Health Insurance Choices Down, Costs Up

We all remember candidate Barack Obama’s promise, “There is no doubt that we must preserve what is best about our health care system, and that means allowing Americans who like their doctors and their health care plans to keep them.” Candidate Obama also warned that if a federal health care law was not passed, “premiums will climb higher, benefits will erode further, and the rolls of uninsured will swell to include millions more Americans.”

Unfortunately Americans are learning that the promises of candidate Obama are not matching up to the reality under President Obama. The effects of the federal health care law may still be in the earliest stages, but we can see where the trend line is going.

Already businesses and insurance companies are reporting health insurance premiums are going up. A recent survey of Milwaukee-based employers indicated that 64% of companies with 100 or more employees are facing insurance premium increases of 2% or more due to the federal health care law. Fourteen percent are reporting the new requirements of the federal health care law will add more than 4%, according to a survey conducted by HCTrends.

Costs for health insurance premiums are going up because of federally mandated increased coverage. Half of those surveyed by HCTrends said federal mandates for “the elimination of lifetime caps, the addition of free preventive care and mandated coverage for children up to age 26 will add between 2 and 4 percentage points to their 2011 rates.”

That is if they keep the same insurance. Forty percent of those surveyed said they were “seriously considering” changing networks or health plans. This seriously undermines the promise that Americans will get to keep their insurance plans and their doctors if they are currently satisfied with their health care.

Unfortunately, the situation is only going to get worse. Some insurance companies are looking to get out of certain types of health care coverage altogether. This will reduce choices for American health care consumers and will result in many Americans losing the health care providers they currently are satisfied with.

For example, Aetna will stop selling insurance to small groups in Colorado next year. Aetna, Cigna, WellPoint, and other insurance companies will stop selling child-only insurance in certain states next year.

The New York Times reports this is part of a larger trend of smaller insurance companies not having the resources and economies of scale to remain competitive. Once the health insurance market is concentrated into a smaller number of companies, prices could go up even more, even as more Americans are no longer in the health insurance plans they preferred before the federal health care law passed.

Some worry that companies could begin to drop health care coverage altogether under the new federal health care law. As we saw recently when McDonald’s was granted a waiver by the federal government, many companies may decide to opt out entirely of providing insurance to their employees as the new federal mandates go into effect.

The federal health care law penalizes employers that drop their health care coverage $2000 per employee. Employers may look at that number and decide that it is not enough of a deterrent. James Klein, president of the American Benefits Council, even said to the Associated Press that the federal health care law could begin to dismantle the employer-based health insurance system.

While the White House disagrees, claiming the new law actually encourages employers to offer health insurance coverage, Democratic Tennessee Governor Phil Bredesen predicts that the new exchanges that begin operating in 2014 will make dropping insurance coverage an attractive option for employers, including in the public sector.

Bredesen, in an op-ed for the Wall Street Journal, said that not having coverage would be especially attractive to new business start-ups.

“For a person starting a business in 2014, it will be logical and responsible simply to plan from the outset never to offer health benefits. Employees, thanks to the exchanges, can easily purchase excellent, fairly priced insurance, without pre-existing condition limitations, through the exchanges. As it grows, the business can avoid a great deal of cost because the federal government will now pay much of what the business would have incurred for its share of health insurance. The small business tax credits included in health reform are limited and short-term, and the eventual penalty for not providing coverage, of $2,000 per employee, is still far less than the cost of insurance it replaces.”

So under the federal health care law, Americans will have higher insurance costs, and it is very likely they will not be able to keep the insurance plans or the doctors they preferred before the federal health care law went into effect. We are already seeing the beginning of this trend in Wisonsin’s largest city, and the final result could be the end of employer-based health insurance, according to a member of the president’s own party. That’s completely different than what was promised before the health care law was passed. Perhaps House Speaker Nancy Pelosi was correct when she said that the law would have to be passed before we knew what was in it.

By James Wigderson
Special Guest Perspective for the MacIver Institute