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Topics of interest to both consumers and agents related to Covered California and the ACA biased in favor of the successful implementation of the Exchange and deliberately apolitical.


The Great Rate Debate

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It didn’t take long for those opposed to the successful implementation of the ACA to attack Covered California’s claim that their health care rates would be lower than predicted.

Avik Roy of Forbes headed his article, “Rate Shock: In California, Obamacare to Increase Individual Health Insurance Premiums by 64-146%”. He charged that Covered California “was making a misleading comparison. They compared apples - the plans that Californians buy today for themselves in the individual market - and oranges - the highly regulated plans that small employers purchase for their workers as a group.” He went on to compare today’s individual plans by getting an online quote for individual plans available today where the median cost of the five cheapest plans was $121 for a 40 year old and $92 for 25 year olds. That’s how he arrived at an Obamacare increase of 100% for 25 year olds and 116% for 40-year-olds.

In response, Ezra Klein of the Washington Post and a frequent contributor to MSNBC wrote what I though was an amusing and spot-on analogy. “Imagine you went to Best Buy and found a great deal on a plasma television set. I want to be clear here: You didn’t find a great television set. This television set is actually a bit crummy. The picture is fuzzy. Consumer Reports says it breaks down a lot and it’s expensive to fix. But it’s really cheap. The price tag reads $109. When you take it to the counter, the saleswoman tells you that the set will actually cost you $199. And count yourself lucky, she confides in a conspiratorial whisper. There are customers whom Best Buy won’t sell it to at any price. You ask her which customers those are. The ones who need the TV most, she replies. So here’s the question: Does that television really cost $109?

According to HealthCare.gov, 14 percent of people who try to buy an individual health insurance plan are turned away outright. Another 12 percent are told they’ll have to pay more than the quoted rate, So a quarter of the people who try to buy this insurance product for $109 a month are told they can’t. Those are the people who need insurance most — they are sick, or were sick, or are likely to get sick. So, again, is $109 really the price of this plan?

Comparing the pre-underwriting price of this plan to a guaranteed-issue plan in Covered California is ridiculous. The plans in the exchange have to include those people. They can’t turn anyone away or jack up rates because you once suffered a migraine headache, or experienced a summer of hay fever, or had acne as a teenager

Yes, some people will find the new rules make insurance more expensive. That’s in part because their previous health insurance was made cheaper by turning away sick people. The new rules also won’t allow for as much discrimination based on age or gender. The flip side of that, of course, is that many will suddenly find their health insurance is much cheaper, or they will find that, for the first time, they’re not turned away when they try to buy health insurance. For example, the Commonwealth Fund estimates that 94% of the the 19-29 age group will receive free public insurance or subsidized private insurance under Obamacare.

That’s why the law is expected to insure almost 25 million people in the first decade: It makes health insurance affordable and accessible to millions who couldn’t get it before. To judge it from a baseline that asks only what the wealthy and healthy will pay and ignores the benefits to the poor, the sick, or the old is a bit disingenuous.

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