The fiction of Obamacare 'rate shock'

Politicians want to scare us, but early returns indicate Affordable Care Act will save money for many

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In this weekly column, former health insurance executive Wendell Potter offers commentary on matters relating to U.S. health care reform

It’s been a while since you’ve seen a lot of stories in the media about Obamacare “rate shock,” hasn’t it?

“Rate shock” stories were all the rage several months ago, like this one from Forbes last December: “Aetna CEO (Mark) Bertolini: Get ready for ‘Rate Shock’ as Some Insurance Premiums to Double in 2014.”

Health insurance executives were hoping we’d swallow their scare campaign on rates, and thus get behind efforts by their friends in Congress to repeal the Affordable Care Act.  

Many of those friends, like Rep. Marsha Blackburn, R-Tenn., are members of the House Energy and Commerce Committee, which sent out a press release on March 14 with the headline: “Obamacare Oversight: The Looming Premium Rate Shock.”

The next day, that committee held a hearing entitled: “Unaffordable: Impact of Obamacare on America’s Health Insurance.” During that hearing, at which I testified, Blackburn read a long list of what she claimed were names of businesses in her district that had experienced Obamacare rate shock.

Skeptical, I sent Rep. Blackburn a letter asking if I could see those letters and help her determine if Obamacare was really the blame or if, possibly, and more likely, those businesses’ insurance carriers were just gouging them. Five and a half months later, I’m still waiting on a response. Even though I’m from Tennessee too.

Since that hearing, the headlines have diminished because there’s little evidence that the “rate shock” allegations were based on anything other than assertions made by insurance company CEOs and lobbyists and their buddies on Capitol Hill.

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The number of rate shock stories declined as state after state disclosed over the summer what insurance companies will actually charge for policies next year. Those disclosures have shown that not only will premiums not skyrocket when Obamacare’s most important consumer protections kick in on January 1, most Americans who buy coverage on their states’ online marketplaces will get better deals than they can today.

A study published last week by the Rand Corporation, a research group, is also helping to show that the rate shock hype was just that: hype.

Rand researchers said that although prices will vary from state to state, Obamacare will not increase premiums overall. Yes, some people, smokers in particular and folks enrolled in policies with benefits so meager they will be outlawed next year, will have to pay more. But most Americans who will be buying coverage in the marketplaces (also known as exchanges) will be eligible for tax credits that will make their coverage more affordable and, in many cases, cheaper than what is available today. Don’t expect a press release from the House Energy and Commerce Committee about that.

Another study released earlier this month also indicated that Obamacare has not been the cause of recent rate increases. The Kaiser Family Foundation’s annual survey of employer-based insurance showed that over the past year, premiums for family coverage increased just 4 percent. While 4 percent is still a hefty increase for many workers, it’s far less than the double-digit increases that were common in previous years.

So what happened to the rate shock scare?

Politicians and the media were all too willing to repeat what CEOs of big for-profit insurance corporations were saying without analyzing their motives or taking into account the fact that the marketplaces will force real competition in the health insurance world.

What the insurance company executives were actually “disclosing” several months back was what they would like to charge for their policies on the marketplaces, not what they actually would be able to charge. Aetna, for example, might have liked to be able to charge $500 a month for a certain policy but it won’t because its competitors will charge less than that for the exact same coverage.

We’ve already seen in Oregon and other states that insurers have been resubmitting lower prices for policies after seeing what their competitors’ price plans are.  

I predict that beginning Oct. 1, when the marketplaces go online, most people will discover that because of the new level of competition and the availability of tax credits, affordable coverage will actually at long last be available. To save face, though, you can also expect those politicians who have been crying “rate shock” to search high and low for constituents who believe their policies have grown more expensive because of Obamacare. And, like Rep. Blackburn did last March, some of those politicians will read the entire list of those constituents in a Congressional hearing.