Peter Suderman | Paying for Obamacare

For most people, affordability is about one thing: health insurance premiums. President Obama’s campaign-trail promise that the law would reduce average family premiums by about $2,500 has obviously not come true, but Obamacare’s backers say it is a success on this front anyway. That’s because average premiums have come in lower than the Congressional Budget Office projected.

That may be comforting to liberal wonks, but it’s doubtful that most people’s first—or last—instinct when looking at new health insurance rates is to compare them to the CBO’s old scores. A November 2013 analysis of individual market rates under the law by Avik Roy of Forbes and the Manhattan Institute suggests that the majority of states have seen premium hikes under the law. Insurance industry sources have already warned that in many states, rates next year will be far higher still. A Morgan Stanley survey this month of health insurance brokers finds double-digit increases in both the small group and individual markets, with some states seeing outsized spikes. The report says that the “increases are largely due to changes under [Obamacare].”

Lower than expected rates may be partially a temporary benefit of the start-up process, with insurers posting artificially low premiums in order to gain customers up front, especially in heavily populated states. If so, then premium spikes will eventually have to follow; pocketbook-friendly below-cost rates won’t be sustainable in the long run.

The law’s system of health insurance subsidies will offset some of the increase. But given how common cost concerns already seem to be amongst those choosing to remain uninsured, it seems unlikely that they will fully insulate lower-income individuals from higher premium costs.

The $2 trillion worth of public spending the law calls for will inevitably have an impact on federal finances as well. The law’s supporters have long argued that its deficit impact would be positive, pointing to a CBO score that calculates a net deficit reduction once all the law’s new taxes and spending cuts are factored in. But several of those revenue mechanisms have already proven troublesome: the CLASS (Community Living Assistance Services and Supports) Act, a long-term care program that was to be the source of a significant portion of the law’s officially scored deficit reduction, was shut down when it was revealed that it would not be self-sustaining, as required by law. Medicare Advantage cuts intended to offset the law’s spending have not gone into effect.

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