From The Left: The Surprising Results Of Health Insurance Exchanges


I have been a fan of health care reform for over 25 years. I remember arguing in the early 90’s that if the Clinton administration did not do something about Health Care costs, health care would approach 15% of the GDP. Well, as it turns out, Republicans got their way, and nothing was done until 2010. By the time the Patient Protection and Affordable Care Act passed a little over three years ago, health care costs were almost 18% of the GDP. Projections at that time showed that health care would consume over 20% of the GDP within 10 years and 25% within 15 years.

I have never thought that the Patient Protection and Affordable Care Act was a perfect law. However, it remains significantly better than the previous health insurance system, and far better than any Republican alternative. (Full disclosure: The current “insurance mandate” was first proposed by 19 Senate Republicans in 1993 as an alternative to “Hilary Care”. So in short, Republicans were for the mandate before they were against it).

Since the PPCA was passed, it has not been the most popular law. However, many parts of the law are popular. Polls have shown that most Americans support the efforts to make buying insurance easier for people with pre-existing conditions, people support efforts to allow children to stay on their parents plan longer, and many states, including North Dakota, have chosen to allow Medicaid expansion as part of the law.

The biggest issue with the PPCA is that people have yet to believe that the cost curve is actually going to be controlled. Scare stories come out almost daily of employers who are going to have to let people go or cut their hours in order to be in compliance with the law. One of the most famous of these efforts was by the owners of Olive Garden and Red Lobster, who were forced to back off of their hour/job cutting threats after the public responded by eating elsewhere.

However, many have been shocked to learn that the costs of Health Care Exchanges in California are significantly below the cost projections. According to the The Washington Post:

“The Congressional Budget Office predicted back in November 2009 that a medium-cost plan on the health exchange – known as a “silver plan” – would have an annual premium of $5,200. A separate report from actuarial firm Milliman projected that, in California, the average silver plan would have a $450 monthly premium.

Now we have California’s rates, and they appear to be significantly less expensive than what forecasters expected.
On average, the most affordable “silver plan” – which covers 70 percent of the average subscriber’s medical costs – comes with a $276 monthly premium.”

There is a very simple reason for these lower costs. With millions of new customers, insurance agencies are now able to spread the cost of health insurance among more people, bringing down the costs for everybody. This is exactly what health care reform supporters have been saying would happen for years.