25% premium hikes "just a flesh wound," say some Democrats

As the steep premium hikes in the individual market for health insurance have become official and specific, some progressives are comforting themselves with the thought that the market's 8-9 million unsubsidized enrollees constitute just 3% of the U.S. population. That's a silly frame.

If the ACA marketplace and larger individual market were firing on all burners, according to Kaiser Family Foundation estimates*, it would serve 27.4 million people, slightly more than half of them subsidized. That's about 60% of the population the ACA was designed to serve most directly b two means:  the Medicaid expansion (envisioned to newly insure about 17 million) and reform/subsidization of the individual market. A core purpose of the law was make the individual market accessible and affordable to all who needed it. That was always going to include 8-10 million people who don't qualify for subsidies -- not all of whom earn over 400% FPL (some have an employer's offer of insurance that they find unaffordable, though the law doesn't deem it so).

About a fifth of the law's current direct "beneficiaries" are unprotected from premium hikes averaging 25% overall and 22% in benchmark silver plans, the best measure of what those seeking decent insurance will be forced to pay. In some states, average increases are far worse -- 45% in Illinois, 57% in Arizona and Minnesota, 76% in Oklahoma. Note that two of those states are blue states, committed to making the law work. If hikes at this year's levels are more than a one-year correction, they're unsustainable.

The ACA preserved state regulation of health insurance

Yesterday I noted that the state-vs.-federal exchange debate within the Democratic party in early 2010 was focused primarily on which level of government would regulate insurance -- and not, as Halbig proponents are suggesting, on whether the "backstop" federal exchange created by the Senate bill would be enabled to issue tax credits.

Both before and after the Scott Brown earthquake, the question was how the Senate and House bills would be reconciled. The House bill created a federal exchange, with an opt-out for states that wanted to create their own. The Senate bill stipulated that states would establish their own exchanges, with an opt-out for those that chose to cede the function to the federal government.

As it turned out, the reconciliation bill that tacked House modifications on the Senate bill did not substantially alter the Senate bill's state exchange structure -- though it did, by the way, include a tax reporting provision that referred directly to tax credits allocated by the federal exchange, a provision that should lay to rest the Halbig contention that ACA tax provisions preclude the federal exchange allocating tax credits.  And although the federal government did end up running most of the state exchanges, in the sense of running the website processing citizens' applications, regulation of insurance, within the broad coverage parameters set by the ACA, remained mainly in state hands.*

Evidence of that retained state control can be found in the varying steepness of 2015 health insurance premium increases in different states. Overall, the rate hikes are in line with or slightly below the increases of previous years. A heat map by PriceWaterhouseCooper indicates that states that ran their own exchanges, and so more actively oversaw the offerings approved for sale, were on balance subject to more moderate increases (Vermont is an exception). From the data that's come in so far (only about half of the states have so far reported wholly or partly on 2015 rates), Jonathan Cohn extracts an illustrative tale of two states: