Medicaid’s Blue State Bailout

In discussing future coronavirus legislation, Senate Majority Leader Mitch McConnell (R-Ky.) has taken a skeptical view towards additional subsidies to states, including a potential “blue state bailout.” But current law already includes just such a mechanism, giving wealthy states an overly generous federal Medicaid match that results in bloated program spending by New York and other blue states.

Section 1905(b) of the Social Security Act establishes Federal Medical Assistance Percentages, the matching rate each state receives from the federal government under Medicaid. The statutory formula compares each state’s per capita income to the national average, calculated over a rolling three-year period. Poorer states receive a higher federal match, while richer states receive a lower match.

However, federal law sets a minimum Medicaid match of 50 percent, and a maximum match of 83 percent. No poor states come close to hitting the 83 percent maximum rate, but a total of 14 wealthy states would have a federal match below 50 percent absent the statutory minimum. (In March, Congress temporarily raised the federal match rate for all states by 6.2 percentage points for the duration of the coronavirus emergency.)

Absent the statutory floor, Connecticut would receive a match rate of 11.69 percent in the current fiscal year, according to Federal Funds Information Service, a state-centered think-tank. At that lower federal match, Connecticut would receive approximately one federal dollar for every eight the state spends on Medicaid, rather than the one-for-one ratio under current law.

Federal taxpayers pay greatly because the overly generous match rate for wealthy states leads to additional Medicaid spending. In fiscal year 2018, Connecticut spent far more on its traditional Medicaid program ($6.5 billion in combined state and federal funds) than similarly sized states like Oklahoma ($4.9 billion) and Utah ($2.5 billion). Those totals exclude the dollars Connecticut received from Obamacare, which guarantees all states a 90 percent Medicaid match for covering able-bodied adults.

The budget crisis in New York that preceded the pandemic stems in large part from Washington’s overly generous match for wealthy states. Absent the statutory floor, the state would receive a Medicaid match of 34.49 percent this fiscal year, meaning it would have to spend approximately two dollars to receive an additional federal dollar.

But the one-to-one Medicaid match guaranteed under federal law led New York to expand its program well beyond most states’. At more than $77 billion in 2018, New York Medicaid cost taxpayers more than three times the $23.4 billion spent by the larger state of Florida. And a federal audit last summer concluded that New York Medicaid spent $1.8 billion on more than 600,000 ineligible enrollees in just a six-month period. Little wonder that Gov. Andrew Cuomo in January called the state’s fiscal situation “unsustainable” after the state announced a $6 billion budget deficit, most of which came from Medicaid.

To his credit, Cuomo proposed changes to crack down on Medicaid fraud and enact other program reforms. He also criticized Congress when it passed legislation to block New York and other states from changing their Medicaid programs during the pandemic. But he has not acknowledged the underlying flaws in federal law that, by encouraging profligate blue state spending, created the problem in the first place.

Of the 14 wealthy states that benefit from the guaranteed 50 percent minimum Medicaid match, Hillary Clinton won 11. If the dramatic drop in oil and commodity prices in recent weeks persists, the three traditionally red states—Alaska, North Dakota, and Wyoming—that benefit from the statutory floor may no longer do so, should those states’ income decline. In the number of states affected and overall spending levels, the 50 percent minimum Medicaid match encourages overspending by blue states at the expense of federal taxpayers in red states.

In December 2018, the Congressional Budget Office estimated that removing the guaranteed 50 percent Medicaid match would save $394 billion over ten years. If McConnell and his colleagues want to tackle rising federal debt while stopping blue state bailouts, they should amend the Medicaid statute accordingly.

This post was originally published at The Federalist.

Don’t Just Bail Out a Flawed Medicaid Program

In recent days, some observers have discussed the possibility of targeted assistance to state Medicaid programs affected by the coronavirus outbreak. Unfortunately, the legislation proposed by House Speaker Nancy Pelosi (D-CA) falls far short of that marker, providing a gusher of new spending with no long-term reforms to the program. Conservatives should insist on better.

The House’s bill, introduced late in the night Wednesday, contains several noteworthy flaws. By increasing the federal Medicaid match for all states by 8 percentage points for the entire public health emergency, it prevents the targeting of assistance to those states most affected by coronavirus cases.

Increasing the federal match for able-bodied adults to 98 percent encourages states to prioritize these individuals over disabled populations, while discouraging states from rooting out fraud. The legislation also precludes states from making any changes to their Medicaid programs for the duration of the bailout, reinstituting the fiscal straight-jacket contained in President Obama’s “stimulus” bill.

Like that 2009 package, Pelosi’s legislation proposes tens of billions in new spending for an already-sprawling Medicaid program without any structural changes. But if Pelosi or conservatives wish to pay for the short-term largesse via long-term changes to Medicaid, they need not look far: President Obama’s budgets included several proposals that, if enacted into law, would change incentives in Medicaid for the better.

One area ripe for reform: Medicaid provider taxes. Hospitals and other medical providers often support these taxes—the only entities that ever endorse new taxes on themselves—because they immediately come right back to the health care industry, after states use the tax revenue to draw down additional Medicaid matching funds. In 2011, none other than Joe Biden reportedly called this form of legalized money laundering a “scam.”

At minimum, Congress should immediately enact a moratorium on any new provider taxes, or any increases in existing provider taxes, cutting off the spigot of federal dollars via this budget gimmick. Lawmakers can echo President Obama’s February 2012 budget submission, which would have saved $21.8 billion by reducing states’ maximum provider tax rate.

That proposal delayed its effective date by three years, “giv[ing] states more time to plan”—which would in this case delay the changes until the coronavirus outbreak subsides. Another positive solution: Codifying the Trump administration’s Medicaid fiscal accountability rule, which includes welcome reforms reining in states’ most egregious accounting gimmicks, effective a future date.

More broadly, Congress should also consider the ways the existing matching rate formula encourages additional Medicaid spending by states. For instance, current law provides all states with a minimum 50 percent match rate, encouraging richer states to spend more on Medicaid. Absent that floor, 14 states—11 of them blue—would face a lower match; Connecticut’s rate would plummet from 50 percent to 11.69 percent.

Gradually lowering or eliminating the federal floor on the match rate, beginning 2-3 years hence, would discourage wealthier states from growing their Medicaid programs beyond their, and the federal government’s, control. Had lawmakers enacted this proposal as part of the 2009 “stimulus,” New York—which would have a federal match rate of 34.49 percent in the current fiscal year absent the 50 percent minimum—might have right-sized its Medicaid program well before the program’s current budget crunch.

Alternatively, Congress could embrace Obama’s budget proposal for a blended Medicaid matching rate. Replacing the current morass of varying federal match rates for different populations could save money, and eliminate the perverse incentives included in Obamacare, which gives states a higher match rate to cover able-bodied adults than individuals with disabilities.

Judging from her initial bid in the “stimulus” wars, Pelosi has taken Rahm Emanuel’s advice never to let a serious crisis go to waste. If she wishes to emulate Obama’s first chief of staff, conservatives should insist that she also enact some of the Medicaid changes proposed in Obama’s own budgets, to begin the process of reforming the program.

This post was originally published at The Federalist.

Christmas Eve Vote on Obamacare Showed Washington Still Has Shame

A decade ago this morning, 60 Senate Democrats cast their final votes approving the legislation that became Obamacare. The bill took a circuitous route to enactment after Scott Brown’s surprise victory in the Massachusetts Senate contest, which occurred a few weeks after the Senate vote, in January 2010.

Brown’s election meant Republicans gained a 41st Senate seat, giving them the necessary votes to filibuster a House-Senate conference report on Obamacare. Because Democrats lacked the 60 votes to overcome a filibuster, they eventually agreed to a process amending certain budgetary and fiscal elements of the Senate bill through the reconciliation process on a 51-vote threshold.

The grubby process leading up to Obamacare’s enactment, full of parochial politics and special interest pork, cost Democrats politically. But many Americans do not realize that such machinations occur all the time in Washington—indeed, occurred just last week. When one party participates in a corrupt process, it becomes a scandal; when both parties partake, few outside the Beltway bother to notice.

Backroom Deals

The process among Democrats leading up to the final health vote resembled an open market, with each Senator making “asks” of Majority Leader Harry Reid (D-NV). Reid needed all 60 Democrats to vote for Obamacare to break a Republican filibuster, and the parochial provisions included in the legislation showed the lengths he would go to enact it:

Cornhusker Kickback:” The most notorious of the backroom deals came after Sen. Ben Nelson (D-NE) requested a 100 percent Medicaid match rate for his home state of Nebraska. The final manager’s amendment introduced by Reid included this earmark—Nebraska would have its entire costs of Medicaid expansion paid for by the federal government forever. But the blowback from constituents and the press became so great that Nelson asked to have the provision removed; the reconciliation measure enacted in March 2010 gave Nebraska the same treatment as all other states.

Gator Aid:” This provision, inserted at the behest of Sen. Bill Nelson (D-FL), and later removed in the reconciliation bill, sought to exempt Florida seniors from much of the effects of the law’s Medicare Advantage cuts.

Louisiana Purchase:” This provision, included due to a request from Sen. Mary Landrieu (D-LA), adjusted the state’s Medicaid matching formula. Landrieu publicly defended the provision—which she said reflected the state’s circumstances after Hurricane Katrina—and it remained in law for several years, but was eventually phased out in legislation enacted February 2012.

While these three provisions captivated the public’s attention, other earmarks and pork provisions abounded inside Obamacare too—a Medicaid funding provision that helped Massachusetts; exemptions from the insurer tax for two Blue Cross carriers; a $100 million earmark for a Connecticut hospital, and health benefits for miners in Libby, Montana, courtesy of then-Senate Finance Committee Chairman Max Baucus (D-MT).

Not only did senators try to keep these corrupt deals in the legislation—notwithstanding the public outrage they engendered—but Reid defended both the earmarks and the horse-trading process that led to their inclusion:

I don’t know if there’s a senator who doesn’t have something in this bill that’s important to them. And if they don’t have something in it that’s important to them, then it doesn’t speak well for them.

It was a far cry from Barack Obama’s 2008 (broken) campaign promise to have all his health care negotiations televised on C-SPAN, “so we will know who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies.” And it looked like Democrats didn’t really believe in the merits of the underlying legislation, but instead voted to restructure nearly one-fifth of the American economy because they got some comparatively minor pork project for their district back home.

Déjà Vu All Over Again

Democrats lost control of the House in the 2010 elections, and political scientists have attributed much of the loss to the impact of the Obamacare vote. One study found that Obamacare cost Democrats 6 percentage points of support in the 2010 midterm elections, and at least 13 seats in Congress.

But did the rebuke Democrats received for their behavior prompt them to change their ways? Only to the extent that, when they want to ram through a massive piece of legislation no one has bothered to read, they include Republicans in the taxpayer-funded largesse.

Consider last week’s $1.4 trillion spending package: Two bills totaling more than 2,300 pages, which lawmakers introduced on Monday and voted on in the House 24 hours later. Democrats wanted to repeal one set of Obamacare taxes—and in exchange, they agreed to repeal another set of taxes that Republicans (and their K Street lobbying friends) wanted gone. The Obamacare taxes went away, but the Obamacare spending remained, thus increasing the deficit by nearly $400 billion.

And both sides agreed to increase spending in defense and non-defense categories alike. Therein lies the true definition of bipartisanship in Washington: An agreement in which both sides get what they want—courtesy of taxpayers in the next generation, who get stuck with the bill.

It remains a sad commentary on the state of affairs in the nation’s capital that the Obamacare debacle remains an anomaly—the one time when the glare of the spotlight so seared Members seeking pork projects that they dared consider forsaking their ill-gotten gains. To paraphrase the axiom about casinos, in Washington, The Swamp (almost) always wins.

Aetna Gun Control Donation Epitomizes Crony Capitalism

Just when conservatives couldn’t find enough reasons to oppose an Obamacare “stability” package — or the law itself — the health insurance industry generated another. Aetna’s CEO Mark Bertolini announced Tuesday the company would donate $200,000 to support the March for Our Lives gun control rally scheduled for later this month.

Which raises an obvious question: If a company like Aetna can afford to make a six-figure contribution to a liberal gun control effort, why exactly did health insurers spend some of Tuesday asking for taxpayers to provide a multi-billion dollar “stability” package for the Exchanges?

And when it comes to taxpayer largesse, Aetna has already received plenty. According to page 56 of its most recent quarterly financial filing, last year Aetna’s revenue from government business outstripped its private-sector commercial enterprises: Even as private sector revenues dropped the past two years, government business rose by over $4.5 billion, due at least in part to the additional revenues generated by Obamacare’s Medicaid expansion.

As with other health insurers, Aetna has rapidly become an extension of the state itself — a regulated utility that focuses largely on extracting more business from government. Rather than focusing on new innovations and selling product to the private sector, it instead hires more lobbyists to seek rents (e.g., a “stability” package) from government. And in exchange for such governmental payments, it promotes liberal causes that will win the company plaudits from the statists who regulate it.

