THE BLOG
09/10/2013 09:03 pm ET Updated Nov 10, 2013

The Fifth Myth: "Rate Shock" Isn't Shocking at All!

The rate shockers have been shocked.

By "rate shockers," I'm referring to the Obamacare critics who predicted that the uninsured would be shocked by higher health insurance rates once they were required to purchase insurance on government-run exchanges. A few months ago, I argued that this "individual mandate" was necessary to keep costs down if we want to outlaw most forms of discrimination against consumers.

Well, the numbers are in, and rate shock... isn't shocking at all. The only shock is how low the rates are!

Originally, the Congressional Budget Office predicted that the Affordable Care Act would lower the cost of health insurance for the individual market, where the exchanges and subsidies are targeted.

Critics latched onto the prediction that people will pay 10 to 12 percent more, but that's a misleading statistic. They'll be paying more because they'll be receiving more. The CBO predicted that people would be able to afford better plans; hence, the higher cost. When they compared policies with the same quality, the CBO found that premiums will fall by 14 to 20 percent -- and that doesn't include the subsidies from the government that will make the plans even cheaper.

As it turned out, the CBO was wrong: Under Obamacare, premiums are falling more than 20 percent!

The first evidence of this success came in May when California announced the premiums that insurers will be charging on the individual market exchange next year. Plans that were supposed to cost $400 to $500 per month are actually going to cost $200 to $300.

A couple months later, New York released its individual market premiums for 2014, and they're going to be 50 percent lower than what they are now!

The New York rates are even more newsworthy because they prove that the individual mandate is essential and cannot be postponed.

In 1993, New York passed a law requiring insurers to charge everyone the same price. As I explained in my previous op-ed, without an individual mandate, this is a recipe for extremely high premiums because healthy people will choose not to buy insurance, leaving only the sick people who are willing to pay high rates because they need the insurance so badly.

That's exactly what happened in New York. For two decades, they've had the highest insurance costs in the country. Currently, only 17,000 people purchase health insurance on their individual market.

But that will change in 2014 for one reason and one reason only: Obamacare. The individual mandate and the subsidies will bring healthy people into the market, spreading the costs of health care among less expensive patients.

And New York isn't alone. Last week, the Kaiser Family Foundation released the most comprehensive analysis to date, containing the premiums for 17 states and the District of Columbia in the new ACA-mandated exchanges. In 15 of the 18 exchanges, they found that the premiums will not only be lower than the critics predicted. They will not only be lower than the current premiums in those markets. They will even be lower than the CBO predicted!

And then, the very next day, Minnesota announced the premiums for their ACA exchange... and they're even lower than the other 18 exchanges!

The Republicans' response to all this good news, of course, is to try to reverse it, forestall it, abolish it.

Now, it's important to remember that we're only talking about the individual market. If you get insurance from your employer or the government, these numbers don't apply to you.

It's also important to note that someone has to pay for those subsidies. This fact alone has caused some confusion, so let me add one more myth to my previous list: Myth #5: Obamacare will force everyone to pay higher taxes.

There are a few new taxes under the ACA, like 10 percent on indoor tanning and a higher penalty on non-medical withdrawals from Healthcare Savings Accounts, but the majority of Americans will never have to pay these taxes. The only taxpayers who will definitely face a higher rate are the richest 2 percent, who earn more than $200,000.

In other words, the cost of Obamacare is far less than its critics would have you believe.

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This is an updated version of an op-ed that was originally published in Friday's South Florida Sun-Sentinel.

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