Where are the Lower Health Insurance Premiums?

Marc Kilmer May 17, 2017

If you buy your own health insurance in Maryland, your rates may be going up.

Companies selling policies in the individual market are asking state regulators to allow them to charge huge price increases. CareFirst is looking for a 50.4% increase, Cigna is looking for a 37.4% increase, Evergreen is seeking a 27.8% increase, and Kaiser wants an 18.1% increase.

It is up to Maryland Insurance Commissioner Al Redmer to determine what increases these companies get. Redmer faces quite the dilemma: allow insurance companies to increase rates to an extent that will burden consumers or see these companies leave the state. After all, no one can force a company to sell policies in Maryland. If it is not profitable for companies to do so, then they will not operate here. That’s pretty simple.

It should be noted that these companies are not saying they will leave the state if they don’t get approval to charge these increases. But if they continue to lose money in Maryland, it’s difficult to see how they will be operating here in the years to come.

There are a few things wrong with this situation. For one, this should not be happening. According to President Obama, “You should know that once we have fully implemented, you’re going to be able to buy insurance through a pool so that you can get the same good rates as a group that if you’re an employee at a big company you can get right now — which means your premiums will go down.” Proponents of Obamacare sold the law as making health insurance more affordable. These types of huge premium increases are illustrating that this promise was hollow.

Another problem is that we entrust one bureaucrat with the power to determine how much companies will charge for their products. Usually, the market decides what consumers will pay. Unfortunately, because of state and federal law (Obamacare is far from the only law governing this situation, so it’s not accurate to blame this law for all the ills in the insurance market), we have a system where consumers have few or no choices, companies must operate in a highly regulated marketplace, and bureaucrats are the ones making the really consequential decisions.

I’m sure Al Redmer is a nice guy and he’s also probably pretty smart, but there is no way he should have the power to determine whether CareFirst is justified in seeking a 50.4% increase. How can he know whether this is a fair number? If he only grants, say, a 20.5% increase, can he really know if that will allow CareFirst to continue operating in Maryland? How does he know what type of losses this company can continue to sustain in order to be able to remain selling policies in Maryland?

No one has that type of knowledge. It’s absurd that we have a health care system that expects to maintain a functional market with bureaucrats making these decisions.

True health care reform would have empowered consumers to decide. There should be a competitive market in health insurance (and health care), where people have a wide selection of choices. As in other areas, companies could compete for your dollar based on a variety of factors, including price. But that is not what Obamacare did. In fact, it restricted consumer choice by placing more mandates on health insurance. It made health insurance more homogenous, driving away competition and driving up the cost.

For some consumers, the true cost of health insurance is masked by subsidies. But this cost-shifting should not blind anyone to the severe problems that exist in the health insurance marketplace. Maryland health insurance consumers should not be facing a situation where they will face huge premium increases or, if companies cannot charge these increases, the prospect of watching their health insurance provider leave the state.

Obamacare’s failure is clear. As the debate over health care reform continues, no one should think that the status quo is sustainable.