One figure in a new report neatly summarizes the potential pitfalls for Obamacare: 30.1%. That's how much premiums could rise next year, on average, for the roughly 1.3 million moderate- and upper-income Californians who buy individual health insurance policies. Most of that increase is attributable to the insurance reforms in the 2010 law, also known as the Affordable Care Act. The bill's title is not ironic — its provisions will slow the growth of healthcare costs and lead over time to a more rational and efficient system. But the transition will have some rough patches, and we're about to hit one.
The report by Milliman, a San Diego-based consultancy, applies only to the small share (6%) of California insurance buyers who aren't covered by employer health plans, Medicare or Medi-Cal. And while it's headline-grabbing, the 30.1% average increase is just part of the story — the ugliest part. The bigger picture is that the law is spreading the cost of medical care more broadly, barring insurers from denying coverage to those with preexisting conditions or from extracting exorbitant premiums from older and riskier customers.
Milliman projects that the law's effect will vary widely, with younger, healthier and wealthier buyers paying more for individual coverage and older, sicker and lower-income buyers paying less. But because the law requires policies to guard against more health and financial risks with lower out-of-pocket expenses, there will be offsetting savings. The net increase in costs for those who aren't eligible for federal subsidies will drop to 20% on average. And for those who are eligible for subsidies — anyone earning less than four times the federal poverty level, or close to $95,000 for a family of four — average costs are expected to drop by 40% to 76%.