ObamaCare Sticker Shock Will Hit Americans Hard

Federal lawmakers are warning Americans to prepare for some “shocking” news when they renew their health insurance next year.

The House Energy and Commerce Committee just published “The Looming Premium Rate Shock” — a report estimating that some Americans could see their insurance bills quintuple.

It’s yet more evidence that the “Affordable Care Act” will fail to live up to its name — and instead will make insurance more expensive for virtually all Americans.

The House report draws on data provided by 17 major insurance companies. On average, premiums in the individual market for new customers will nearly double. For some, they could surge by more than 400%. That translates to an average yearly increase of more than $1,800.

The average consumer who already has coverage will pay 73% more.

One insurer projected that “individual consumers in about 90% of all states would likely face significant premium increases.”

In California, for instance, average premiums will jump 23% to 66%. Men in California could face premium hikes of 40%.

Another insurer concluded, “The bottom line is that the PPACA does not contain many provisions that will reduce costs and improve affordability.”

Big Problem For Small Firms

For small businesses, the outlook isn’t much better. Average premium hikes will amount to 50% — with the potential for increases of more than 100%.

In fact, the report looked at the small-group insurance market in 22 states and projected rate hikes from 16% to 75% in every one.

In California, small businesses are facing an average premium hike of 37%. In Connecticut, the increase amounts to 36%. And in New Jersey, 16%.

Why the precipitous cost increases? According to the report, “The primary reason costs will in crease is that the PPACA requires insurers to provide increased services and benefits while, at the same time, it limits their ability to charge consumers based on age or health status.”

ObamaCare prevents an insurer from charging a customer more than three times what it charges any other customer. Thanks to this community rating requirement, everyone pays more.

Average premiums would be a lot lower if policymakers revised that requirement to permit a community rating ratio of 5-to-1.

The House report also suggests that ObamaCare doesn’t just force all Americans to obtain insurance — it also forces them to pay for services they don’t need or want.

According to a survey by one insurer, 50% of consumers said that if they were shopping in a new ObamaCare insurance exchange, they’d choose a plan based on price. Just 15% said that the level of benefits offered by the plan “would influence their decision.”

Passing On Tax Hikes

The law also affects insurers, drugmakers and medical device manufacturers with $165 billion in tax increases. They won’t simply swallow their new tax bills and keep prices the same. In the end, according to the nonpartisan Congressional Budget Office, the taxes will “be largely passed through to consumers in the form of higher premiums.”

The tax on insurers, for example, could raise premiums 2.3% to 2.5% in 2014 — and by 3% to 4% in future years, according to the House report.

Young, healthy people may respond to all these premium hikes by flouting ObamaCare’s requirement that they purchase health insurance. After all, the financial penalty for disregarding the law’s individual mandate starts at just $95 next year — one- 50th of what the average yearly cost for a new customer in the individual market will be.

These new data reveal that ObamaCare cannot burden insurance policies with thousands of pages of regulations and required benefits, and simultaneously expect costs to fall. Americans are about to experience this disconnect firsthand, when they open up their insurance bills later this year for coverage in 2014.

• Pipes is president, CEO and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her next book, “The Cure for ObamaCare” (Encounter), will be released this summer.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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