The Early Returns Are Not Looking So Good For Obamacare

There's been a great back and forth in the blogs over the past couple of weeks over the early returns on Obamacare implementation.    It began when something called "Covered California" issued a press release on May 23 announcing the results of bidding for the cost of new compliant health insurance policies to be available next year to Californians in the individual market.  Covered California is the name for California's version of the Obamacare insurance exchange for those who don't have health insurance through their employer.

If you read the press release, the situation looks like a great triumph.  Many rates will actually go down!  

“This is a home run for consumers in every region of California,” said Peter V. Lee, Executive Director of Covered California.  “Californians should be proud of how not only health plans in this state, but doctors, medical groups and hospitals have stepped up – and creating a market that will allow millions of consumers to enroll in affordably priced products. Because of that, we will be able to deliver exceptional value, low rates, access to health care in every region of the state, and a solid platform to achieve the dream of providing quality health care for all Californians,” Lee said.

Statist commentators like Paul Krugman of the New York Times and Ezra Klein of the Washington Post promptly joined in claiming great success.

Well, not so fast.  Next to join the discussion was Forbes columnist Avik Roy on May 30.  He took the actual numbers put out by Covered California and compared them to policies available today in the individual market from the internet site  Result:  rates for the young and healthy on the individual market will increase by 64 - 146%.   

Klein's response was that Roy's numbers did not include about 25% of applicants through who are not qualified for its low rates due to various existing health issues.  In today's market, they either can't buy insurance at all, or else must pay dramatically higher rates.  True enough.  But that leaves about 75% who will be subject to, on average, a doubling of their rates.  

The problem here is that the people whose rates are about to double are not all just going to go along with it and buy the new Obamacare insurance with all the required coverages (free birth control!).  Since Obamacare outlaws all non-compliant health insurance, the available option is to decline to buy insurance, pay the tax penalty, and wait until you get sick.  Supposedly the whole idea of Obamacare was to solve the "problem" of 50 million +/- of people without health insurance.   The solution was a mandate to buy insurance, the cost of which, our President promised, would go down.  But if the cost goes up, and if the only teeth of the "mandate" are a tax penalty that is far less than the cost of the insurance, and if insurers are required to sell you "insurance" after you get sick, why would any sane person do this?  Isn't it just about a sure thing that the number of uninsured is about to soar?  

Time to place your bets.