Obamacare’s premiums and Vermont’s regulation

by Robert Maynard

It turns out that the Obamacare exchanges and Vermont’s high regulatory burden are pairing up to create rate shock for those unfortunate Vermonters being forced into the exchanges.  Here is an excerpt from a Forbes article on the rate shock in various states where the exchanges are being enacted:

Most states are seeing rate hikes; some will see reductions

While these mostly-blue states will see an average premium increase of 24 percent, the impact of Obamacare is highly variable. Nine of the states will see increases on average, and five will see decreases on average. New Mexico, Vermont, South Dakota, and Connecticut will see the steepest rate hikes: on average, 130, 97, 83, and 59 percent, respectively. Four states will see meaningful declines in rates: Maine (71 percent), Colorado (34 percent), Ohio (30 percent), and New York (27 percent).

A number of blue states have heavily-regulated individual insurance markets that, in the recent past, have driven healthy people out of the market. Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont, and Washington have all experimented with Obamacare-like regulations, such as community rating (forcing young people to subsidize the old) and guaranteed issue (requiring insurers to offer plans regardless of pre-existing conditions).

Vermont (+97%) and Ohio (-30%) are the biggest surprises

As I noted above, Vermont is one of those blue states where the individual insurance market was already heavily regulated. In 1993, the Green Mountain State instituted guaranteed issue and community rating, laws that remain on the books today. The other states that have instituted such reforms have seen an adverse selection death spiral, in which healthy people correctly see health insurance as a raw deal for them, driving premiums up as they drop out.

Most observers, myself included, expected Vermont to see rates go down under Obamacare, as more people were forced into the market, and others were subsidized into it. But instead, rates are going way up. 27-year-olds in Vermont will see average increases of 133 percent; 40-year-olds will see hikes of 104 percent; and 64-year-olds will see hikes of 55 percent. We see the same phenomenon, to a lesser degree, in Washington State.

Some of us were not surprised at all.  Between Obamacare’s premiums and Vermont’s regulations, we have a deadly combination.  It is about time that we change course and adopt patient centered care.

 

2 thoughts on “Obamacare’s premiums and Vermont’s regulation

  1. This really needs some morexplanation.
    Since 1992 VT community rating and guaranteed issue have given Vermonters in small group an d nongroup plans very expensive premiums – roughly four times those in states which did not destroy their markets, for younger insureds. Why Obamacare is now causing another huge increase in Vermont isn’t obvious to me.

    • The author of the original article was surpised that Vermont’s health insurance jumped so with the exchanges. He did not offer much of an explanation. My take is that the jump is due to the way Vermont in implementing the exchage as a stepping stone toward single payer. This apporach seems to have thinned out the health insurance market even more than it was.

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