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The war for California

Since the passage of the Affordable Care Act just over three years ago, the heated debate surrounding the law’s effects on health care and insurance boils on between its critics and proponents. The controversy has recently settled on California, where a relatively large uninsured populace resides—more than 20 percent of the state’s population—making the Golden State especially vulnerable to rising prices as the ACA is implemented. 

But if California can comply with the law without breaking the bank, the argument goes, so can the rest of us.  

The battle began last week when Covered California released a press statement suggesting that the premiums submitted by insurers for 2014 “ranged from 2 percent above to 29 percent below the 2013 average premiums for small employer plans.” Covered California is a state-based, health insurance exchange market adopted as part of President Obama’s health care law. Supporters of the ACA took this information as an opportunity to declare victory, trumpeting the cost-saving effects of the law. 

“This is a home run for consumers in all regions of California,” exclaimed Peter Lee, executive director of Covered California. “Our active negotiating … will benefit all Californians by making health care affordable.” The New York Times, the New Republic and the Washington Post’s “Wonkblog” all had similar things to say. Economist Paul Krugman, who called California “the law’s most important test case,” wrote that the rates were “surprisingly low” and celebrated “unexpected success.” 

Conservative and libertarian critics, however, remain unimpressed. “This good news is not as good as it might sound,” wrote Peter Suderman of Reason magazine. As Suderman and a number of others were quick to point out, the at-most 2 percent increases in premiums quoted by Covered California were based on misleading information, including comparisons of the rates that small businesses paid this year with the rates that individual purchasers will pay next year. Critics argue that it would be more informative and accurate to compare the individual purchaser rates from 2013 with the new individual purchaser rates for 2014. Lanhee Chen, a Hoover Institute research fellow who also served as policy director for Mitt Romney’s 2012 presidential campaign, did the math—finding that for an average, 25-year-old male, insurance premiums will increase anywhere from 38 to 53 percent in the next year. Avik Roy of Forbes magazine calculated even more dramatic numbers, arguing that premiums will go up 100, 116, 123 and 146 percent for several different plans and demographics. “If anything,” concluded Suderman, “concerns about big premium increases remain legitimate.” 

That may be true, but things only get more complicated from there. For instance, Ezra Klein of the Washington Post argues that Roy and others based their numbers on “teaser rates” that private insurance companies post online. However, a quarter of consumers do not receive these rates due to various pre-existing conditions. Klein’s most important contribution, however, comes when he attempts to put the scope of this debate into perspective. 

“We’re talking about a small fraction of the American health care system,” he writes in a recent column. “In 2014 … 2.5 percent of the population is expected to buy insurance through the exchanges. By 2023, that will rise to … eight percent.” In the case of California’s individual plan premiums then, what started as a potentially interesting case study undertakes a disproportionate degree of significance. Despite the reality that few are likely to sway in either direction, critics and supporters alike are viewing California as the crucible in which the entire ACA will be either fortified or forgotten. 

One disturbing corollary to this is the degree to which such vague information has been touted as indisputable proof both for and against the ACA. Although a bird’s eye view of the debate leads an open-minded observer to no obvious conclusions, a series of close-up encounters with all of the different, opposing spins that have been put on this data may be enough to cause an explosion of the head for more impressionable on-lookers. Of course, this sort of universal emphasis on a contentious statistic is not unique to the debate over health reform. Whether it is an issue of ambiguous health insurance premiums, rising interest rates on the US ten-year, falling rates of gun violence or stagnant rates of college graduation, one could be forgiven for believing that statistics—like tacky clothing—are made in a convenient, one-size-fits-all manner.  

Now, none of this is to say that statistical evidence is not useful, or that it doesn’t have its place in social, economic and political debates. But it‘s worth questioning how much stats really means in a conversation—whether it be on health care, on the economy, on guns, on higher education—in which most of the involved parties have already made up their minds. Paul Krugman and Ezra Klein support the ACA because they believe it will lead to better health outcomes for the poor and uninsured; thus, they are unlikely to speak ill of it no matter how much it may inflate premiums for the healthy and wealthy. Avik Roy and Lanhee Chen, on the other hand, oppose the act because they believe it will make our health care system less equipped to deliver care to those who need it most—and probably cannot be swayed even in the event of falling premiums. 

If all that’s the case—and a brief survey of each writer’s online canon suggests that it is—then how much weight does the war over one state’s health insurance premiums actually hold anyway? 

Chris Bassil, Trinity ’12, is currently working in Boston, Mass. His biweekly column will resume in the Fall. You can follow Chris on Twitter @HamsterdamEcon.

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