Another important aspect of pre-Obamacare insurance is the extent to which individuals actually obtained insurance under pre-existing frameworks. In New York, for instance, individual-coverage insurance has traditionally been extremely expensive, providing a huge incentive for healthier individuals to take the risk of going without insurance rather than paying high premiums. The result was essentially a high-risk pool of insurance policyholders who had no alternative. Insurance always works better when there are more people to share the risk, and the individual mandate under Obamacare will have a more positive impact on premiums in states where individual participation in pre-Obamacare insurance options was low.
Finally, no analysis of Obamacare health-insurance premium costs is complete without understanding the impact of federal subsidies on cost. With hefty redistributive impacts between high-income individuals paying full cost while middle- and lower-income households get varying amounts of subsidies, relying on averages can hide the differences that families in different financial situations will pay.
Don’t believe the headlines
Whenever you see a claim that a state’s premiums will go up or down under Obamacare, your first reaction should be to look beyond the headlines to see the assumptions that the claim is making. Without considering both total cost and insurance quality, you’re likely to draw false conclusions from shallow analysis of Obamacare’s impacts.
The article Why Obamacare’s State Rate Changes Are Misleading originally appeared on Fool.com and is written by Dan Caplinger.
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