Will Obamacare Increase Health Insurance Costs for Americans?

Some (though not many) may pay more for health insurance under Obamacare. But in the long run, everyone benefits with an improved healthcare system.

There was a time when automobiles were a lot cheaper than they are now. One reason was that there was little or no government regulation dictating how auto manufacturers built their cars. Thus, they didn't have to provide things like seatbelts, airbags, pollution control systems, shatterproof windshields, or other crash protections for drivers.

However, starting in the 1960s, the government decided it wasn't good policy for large numbers of Americans to be driving cheap deathtraps. The era of automobile regulation began. One result of this is safer cars that pollute the environment less. Another result was an increase in the cost of automobiles: It is estimated that between 20% to 33% of the increase in the cost of automobiles since 1967 has been due to cost of auto manufacturers complying with government regulations.

So we have safer, more expensive cars. Even if you want a cheap dangerous car, you can’t get one today.

A similar process of regulation is now taking place in the health insurance industry. Prior to the Obamacare health reforms, insurers were largely free to offer the public the equivalent of cheap and unsafe automobiles. These policies were cheap because they weren't very good. They had things like extremely high deductibles or extremely low annual and life-time caps on how much the insurer had to pay out. They frequently excluded or limited coverage for pre-existing conditions. These policies were perfectly good as long as you didn’t get seriously ill. Just like a poorly built car is perfectly okay as long as you don’t get into a bad accident.

Today, lots of people say they were perfectly happy with their cheap crappy health coverage. They don't want to have to pay more for the better health insurance coverage that Obamacare requires all insurers to offer. However, when they enacted Obamacare, Congress and the President decided that cheap crappy health insurance coverage was not in the best interests of the American people as a whole, even if it meant some people would have to pay more for health insurance.

Under Obamacare, all health insurance policies have to provide a minimum level of coverage that far exceeds that provided by the cheapest policies previously available. Plans are no longer allowed to set lifetime dollar caps on coverage, and annual dollar limits on services will not be allowed beginning in 2014. Also in 2014, plans in the individual and small group markets will have to cover a certain set of benefits, referred to as essential health benefits, ranging from hospital coverage to prescription drugs to mental health care. Together, these provisions ensure that when consumers buy a health plan, they get real coverage that protects them from excessively high costs when they need care.

And it's true that some people have discovered that they will have to pay more because of Obamacare. How many? Not as many as you’d think given the hue and cry in the media. According to a study by Families USA, there are roughly 15 million working age Americans who must purchase health insurance on their own in the individual insurance market. Seventy-one percent or 10.8 million of these have incomes low enough to qualify for subsidized health insurance through the state health insurance exchanges or for Medicaid coverage. This leaves around four million people who may see higher rates without the benefit of financial assistance. This seems like a relatively small price to pay to get the health insurance equivalent of health insurance deathtraps off the road.

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