OBAMACARE JULY 21, 2013
Obamacare got some bad news late Thursday afternoon. State officials in Indiana announced that premiums for residents buying insurance on their own next year would be 72 percent higher than the premiums such people typically pay this year. They also announced that the typical cost for an individual plan next year would be $570, up from $255 this year. “This new data regrettably confirms the negative impact of the Affordable Care Act on the insurance market in Indiana,” Logan Harrison, chief deputy commissioner for the state insurance department said. “The Affordable Care Act requires many Hoosiers to purchase more comprehensive and more expensive health insurance than they may want or need. These rates call into question just how affordable health insurance will really be for many Hoosiers.”
The timing could not have been worse. Earlier that same day, at the White House, President Obama had given a speech touting the law’s benefits. He’d even pointed to a new report, based on information from ten other states and the District of Columbia, showing that the average, pre-subsidy premium insurers were requesting for a basic insurance plan was just $352 a month. By Friday morning, Republicans were all over the Indiana announcement, saying it proved that they were right along—and that Obamacare, once implemented, would place enormous financial strain on both individual insurance buyers and the government as a whole.
But, from the very beginning, there was something odd about the announcement. Officials in states like California and New York, which were eager to show premiums lower than many experts had predicted, provided some background information with their announcements. They offered examples of actual premium proposals, from actual insurers, and explained what assumptions they made in calculating averages and trends. The press release from the Indiana Department of Insurance was just three paragraphs long. It included the figure for the overall increase and the quote from Harrison. It had no background material whatsoever. Also weird: The press release indicated that Harrison would be available to reporters to take questions. But that availability, the release said, was to occur at 3:30 p.m. The press release went out at 2:30. Reporters had little time to prepare or, after the announcement, to check with outside experts about what the numbers might mean.
By the next day, however, the news had caught the attention of some people who follow health care pretty closely—among them, Aaron Carroll, a pediatrician and health policy blogger at The Incidental Economist; Sarah Lueck, a senior policy analyst at the Center on Budget and Policy Priorities; and Larry Levitt, a senior vice president at the Kaiser Family Foundation. By sifting through what information they could find online, and putting it together with some reporting by Indianapolis Star correspondent Tony Cook, they were able to ferret out some of the information that the press release had left out. And that information suggested Harrison hadn’t been particularly forthright in his announcement—although, even now, it’s not entirely clear what the Indiana numbers really show. (Department officials I contacted on Friday and over the weekend either did not respond or were not able to provide the information I requested.)
One issue—which Sarah Kliff raised in the Washington Post on Saturday—is what exactly Harrison meant when he was talking about the “average” premium. People buying insurance under Obamacare will be able to choose more generous ("platinum" or "gold") policies or less generous ones ("silver" or "bronze.") But people will likely gravitate to the silver and bronze plans, because they are cheaper and closer to what people buying on their own have today. Was the estimate Harrison cited a straight average, or did it adjust the numbers based on age and expected enrollment? The department didn’t say and, in response to inquiries from the Star, Harrison eventually said the information about those methods was not yet available.
Perhaps more important, by putting out the $570 figure, Harrison made it sound as if that was the amount Indiana consumers would be paying for coverage next year. But $570 wasn’t the premium. It was the insurer calculations for “allowed costs”—in effect, the cost of insurance before calculating how much individuals would pay out-of-pocket, because of co-payments and deductibles. The actual premiums would be a lot lower. In her reserach, for example, Lueck found sample listings for a "bronze" plan from Anthem. The premiums were just $125 a month for a 20 year old and $307 for a 47 year old. Levitt did some calculations of his own and determined the average, statewide premium for a 40-year-old buying Anthem’s cheapest silver plan would be $320. That figure was important, because that meant the bids from Indiana were right in line with what officials in other states were getting from their carriers—the same bids that the White House had been touting.
And that’s not to mention the dodge most familiar to readers of this space: The announcement made no mention whatsoever of the generous federal subsidies that will discount the premiums for the majority of people buying coverage. In some cases, the discounts will be worth only a few hundred dollars a year. In some cases, they will be worth a few thousand. The press release said not a word about them. Harrison later said he didn’t mention the discounts because Indianans were going to have to pay for those anyway, in the form of higher taxes. (That’s true if you’re talking about wealthy people, who under Obamacare pay some extra taxes, and eventually those who will pay a tax on generous health benefits. But these are not the people who will be receiving subsidies.)
Was Indiana’s Insurance Department just being sloppy? It’s possible. State agencies can be pretty threadbare when it comes to personnel and resources. Then again, Harrison’s boss is Republican Governor Mike Pence, an outspoken Obamacare critic who, while serving in the U.S. House of Representatives, was among the first to join the Tea Party Caucus. Harrison’s announcement also bore a remarkable resemblance to one that Ohio Lieutenant Governor Mary Taylor, a Republican with her own record of hostility to Obamacare, made a few weeks ago. Like Harrison, Taylor had not presented detailed background material for her calculations. Like Harrison, Taylor had not talked about subsidies. Like Harrison, Taylor had presented figures that turned out to be not exactly representative. (One of the plans she used as a basis for comparison had a deductible of $25,000.)
Obamacare critics would point out that state officials who support the law have engaged in some creative presentation of their own. And that’s a very fair charge. Obama on Thursday stressed that premium bids, so far, were coming in lower than official projections had suggested. But premiums from other states may be higher. And even the apparently low premiums already submitted will translate to “rate shock” for some young and healthy people, because Obamacare forces them to buy more generous coverage and prohibits insurers from giving them the same favorable pricing they get now. When California officials made their announcement, they chose a basis for comparing rates that also de-emphasized the rate increases some young and healthy people will pay.
But both the White House and California officials were very clear about the assumptions they made in their calculations, acknowledged the higher prices for some consumers, and published detailed memos giving analysts plenty of opportunity to pore over the data themselves. They also gave reporters some lead time to prepare for their announcement—and made themselves available for questions afterwards.
The irony is that Harrison could have used real numbers to make the points that conservatives have been making during the last few weeks. Indiana has a relatively unregulated insurance market, which means there are probably a lot of young, healthy people walking around with barebones coverage and benefitting from the rates insurers give to favorable risks. The “rate shock” that these people experience may or may not be a big problem—as you know, this is a major point of dispute between Obamacare critics and defenders. But the numbers from Indiana will surely prove that the disparity exists.
Harrison will be making a presentation to the Indiana’s State Finance Committee on Monday; insurance rates under the new health law will be on the agenda then. Maybe he can provide some of the details he didn't last week, so that we can figure out, finally, what's really going on in Indiana.
Jonathan Cohn is a senior editor at the New Republic. Follow him on twitter @CitizenCohn