ObamaCare Exchanges: Less Choice, Higher Prices by David Hogberg, Ph.D.

ObamaCare Exchanges: Less Choice, Higher Prices

by David Hogberg, Ph.D.

“Many supporters of ObamaCare insisted that the health insurance exchanges created by the law would result in consumers having a greater choice among insurance policies and lower prices.

This study tests those claims by examining policies on the exchanges in metropolitan areas across 45 states for a single 27-year-old and a 57-year-old couple. It then compares those with the policies available in those same areas on eHealthInsurance.com (eHealth) and Finder.healthcare.gov (Finder) in 2013.

The results show that the claims that the ObamaCare exchanges would offer greater choice and lower prices did not hold up.

Across all areas examined, the exchanges have resulted in a substantial reduction in choice.

Consumers also previously had more lower-cost options than they now have on the exchanges.

An examination of subsidies that consumers can receive to purchase insurance on the exchanges produced mixed results on costs.

Conclusion

The claims by ObamaCare supporters that the ObamaCare exchanges would result in greater choice of policies and lower premiums are not supported by the evidence. This study shows that consumers were much more likely to have more insurance options on eHealth and Finder than on the exchanges. They also had access to many plans that cost less than the cheapest plans on the exchanges. That holds true not only for those who have to pay full price on the exchange but even for some who have access to subsidies.

That is the predictable result of regulations that standardize plans and impose community rating and guaranteed issue. Indeed, in the years to come, community rating and guaranteed issue will likely lead to even higher premiums and less choice on the exchange. History shows that community rating and guaranteed issue often lead to the “death spiral” of a health insurance market. A death spiral occurs when the young and healthy drop out of the “insurance pool.” This leads to “adverse selection” in which insurance is primarily attractive to those who tend to be older and sicker. If the insurance pool is comprised largely of older and sicker people, then insurance prices naturally rise to cover their costs. That rate increase results in even more young and healthy people dropping their insurance, leaving the pools even older and sicker than before, and so forth.  As the insurance pool becomes smaller and more expensive to cover, many insurers face huge losses. Eventually, they exit the market, which leaves, at most, a few large insurers still doing business. Fewer insurers in the market means a reduction in insurance options for consumers.

ObamaCare’s exchanges have already taken their first steps toward a death spiral.   The Obama Administration estimates that 38 percent of the exchange insurance pool must comprise of 18-to-34-year-olds to prevent a death spiral. Thus far, 25 percent of exchange enrollees are aged 18-34. – See more at: http://www.nationalcenter.org/NPA656.html#sthash.QUxqM4nn.b3Fi9AqK.dpuf

– See full report here : http://www.nationalcenter.org/NPA656.html#sthash.QUxqM4nn.dpuf

About budbromley

Life sciences executive, retired
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