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That Was Then, This Is Now


Then: Obamacare will “for sure” reduce insurance costs

Now: Obamacare will increase premiums by 19-30 percent

How Obamacare Dramatically Increases the Cost of Insurance for Young Workers
By: Avik Roy

In 2009, during the height of the debate over Obamacare, the law’s architect, MIT economist Jonathan Gruber, was all over the op-ed pages, talking about how the bill would reduce the cost of health insurance. “What we know for sure,” he told Ezra Klein, “is that [the bill] will lower the cost of buying non-group health insurance.” His words were trumpeted by the law’s advocates, and were critical to persuading skittish Democrats to vote for the bill. But it turns out that “for sure” doesn’t mean what you thought it did. Because, now, Gruber is quietly telling state governments that the law will significantly increase the cost of insurance. And it will especially do so for young Americans: the ones who most struggle to find affordable health coverage.

Gruber then: Obamacare will “for sure” reduce insurance costs
Before the Patient Protection and Affordable Care Act became law, Gruber published a widely-cited analysis, using his Gruber Microsimulation Model, in which he asserted that in 2016, young people would save 13 percent, and older people 31 percent, on their insurance premiums….

…But that was then.

Gruber now: Obamacare will increase premiums by 19-30 percent
As states began the process of considering whether or not to set up the insurance exchanges mandated by the new health law, several retained Gruber as a consultant. In at least three casesWisconsin in August 2011, Minnesota in November 2011, and Colorado in January 2012Gruber reported that premiums in the individual market would increase, not decrease, as a result of Obamacare.

In Wisconsin, Gruber reported that people purchasing insurance for themselves on the individual market would see, on average, premium increases of 30 percent by 2016, relative to what would have happened in the absence of Obamacare. In Minnesota, the law would increase premiums by 29 percent over the same period. Colorado was the least worst off, with premiums under the law rising by only 19 percent…

…Gruber neglects Obamacare’s pre-existing condition provision
The money paragraph in Gruber’s report to Colorado comes on page 14. It’s there that he admits that his model doesn’t take into account Obamacare’s biggest change to the insurance market: its requirement that insurers take on all comers irrespective of pre-existing conditions, a.k.a., “guaranteed issue.” Here’s what he has to say about that (emphasis added):

It is important to recognize some limitations in our modeling of prices. In particular, given publicly available data we cannot incorporate the effects of the ban on pre-existing conditions exclusions. This ban will cause a rise in premiums as insurers are forced to cover conditions that they had previously excluded. In addition, there are new premium taxes on insurers that will raise premium rates…Overall, we cannot predict the net impacts of these factors on premiums without more analysis…

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