Thursday, July 18, 2013

The Obama Administration’s Fuzzy Premium Math

President Obama is scheduled to make an address talking about Obamacare this morning. He’s expected to claim that Obamacare is working to lower premiums. There’s only one problem with that claim: His math doesn’t add up.

Let’s look at the facts. In 2008, then-Senator Obama promised premiums would go down under his plan by $2,500 per family per year. But the non-partisan Congressional Budget Office estimated in 2009 that Obamacare would raise premiums on the individual health insurance market by $2,100 per family per year by 2016.

Now, according to press reports, the Administration will release a report today with claims of lower premiums:

Costs for a middle-of-the-road insurance policy average roughly $321 per month across the 11 states that have released their rate filings for next year, administration officials said — compared with initial estimates of $392 per month.

There’s one big problem with that claim: Premiums won’t actually go down—the increases will just be lower than expected.  If premiums are $71 per month ($392 minus $321), or $852 per year, lower than CBO first estimated, that still leaves them nearly $1,250 higher than they would have been without Obamacare.  Remember: CBO said individual health insurance premiums would go up by $2,100 per family.  Even if premiums are going up by less than expected, they’re still going up—in violation of Obama’s 2008 campaign promise.

There are other problems with the Administration’s claims.  As The Hill notes, the claims are based on an apples-to-oranges comparison flattering to Obamacare:

The administration is comparing the cheapest policy in the middle tier of benefits to estimates for the second-cheapest policy — not quite applies-to-oranges, and also not a direct comparison.

Additionally, next year’s premium rates themselves are based on the assumption that enough young and healthy individuals will enroll in Exchanges to offset the cost of older, sick enrollees.  If Exchanges get stuck with only individuals whose health costs are greater-than-expected—either because only sick individuals enroll, or because employers struggling with high health costs dump their workers into the exchanges—premium costs could explode in future years. That’s exactly what happened with Obamacare’s pre-existing condition insurance plan—enrollees’ health costs were greater than expected, such that the program had to take drastic measures to avoid depleting its $5 billion allotment early.

The bottom line: Then-Senator Obama promised a $2,500 premium decrease.  Nothing released today shows that Obamacare is within a country mile of delivering on that promise.  And the fact that Obamacare has failed to deliver on its central promise is yet another reason why Congress should refuse to spend a single dime on this law.

This post was originally published at The Daily Signal.