Obamacare exchanges boosted coverage, premiums and spending in Indiana

Earlier this summer, I highlighted how difficult it is to judge the impact of Obamacare, because to do it properly, we need to understand how good or bad things would have been this year if the law had never passed.

Well, finally someone with a lot more statistical know-how than me has done exactly that for the individual health insurance markets in each state (and Washington, D.C.).

Amanda Kowalski, an economist at Yale University, presented a paper last week that estimates what enrollment, premiums and the medical costs paid by insurers would have been without Obamacare, and then what they actually were at the end of June this year.

Nationally, Kowalski found, enrollment went up 32 percent, or about 4.2 million people, over what pre-Obamacare trends pointed to. Premiums (before factoring in Obamacare’s tax subsidies) shot up 24.4 percent more than they would have otherwise.

“Health insurance premiums almost always go up, but it is impressive that they went up so much relative to trend,” Kowalski wrote in her paper.

Costs for care paid by insurers was a mixed bag, rising in 31 states and falling in 19 states. I constructed a weighted average of cost increases from Kowalski’s data, and found that costs rose by an average of 14 percent beyond what normal year-to-year increases in medical spending would have done.

Kowalski sees those cost extra cost increases not as higher prices charged by hospitals and doctors, but rather the effect of having more people with greater medical needs enter the individual insurance market. Insuers, as a result, spent more per person on medical care.

In Indiana, everything went up over what it was expected to do without Obamacare.

Enrollment rose by 128,000, or 132 percent, according to the data Kowalski used, which included both exchange customers and those who bought individual health insurance the old fashioned way—directly from an insurer. Those extra people mean a total of 225,000 Hoosiers were covered by individual insurance policies (as opposed to those purchased thorugh employers) as of June.

The premiums charged on those individual plans soared by 31.4 percent in Indiana—the 11th highest increase in the nation. Average monthly premiums rose from $277 based on pre-Obamacre trends to $364 per month after the law, Kowalski concluded.

That’s because Obamacare required insurers to take all customers, regardless of their health status, as also established a floor on how skimpy the benefits paid for by health plans could be.

Medical costs paid by insurers in Indiana rose by 8.6 percent, from $222 per month based on pre-Obamacare trends to $241 per month after the law. I’m a tad skeptical of that number because, if true, it implies the health insurers are commanding an enormous profit margin on their individual policies—something Obamacare will force them to refund to their policyholders.

It could be true if either 1) insurers mistakenly overpriced their policies; or 2) lots of healthy Hoosiers have joined the exchanges, and yet aren’t spending much money on health care. Kowalski was using data through the first half of 2014, so perhaps medical spending will rise more in line with premiums by year’s end.

Even so, Kowalski's study confirms what we all expected when Obamacare was first passed: the law would boost individual health insurance enrollment, raise the real price of insurance and boost overall spending on medical care.

The true test of the law still remains whether its efforts to offset the cost of those things—by raising taxes on other parts of the health care industry and giving tax credits to low- and moderate-income insurance customers—turn out save or cost the state and the nation.