Rising Health Insurance Premiums with ObamaCare

January 22, 2013

The President signed ObamaCare into law three years ago. One of the main goals of the legislation was to hold down the cost of health care in the United States.

Three of the fundamental provisions of the law relate to health insurance reform and are scheduled to take effect in 2014. The most significant provision is called guaranteed issue and requires private insurance companies to sell health policies to anyone regardless of pre-existing health conditions. In other words, a lady could wait until she became pregnant and then purchase insurance. This is analogous to a person waiting until his house in on fire and then purchasing home owners insurance.

The other two provisions are 1) community rating, essentially mandating that everyone, regardless of age or illness, pay the same amount for an insurance plan, and 2) no lifetime caps on health care expenditures.

The problem with these health insurance mandates is that companies have no idea how to mitigate risk and how to figure future payments. Consequently, health insurance companies are currently raising premium rates in anticipation of unknown, but definitely increased costs after the provisions take effect in 2014.

Massachusetts has had RomneyCare, the blue print for ObamaCare, in place since 2006. MA is now one of the states with the highest health insurance premium costs in the country. Other states are experiencing dramatic increases as well, especially in the individual market. Even one of the architects of ObamaCare, Jonathan Gruber, is on record for predicting an increase in health insurance premiums of 30% by 2016.

Health insurance companies are also dealing with the ObamaCare mandates that require companies to included "children" up to the age of 26 on their parents' plans as well as the new taxes on health insurance premiums and on the companies themselves. The costs of all these mandates are then passed on to customers.

If the government is serious about holding down health insurance costs, the regulators will undoubtedly force price controls on the health insurance industry. When this happens, health insurance companies will find it virtually impossible to earn a profit and could very well become public utilities.