30 March 2010

Will health care insurance premiums go down even by one cent?

Then-Senator Obama made the reduction of health care insurance premiums a fixture of his campaign. On dozens of occasions he repeated his pledge that his health care plan would reduce premiums:
Under the plan, if you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year.
Let me begin, right off the bat, by making a number of concessions:
  • I fully recognize that political candidates of all shapes and colors and parties regularly over-promise during a campaign. So I understand that this number is all good and well, but no one is ever going to see that sort of reduction, and per year?! That's just laughable. So I'm looking for some reduction in my premiums. Any reduction at all.
  • Now I will also give President Obama an additional benefit of the doubt and say that he is talking about the full premiums, not just the employee-paid portion. So for example, while I pay about $370/month for my Aetna health care coverage, this only represents 30% of the actual cost (the remaining 70% is paid for by my employer). So the true monthly costs are in excess of $1,200/month or nearly $15,000 for the year.
  • According to the President's many promises, my health insurance premiums should be reduced by up to $12,500 for the year; this comes out to about $312/month or a reduction of $58/month. Now I understand this is the maximum, and that my health care plan may or may not be "average," so I'm willing to give the President yet another benefit of the doubt; in fact, I understand that much of this plan won't be fully implemented for several years, so I'm willing to go all the way and suggest that I'll be happy if my premiums are reduced by even 1 cent next year, or any year in the future even.
Now that the health care reform bill has been passed into law, a number of companies have estimated what the new health care costs will be to them. And insurance companies are beginning to chime in, too. In an interview with BusinessWeek, Aetna CEO Ron Williams made a number of interesting points, but the most revealing was:

BW: Will insurance premiums go up?
RW: The answer is yes, and some of the things that will drive those premiums are significant additional taxes the industry will ultimately have to pay in the first year.
Now there are a couple of ways to approach this answer, but in the end the answer still remains the same. Premiums are going up (did you ever honestly think they would go down?).

So my comments for the President (or anyone who truly believes premiums will go down) are these:
  1. If you truly thought insurance companies would raise premiums after this law passed, you blatantly lied for political gain.
  2. If you truly thought insurance companies would lower premiums after this law passed, then you're either incredibly naive (so much so that being the President might be a little too much for you); or the the law is so bad that it can't even force premiums down. And if that's the case, what exactly was the point of all of this?
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