Health-exchange rate shock

Geoffrey Lawrence

It’s alive.

Starting Oct. 1, Nevadans were able to log onto the Silver State Health Insurance Exchange to begin shopping for one of the policies they are compelled to purchase under the federal Affordable Care Act.

Despite the law’s name, however, many Nevadans are finding that the plans that would be available to them are far more expensive than plans that were previously available.

There are two primary reasons for this.  First, the ACA increases the minimum standards of coverage, forcing many individuals to purchase more coverage than they may want or need.  Indeed, many individuals who had previously purchased low-cost “mini-medical” plans have seen those plans cancelled since they do not meet the standards for “Essential Health Benefits“ that the ACA now requires.

Second, the “community rating” provisions of the ACA force younger, healthier Americans to subsidize the health-care costs of older and sicker Americans.  That’s why relatively young individuals and their families are now discovering that the rates they’ll have to pay are far higher than previously.

For instance, a single, 25-year-old Nevadan would need to pay a monthly premium of at least $184 to be ACA-compliant.  In the pre-ACA world, a comparable plan would have been available for around $83.  A new analysis from the American Action Forum, led by former Congressional Budget Office director Douglas Holtz-Eakin, shows that all 50 states and the District of Columbia experienced rate increases due to the ACA, with 44 states seeing the lowest-priced coverage more than double in cost.  Nationwide, pre-ACA premiums averaged $62 per month, but post-ACA premiums average $187.08 per month.

Up-front tax credits intended to subsidize the high costs of these premiums don’t offer the relief that many young people had been led to expect.  A single, 30-year-old male earning about $31,600 would still need to shell out $2,186 in annual premiums even after those subsidies.  If his income rises to just $37,350, his annual premium would also rise to $2,839.

It’s interesting that the ACA targets primarily younger families and individuals for such large premium increases.  Statistically speaking, this segment of the population has a much lower income level and has accumulated relatively few assets, whereas the older population they are forced to subsidize is relatively more affluent.

Thus, the ACA’s requirement that young people pay more to subsidize the health-care costs of older individuals amounts to little more than a highly regressive, inter-generational wealth transfer.

Of course, the Left has never been averse to robbing the relatively young and poor in order to reward the elderly and more affluent — Social Security and Medicare have long had this effect as well.

But the entire success of the ACA hinges on young people agreeing to pay these substantially higher insurance premiums.  As Bill Clinton acknowledged, the law only works “if young people show up.”  Recognizing this fact, the White House has organized a massive public-relations campaign aimed at convincing young people that it actually makes sense for them to pay more.

After suffering from ObamaCare rate shock, however, many young people are bound to discover that the tax penalties they would face for not purchasing an approved insurance plan are dwarfed by the cost of those plans.

According to the analysis by Holtz-Eakin’s group:

Utilizing a cost-benefit analysis to compare the costs of the increased bronze-level premiums net any subsidies to the costs of the penalties, it becomes clear that in the majority of instances, the cost of bronze-level insurance far exceed [sic] the cost of the penalties … Despite cost-defraying subsidies, the combination of costly premiums and ineffective penalties for noncompliance will likely keep many “young invincibles” from enrolling in the exchanges, and could result in a form of premium spiral.

In other words, if young people balk at the high prices they’re now asked to pay and instead elect to pay the penalty — knowing they can’t be refused coverage should they become ill — then ObamaCare rate shock will grow even more dramatic.

For the past three years, many Americans have been deluded into believing that the ACA would deliver them “free” health care.  Now that the exchanges have gone live, however, everyone can see the premiums they would have to pay.

A cold and sobering recognition is starting to emerge: Maybe the ACA isn’t at all what was promised.

Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute. For more visit

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.