07/11/2014 06:49 pm ET | Updated Sep 10, 2014

Finally! Someone Explains What All Those Obamacare Numbers Mean!

You're going to hear a lot about Obamacare this fall, especially from Republicans. They'll try to convince you that it was a bad deal. They'll throw numbers at you to make you think that the cost of health insurance is spiraling out of control. In all likelihood those numbers will be incorrect, but how will you know? There are so many numbers flying around out there that even the experts are having trouble keeping track.

That's why it's time for a math lesson. After reading this post, you'll know what the numbers mean -- and which ones you should trust. No candidate will be able to fool you.

And you won't even need a calculator.

First of all, you have to understand that we're only talking about the individual market, where people buy insurance if they're not covered by their employer or a government program. That means the "individual mandate" and the "government-run exchanges" only affect 7 percent of the population. For those covered by their employer, which is the majority of the population, the cost of health insurance rose less in 2014 than it had in any year since the Milliman Medical Index started keeping track. We can probably thank Obamacare's cost-control provisions for some of that achievement, but that's a conversation for another day.

For now let's focus on the individual market. Before Obamacare, insurers charged low rates to healthy people and high rates to sick people, making insurance unaffordable for the people who needed it the most. Obamacare banned discrimination against sick people and mandated that all people purchase insurance. Without that mandate, insurers would have raised rates to cover the new sick customers, and healthy people would have refused to pay the new high rates, driving rates up even higher as the population became sicker on average.

When the law was passed, the Congressional Budget Office predicted that premiums would increase by 10 to 13 percent, but only because people would be receiving more generous coverage. Obamacare required every health-insurance plan to meet basic minimum standards. Additionally, because it would be more affordable, more people would want to buy more generous coverage. The CBO predicted that if you compared plans with the same level of coverage, premiums would actually go down.

When states started announcing the premiums for their new "exchanges," you probably started hearing about "sticker shock." By comparing the new premiums with old quotes from health-insurance websites, Obamacare critics claimed that the law had drastically raised prices. The problem with their argument was that the quotes on the old websites were very unreliable. They rarely reflected what insurers would actually charge you, once they factored in your medical history, age, gender, etc. In fact, many Americans would be denied coverage altogether. Anyone who knew anything about health insurance knew that the website quotes were lowballing the cost.

State governments like California countered by making a more reasonable comparison. They argued that the new exchange premiums were actually lower than premiums for small-group coverage, for which they had better data. Obamacare critics weren't satisfied. Small-group plans may have been more expensive than the plans on the new exchange, but that's because they offered more generous coverage.

The Manhattan Institute, led by conservative health expert Avik Roy, tried to find a middle ground by adjusting the quotes on the health-insurance websites, raising the estimates for people who were "surcharged" or denied, and finding that Obamacare increased prices by 41 percent.

The problem with Roy's analysis was that his adjusted numbers didn't match reality. Roy suggested that before Obamacare, 27-year-olds -- the ones who were being hit the hardest, he argued -- paid between $1,596 (men) and $1,980 (women) in average annual premiums. But the Kaiser Family Foundation conducted a survey in 2010 and found that they were actually paying closer to $2,630. Across the board, Roy had underestimated the pre-Obamacare cost of health insurance, and he wasn't including costs that consumers paid out of their own pockets.

Last month three Wharton economists used the Current Population Survey to calculate a more accurate estimate of the average pre-Obamacare premium. They found that it was basically identical to the lowest-cost plan available on the Obamacare exchanges. Compared with more expensive plans, of course, it was cheaper, but when they factored in out-of-pocket costs, they found that the new plans were 14- to 28-percent more expensive than the old ones, only slightly higher than the CBO's original predictions.

But wait. The Wharton study only counted people who purchased insurance, not people who were denied or who refused to buy because the insurer's quote was too expensive. We'll never know what that quote was, but we can assume that it would significantly raise our estimate of the average premium. To ignore those people -- and there were millions of them -- is to say that they don't matter, even though Obamacare was designed specifically with them in mind.

The Wharton study also doesn't include the tax credits that the federal government uses to subsidize low- to middle-income buyers on the exchanges. Last month the government announced that 87 percent of shoppers received a subsidy on the federal exchange, bringing their average monthly premium down from $346 to only $82!

That's a 76-percent reduction, and it more than makes up for the 14- to 28-percent premium increase, which may not be much of an increase after all if you include people who didn't buy insurance in the past.

Bottom line: On average, Obamacare clearly lowered the cost of health insurance.

Sure, some people will pay higher rates, but you have to remember that those people only paid low rates in the past because insurers were discriminating against sick people. The new market is much fairer and more affordable for more people -- a fact that you might want to point out to Republicans on the campaign trail this fall.

An abbreviated version of this op-ed was published in today's South Florida Sun-Sentinel.