step decrease in coverage. Such drastic steps did not occur prior to Obamacare. When I look at my 'how the plan changed this year' page, I see things like 'due to the affordable care act, we now cover...blah blah blah.'

Insurance companies are increasing rates now before Obamacare is in full effect to help shield them from the uncertainties of what poorly crafted legislation causes.