Other health insurance organizations have taken much the same tack. Several years ago, the House Ways and Means Committee exposed how AARP received numerous exemptions for its lucrative Medigap plans in Obamacare. Not coincidentally, the organization had previously used its “Divided We Fail” campaign to funnel money to such liberal organizations as the NAACP, the Human Rights Campaign, the Congressional Black Caucus Foundation, and the National Council of La Raza.

(Yes, I recognize that, technically speaking, AARP is not a health insurer. Whereas health insurers might have to place money at risk, AARP faces no such barrier, and can instead reap pure profit by licensing its name and brand.)

On Twitter Thursday evening, I asked Aetna CEO Mark Bertolini if he considers abortion a public health issue — the company’s stated reason for contributing to the March for Our Lives. If Aetna purportedly cares so much about gun violence, it should similarly care about violence against the unborn. But I won’t hold my breath waiting for Aetna to contribute to the March for Life, or any other pro-life cause.

Mind you, a private company can make contributions to whichever organizations it likes or does not like. Unfortunately, however, Aetna and many other insurers aren’t acting like private companies. In constantly begging for taxpayer dollars, they’re acting like wards of the state.

That dynamic provides conservatives with the perfect reason to oppose an Obamacare “stability” package — and support the law’s full repeal. Weaning health insurers off the gusher of taxpayer dollars Obamacare created would represent a move away from the current statist status quo. And who knows? It might — just might — get some health care companies to look beyond government as the solution to all their problems.

This post was originally published at The Federalist.

What the HHS Reports on the Health Exchanges Didn’t Cover

Recent media reports have highlighted unresolved inconsistencies in applications on the new insurance exchanges, including applications for federal premium and cost-sharing subsidies. Two reports released this week by the inspector general of the Department of Health and Human Services paint a troubling picture—and things could be worse than the reports suggest.

One HHS report examined data from federally run exchanges through Feb. 23 and from state exchanges through last December. Put another way, federal auditors tallied data from the months when the exchanges experienced middling to sluggish enrollment—not the periods when the greatest number of applications were completed.

The inspector general’s report indicates that federally run exchanges had 2.9 million data inconsistencies, of which only 1% had been resolved by late February. But those figures underestimate the number of inconsistencies from the 2014 open-enrollment period—and, unless data resolution has dramatically improved in recent weeks, probably also underestimate the number of inconsistencies still pending.

A separate inspector general’s report also released on Monday found that federally run exchanges, and state-run exchanges in California and Connecticut, in many cases lacked proper procedures for verifying applicant information. As a result, applications that should have been flagged for additional inconsistencies were not. Again, the scope of the verification problem is most likely understated.

When troubles became clear with the exchanges last fall, the focus on fixing immediate technical issues led to deferred work on verification systems. Overall, the reports expose another facet of the failures of—and the after-effects of last fall’s rollout could persist for some time.

This post was originally published at the Wall Street Journal Think Tank blog.

Day One of Obamacare’s Exchanges, By the Numbers

Obamacare’s exchanges have now been “open” (such as it is) for more than 24 hours. The results are in, and they’re not promising:

0—Enrollment navigators certified in Wisconsin in time for the start of enrollment.

0—Individuals one North Carolina insurer was able to sign up for subsidized insurance.

3—Months President Obama warned Americans could face glitches when trying to sign up.

4—Hours Maryland’s exchange opening was delayed.

7—Miles one Indiana resident drove to obtain enrollment assistance; after receiving little information and a four-page paper application, the potential applicant called the trip “a waste of time.”

22—Actual enrollees in Connecticut’s exchange out of more than 10,000 individuals who visited the website by mid-afternoon, a conversion rate of 0.22 percent.

34—Minutes one Politico reporter listened to “smooth jazz” before reaching an actual call-center representative.

35­—Minutes one MSNBC reporter spent attempting to enroll online, before finally giving up.

47—States whose exchange websites “turned up frequent error messages.”

1,289—Days between the signing of Obamacare and yesterday’s launch, a gap which prompted one insurance broker to comment, “You would just think that with all this time they’ve had to get it set up and ready to go there would have been a better premiere.”

2,400—Individuals who had their Social Security numbers and other personal data disclosed even before the exchanges opened for business.

Not only were the American people faced with major glitches surrounding the exchanges, but they also faced a wall of silence from bureaucrats when looking for explanations for the delays.

The latest in a long line of Obamacare implementation glitches and failures demonstrates how the law is inherently unworkable. It’s why Congress needs to stop Obamacare now.

This post was originally published at The Daily Signal.

