Obamacare keeps costing Louisianans needlessly

Thanks to the ill-conceived Patient Protection and Affordable Care Act (“Obamacare”), Louisianans face some of the highest health insurance costs and premiums in the country, and the bad effects of the law promise to keep on giving this gift that only those interested in wealth redistribution want.

As rates are being proposed for the 2016 year for the health exchanges ordered under law, Louisiana suffers through a 12 percent average increase for this year, tied for fourth-highest among the states and District of Columbia, which set the average premium for a “silver” plan at $359 a month, sixth-highest in the country and well above the national average of $314, for a state whose per capita income ranks only 30^th. But, guess what, for those receiving subsidies, the price is expected to go up hardly at all – which means, of course, that taxpayers get billed for almost all of these increases.

This is one reason why Louisiana’s rates are so high and promise to go higher and more intensely so – given the relatively poor lifestyle choices made by a large number of qualifiers for subsidies (Louisiana as a whole ranks near the bottom of states on a number of key health indicators reflective of habits in the areas of eating, drinking, smoking, and exercise), their health is worse, but with them not having to pay much if anything for health care (either through Obamacare or Medicaid), they have reduced incentive to make the effort to live healthier lives that would cut down on costs. However, another reason is that the health insurance market nationally has become more and more concentrated, reflected particularly in Louisiana.

In Louisiana, the dominant insurer has become Blue Cross/Blue Shield through its affiliate Louisiana Health Services Group, which as of 2013, the start of Obamacare, had 73 percent of the individual market. Through in the next two in size, Humana and Aetna, and three firms have 92 percent of the business, tying the state for 18^th most concentrated. (The large group market almost is as concentrated, at 89 percent.) As the industry becomes more concentrated, downward pressure on rates subsides.

And it is Obamacare that is causing this concentration. As it tries to reconcile the incompatible goals of insuring a sicker population with bringing down the rate of increases in costs, this has encouraged insurers to cut expenses, and they do so most effectively by creating economies of scale through mergers. Yet over the long run, while this may work for the insurers, it actually discourages cost reduction to consumers and the taxpayers who heavily subsidize their purchases. The perverse nature of Obamacare gives regulators every incentive not to dampen rate escalation too much: they can’t force insurers to write policies but with the politics of the situation of people forced by law to buy insurance means these have to be made available, so the path of least resistance is to fob it all off on the taxpayers and hope enough of them don’t notice.

Ironically, the perversities of Obamacare that have led to concentration among insurers also have wiped out, at taxpayer expense, an intentional market intervention to do exactly the opposite. At the end of this year, the Louisiana Health Cooperative, funded with $66 million of federal taxpayer dollars, will close its doors due to operating losses. One of 23 federally-created nonprofits under the law designed to provide more choices in the individual health insurance market, already one state’s has closed and all but one of the remainder pay out more than they take in.

Naturally, some of this turmoil was planned. Many in the hard left welcome industry concentration and price spikes in order to demonize private carriers as an argument to force a government-run single-payer system into existence. Obviously, the total cost of health care provision would spike even higher were this to occur with a decline in health outcomes.

Regardless of where this proceeds, it’s not just taxpayers but ratepayers that suffer the consequences. As the industry concentrates, this also relieves downward pressure on private market pricing. As more people are shoehorned into the system, providers squeezed in resources apply the opposite pressure to raise their rates across the board, lifting premium rates for all – not including the extra expense imposed by mandating coverage features that over-insures many.

It used to be the health uninsured, precisely because they were uninsured, had incentives to be careful about their lifestyles in order to avoid the potential cost (although often written off in part or full) and aggravation of navigating health maladies. Now that someone else foots most or all of the bill for most of them, this natural depressant on health problems and cost has disappeared. Louisianans continue to pay needlessly for this.