The so-called rate shock from Obamacare has hit Ohio. The state’s Department of Insurance announced last Thursday that, based on rates submitted by insurers to date, it estimates the average individual-market health insurance premium in 2014 will cost approximately $420, “representing an increase of 88 percent” compared to 2013.“We have warned of these increases,” said Lt. Gov. Mary Taylor in the accompanying press release. “Consumers will have fewer choices and pay much higher premiums for their health insurance starting in 2014.”
Projected costs from the companies for providing coverage for the Affordable Care Act’s required essential health benefits ranged from $282.51 to $577.40 for individual health insurance plans, said the state.
But for many experts who understand the economics of health insurance, the premium increases are not shocking at all. In August of 2011, the actuarial firm Milliman predicted that the Affordable Care Act — whose provisions mandate all Americans purchase health coverage — would increase individual-market premiums in Ohio by 55 to 85 percent. There are two main drivers for this increase: risk pool composition changes will require the young to subsidize the old and the healthy to subsidize the sick; and Obamacare’s expansion of insurance benefits, particularly its required reductions in deductibles and co-pays.
When California released its pricing structure for the individual health insurance exchanges, the reported insurance premiums were lower than previously estimated, indicating that premiums under Obamacare may be more affordable than previously expected. Following that announcement, New York Times opinion columnist Paul Krugman shared this analysis of the rate shock: important new evidence — especially from California, the law’s most important test case — suggests that the real Obamacare shock will be one of unexpected success.”