How Obamacare Encourages People to Drop Their Coverage

The Wall Street Journal reported yesterday that Connecticut is seeking to scale back the Medicaid expansion it embarked upon immediately after the passage of Obamacare.  Just as interesting are the reasons why the Nutmeg State wants to scale back its program:

Connecticut officials believe some parents of college-aid children are taking advantage of the state’s Medicaid health-insurance program for low-income adults, seeking government subsidies for their children’s health care so they don’t have to pay for private insurance….The agency wants to count parental income and assets for applicants under 26 years old who live with their parents or are claimed as a dependent on their parents’ tax returns.  “If your son’s or daughter’s college provides a basic medical coverage for $1,200 or $1,300, our taking on that expense is not what this program was designed for,” Democratic Gov. Dannel P. Malloy said last week.  “And certainly, it was not designed for people who have substantial assets.  So we’re just trying to get it right.”

As of December, expenditures for LIA Medicaid applicants 18-21 years old had grown to 4.3 percent of the total expenditures, according to the state’s draft application.  The caseload for that age group increased from 0.1 percent of the total caseload in June 2010 to 8.2 percent, or 6,114 cases, as of December 2011.  It is “expected to continue to climb as more parents with college-age children become aware of the availability of…coverage,” according to the state’s application.

In other words, if the government gives health insurance away for free, people will find ways to game the system to qualify.  No wonder the state’s Medicaid director called the Medicaid expansion a “self-inflicted wound” recently.  That’s because the expansion turned out to be a solution in search of a problem – the expansion led affluent families to game the system and have their college-age children obtain “free” health insurance, contributing to a 70 percent increase in enrollment in just over a year.

We previously wrote about how Obamacare’s under-26 mandate was leading millions of individuals to drop their existing health coverage to obtain “free” insurance under their parents’ health plans.  The news from Connecticut provides further evidence of this “crowd-out” phenomenon, whereby government insurance crowds out private health coverage.  But the bigger question is this:  If parents are gaming the system to obtain “free” health coverage for their students, why won’t private businesses do the same by “dumping” their workers on to Exchanges?  That would lead to trillions in new spending, undermining any notion that Obamacare  will reduce the deficit.

The preliminary evidence from the student population indicates that families are functioning as rational actors, and dumping their private coverage when the government offers them a better deal of “free” health insurance.  If businesses follow suit, Obamacare could see a “Big Dump” of employers in 2014 – and the federal fisc may never be the same again.

Obamacare’s “Self-Inflicted Wounds” on States

The Washington Post has a story out today about today’s semi-annual report on the Fiscal Survey of States.  The article notes that even as state revenues stabilize following the recession, the skyrocketing costs of Medicaid obligations are “leaving most [state] governments in dire fiscal straits.”  The report indicates that Medicaid spending rose a by 20.4 percent this fiscal year, after a double-digit increase of 10.6 percent in fiscal 2011.  Moreover, enrollment growth surged by 7.2 percent during the recession, and will continue to increase: “The implementation of [Obamacare] will greatly increase the individuals served in the Medicaid program” – by as much as 26 million people, according to the Administration’s own actuary.  As a National Governors Association press release on the survey noted, the growth in enrollees is raising Medicaid spending much faster than other areas of the budget; NGA Director Dan Crippen admitted that “spending priorities” – including things like education, transportation, and law enforcement – “will again face competition for state budget dollars” due to skyrocketing growth in Medicaid.

On a related topic, Inside Health Policy has an article (subscription required) outlining comments from Connecticut’s Medicaid director about how that state’s early expansion of Medicaid has become a “self-inflicted wound” on that state’s budget.  Using new authorities granted by Obamacare to expand Medicaid to low-income childless adults, the state experienced a 70 percent increase in enrollment in “about a year, year and a half’s time.”  Even though Connecticut was granted additional matching funds by the federal government, “our revenue expectations were eclipsed by the new obligations of a…population that rushed headlong into this new program,” according to the Medicaid director.  As the article noted, Connecticut’s experience “is a bit of a red flag, as it is indicative of the difficulty states face because they don’t really know how many people will be signing up for Medicaid in less than two years.”

Today’s state fiscal survey reveals that over the past two fiscal years, states had to close a combined $146.3 billion in budget gaps.  Yet Obamacare is about to impose new unfunded mandates on states of at least $118 billion.  And today’s stories show how Obamacare will impose more “self-inflicted wounds” on states through its misguided policies.  The state survey illustrates how skyrocketing Medicaid spending is crowding out other priorities, and Connecticut’s example shows how state budgets can be greatly impacted by millions of people “rush[ing] headlong into this new program” in 2014.  It’s more evidence why America should NOT “rush headlong” into creating this massive and unsustainable new entitlement state.

