Thursday, May 16th, 2013 @ 3:08PM

Between the Lines
by Gary D. Halbert

The US House of Representatives’ Energy and Commerce Committee recently sent letters to 17 of the nation’s largest insurance companies regarding health insurance premiums when Obamacare is fully implemented in 2014. The 17 companies include Aetna, Blue Cross Blue Shield, the Kaiser Foundation and others.

The Committee specifically asked the companies to estimate how much their health insurance premiums would increase next year for individuals who need to purchase health coverage. Internal cost estimates from 17 of the nation’s largest insurance companies indicate that health insurance premiums for individuals will rise an average of 100% under Obamacare, and that some will soar more than 400%, crushing the Obama administration’s stated goal of healthcare affordability.

New regulations, policies, taxes, fees and mandates are the reasons for the unexpected “rate shock,” according to the House Energy and Commerce Committee, which released a report Monday based on internal documents provided by the insurance companies.

The report found that individuals will face “premium increases of nearly 100 percent on average, with potential highs eclipsing 400 percent. Meanwhile, small businesses can expect average premium increases in the small group market of up to 50 percent, with potential highs over 100 percent.”

One company said that new participants in the individual market could see a premium increase of 413% when new requirements on age rating and required benefits are taken into account, according to the report. “The average yearly cost for a new customer in the individual market grows from $1,896 to $3,708 — a $1,812 cost increase,” it added.

The key reasons for the surge in premiums include providing wider services than people are now paying for and adding less healthy people to the rolls of insured, said the report.

The report cites two main and entirely predictable reasons for the skyrocketing premiums. First is Obamacare’s pre-existing conditions mandate. I understand that this sounds like a good idea, but it indicates a profound misunderstanding of the purpose of insurance. Forcing a health insurance company to cover a pre-existing condition is no different than forcing a casualty insurance company to provide fire insurance after the fire has burned the building down. It throws the whole concept of risk, which is what insurance is based on, out the window.

A second reason for the premium spikes is the wide array of services Obamacare mandates health insurance plans cover in order to comply with the law. Consider what would happen if the government required my auto insurance plan to cover routine expenses such as gasoline, mufflers, tires, oil changes, etc. How much would that “insurance” cost?

And let’s not forget the perverse incentives such a system fosters. If people are getting lots of new services, medical tests, etc. – which are perceived to be free – then they’re going to request more and more services and testing, and more frequently as well.

The practical effect of mandating that insurance companies cover all of these additional services is that it puts further upward pressure on prices and incentivizes people to over-use the system. Nobody should be surprised, then, when such a scheme leads to 100-400% increases in premiums.

The report concluded: “Despite promises that the law will lower costs, [Obamacare] will in fact cause the premiums of many Americans to spike substantially. The broken promises are numerous, and the empirical data reveal that many Americans, from recent college graduates to older adults, will not be able to afford the law’s higher costs.”

Remember Obama’s promises: “If you like your doctor, you can keep your doctor. If you like your plan, you can keep your plan. A family of four could save over $2,000 a year under my plan.” Etc., etc.

Finally, if these preliminary premium estimates from the largest insurance companies are remotely accurate, there’s going to be a revolution in this country in January of next year! We all know that Obama desperately wants to move to a “single-payer” system, but if premiums explode as discussed above, this will be one hell of a risk to get there.

You have to wonder if this coming revolt was created by design or incompetence. It is simply impossible to know at this point – it could be either, or both!

Posted by AIA Research & Editorial Staff
Categories: Between the Lines