Why We Can’t Afford Obamacare’s Exchanges

November 05, 2013

By Hannah Fjeldsted

As Americans are all too aware, the early October rollout of the Patient Protection and Affordable Care Act’s insurance exchanges was riddled with severe technical difficulties. Still a month later, the exchanges are not functioning properly. The nightmare is still not over for the few who are lucky enough to access the plans on these exchanges, as the prices are turning out to be much higher than the law’s proponents promised. Obamacare’s insurance exchanges make health insurance less affordable by requiring insurers to cover benefits that not all consumers need, mandating coverage of preexisting conditions, and limiting the amount insurers can charge based on age and gender.

First of all, Obamacare requires all plans sold on its insurance exchanges to cover a minimum of ten essential benefits, including maternity care, substance abuse treatment, and prescription drugs. The logic behind this provision was that, in the past, many insurance plans were not comprehensive; people had difficulty getting coverage for certain procedures. For example, according to a study by the National Women’s Law Center, the vast majority of insurance plans that they reviewed on the individual market did not cover maternity care. Instead of letting consumers shop for the coverage they truly need, Obamacare consolidates control and forces all consumers—including men—to be covered for maternal benefits. As a result, insurers have no choice but to charge higher premiums across the board to comply with these new federal standards. For example, George Schwab of North Carolina recently received a letter from Blue Cross, notifying him that his insurance coverage would be canceled because it did not cover all the required benefits. The letter went on to suggest a plan that charged $1,208 per month, as opposed to the $228 per month that he paid previously.

Obamacare also prohibits insurers from denying coverage for patients with preexisting conditions. A preexisting condition is a medical problem a consumer already has, such as diabetes, cancer, heart disease, and high blood pressure. Before Obamacare passed, it was a common practice for insurance companies to choose not to cover preexisting conditions because they are very expensive to insure. As a result, many were unable to obtain insurance. So, Obamacare aimed to address this problem by prohibiting insurance companies from rejecting patients due to preexisting conditions. While this solution may be well-intentioned, it is only making insurance more expensive for everyone. Insurers must now increase premiums overall to offset the large risks associated with the policy. For instance, Blue Cross has raised premiums for many customers in Alabama. Doug Hoffman saw his premium skyrocket from $675 to $1,360 per month. When asked about the boost, Blue Cross cited the preexisting condition mandate as one justification for the increase.

Another way the exchanges make health insurance less affordable is by restricting the amount insurers can charge their customers based on characteristics like age and gender. Insurers are now forbidden to charge older customers more than three times the price they charge younger customers. Obamacare sought to make insurance more affordable for older consumers by forbidding insurance companies from charging this group beyond a certain point. Consequently, younger consumers face higher premiums to subsidize the costs of their older counterparts. One study by the Manhattan Institute found that exchange premiums for twenty-seven-year-old men will increase by an average of 97%and for women by 55%, while another study found that men age 60 to 64 could see their premiums drop by 12%. So, although premiums for older consumers will drop, it is only because the financial burden is being placed on the young. Insurers are also prohibited to charge women more than they charge men. Before Obamacare was passed, it was common for insurers to charge higher premiums for women because they tend to utilize more health care services than men do. However, in the face of this new mandate, insurers are motivated to increase men’s premiums. It has been estimated that the insurance rates of men between the ages of 25 and 36 could increase by more than 50%.

While Americans should strive to make health insurance more affordable and accessible for those with preexisting conditions, there are ways to achieve that goal without wreaking havoc on the country’s health care industry. Obamacare’s exchanges do not meet this criterion.

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