Surprise: “Rate Shock” Fear-Mongering Massively Overplayed
With the technical issues of the federal health insurance exchange being acknowledged and worked on with all due haste, the attention of the Affordable Care Act’s critics has turned to “rate shock,” the argument that an increasing number of insurance policy holders who said they were “happy” with their insurance in 2010 will soon be getting cancellation notices and moved to far more expensive policies.
But reality is, once again, not playing nice with this argument. Jon Gruber, an M.I.T. economist and the architect of both Romneycare and the ACA, has weighed in on the numbers and found that the much ballyhooed pain of “rate shock” is confined a tiny fraction of Americans:
Gruber broke down the A.C.A. “winners” and “losers” for me. About eighty per cent of Americans are more or less left alone by the health-care act—largely people who have health insurance through their employers. About fourteen per cent of Americans are clear winners: they are currently uninsured and will have access to an affordable insurance policy under the A.C.A.
But much of the current controversy involves the six per cent of Americans who buy their own health care on the individual market, which the A.C.A. has dramatically reformed. Gruber argued that half of these people (three per cent of all Americans) will have little change to their polices. “They have to buy new plans, but they will be pretty similar to what they had before,” he said. “It will essentially be relabeling.”
The other half, however, also three per cent of the population, will have to buy a new product that complies with the A.C.A.’s more stringent requirements for individual plans. A significant portion of these roughly nine million Americans will be forced to buy a new insurance policy with higher premiums than they currently pay. The primary reason for the increased cost is that the A.C.A. bans any plan that would require a people who get sick to pay medical fees greater than six thousand dollars per year. In other words, this was a deliberate policy decision that the White House and Congress made to raise the quality—and thus the premiums—of insurance policies at the bottom end of the individual market.
This chart makes it easier to get a sense of just what Mr. Gruber is describing:
So there you have it, 3% of American health insurance policy holders will be inconvenienced by being legally required to drop crap insurance policies (high co-pays, high deductibles, lifetime caps, minimal coverage) and buy comprehensive insurance policies on the market. For all of their sobbing about the cost, they will no doubt be happy with that insurance when they have one of those unplanned medical emergencies that would bankrupted them with their old policies.