Obamacare and Premium Increases

The Administration is preparing to announce another round of rate review grants this morning, and will likely claim this new government spending shows Obamacare is lowering premiums.  However, the reality is that premiums keep going up – in many cases because of, not despite, the provisions in the law.  Just yesterday an article highlighted some of the premium increases in Connecticut:

  • “Many of [an insurance broker’s] clients are seeing average rate hikes for the fourth quarter 2011 and 2012 in the high single digits…”
  • Another insurance broker “said his small group clients are seeing average fourth quarter rate increases in the 9 to 15 percent range.”
  • A third broker for large employers said that “medical costs are still trending 11 to 12 percent higher.”
  • “Connecticare will be raising fourth quarter rates on average from 6.8 percent to 8.6 percent on its small group medical plans.”
  • “Anthem Blue Cross and Blue Shield has proposed an average annual rate increase of 5.5 percent…”
  • “Oxford Health Plans/United Healthcare had one of the higher requests, asking regulators for permission to raise its small group rates an average of 14.4 percent.”

Some may claim that these increases of “only” 5-15 percent – well above inflation – represent “successes,” because premium growth slowed in some cases.  But to the extent health care spending trends slowed, they have likely been due to the bad economy and individuals foregoing treatments – which is reflective of the “stimulus’” failure to create the jobs it promised.   Moreover, the President repeatedly promised during his campaign that he would “cut” premiums by an average of $2,500 per family – meaning premiums would go DOWN, not merely just “go up by less than projected.”

Separately, Politico reports this morning that “there’s some speculation…that HHS might not release” a rule regarding “essential health benefits” “until after the 2012 elections to avoid a political land mine.”  The rule in question is a huge one:  The “essential health benefits” definition will determine the health insurance coverage all Americans must buy under Obamacare’s constitutionally dubious individual mandate.  And the Congressional Budget Office previously found that the “essential health benefits” and related mandates in Obamacare will raise individual health insurance premiums by up to 30 percent.  Today’s report suggests HHS may punt on issuing these critical regulations – creating more uncertainty for states and businesses alike – in order to avoid showing the American people just how much Obamacare will raise premiums before President Obama faces re-election.

Last March, then-Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  Given that today’s report suggests HHS will delay its ultimate verdict on how much Obamacare will raise premiums until after the election, some may wonder: If this Administration has to try and prevent American voters from finding out what’s in the law, how good can it be…?

Health Care Law’s Impact on Premiums

I wanted to pass along this article from today’s Hartford Courant about some of the premium increases being requested in Connecticut – many as a result of the health care reform law:

Anthem Blue Cross and Blue Shield in Connecticut, by far the largest insurer of Connecticut residents, said in a letter that it expects the federal health reform law to increase rates by as much as 22.9 percent for just a single provision — removing annual spending caps. The mandate to provide benefits to children regardless of pre-existing conditions will raise premiums by 4.8 percent, Anthem said in the letter. Mandated preventive care with no deductibles would raise rates by as much as 8.5 percent, Anthem said.

An Obama Administration was quoted in the article as saying that “outside groups have done estimates, including the Urban Institute and Mercer, and the credible estimates come in the 1 [percent] to 2 percent range.”  However, in reality Mercer’s survey of employers found that the mandates taking effect this year alone would raise premiums by more than 2 percent on average – and small groups would face even greater premium impacts.

The article also makes a particularly salient point with respect to premium impacts: “Among all the plans, some already deliver the provisions required by health reform, while others do not.”  In other words, some individuals choose affordable plans that provide the benefits they need without other benefits they do not want.  These plans, and these individuals, will be most impacted by premium increases under the law – and the impact in these cases may be much greater than the 1-2 percent the Administration projects.

On a related note, below is a graph we’ve prepared highlighting rhetoric versus reality on premiums.  The President promised during his campaign that his health care plan would “bring down premiums by $2,500 for the typical family.”  However, the annual Kaiser Foundation survey of employer-provided insurance found that average family premiums totaled $12,860 in 2008, $13,375 in 2009, and $13,770 in 2010.  In other words, while candidate Obama promised premiums would fall by $2,500 on average, premiums have risen by $1,090 during the Obama Administration.  That difference is manifest in the graph below.