10/21/2013

States with Federally Run Healthcare Exchanges face much larger increases in insurance premiums, 27 year olds face a 50.5 percentage point greater increase

I ran a couple simple regressions to see whether insurance premiums are rising faster under state or federally run Obamacare exchanges.  Fourteen states and the District of Columbia are running their own exchanges.  Eight states are running their exchanges jointly with the Federal government.  Twenty-eight states are letting the Federal government run their exchanges.  The results show that states where the federal government ran the exchanges had a 50.5 percentage point greater increase in insurance premiums for those age 27 than those where the state ran the system and a great 30.7 percentage point increase in premiums for those age 50.  States where the exchanges were jointly run fell in the middle.

To put it differently, it looks as if Obamacare is increasing insurance premiums more in so-called Red states than Blue ones.

Back in July, some supporters of Obamacare were predicting the opposite would happen, though no real explanation seems to have been offered.  

One possibility is that the states that have fought hardest against Obamacare and didn't want the federal exchanges also had the least regulations on health insurance.  Thus, Obamacare's regulations, not the federal exchanges themselves may have been responsible for the much larger increase in premiums.  To test this, I looked at data on on state insurance mandates in 2009 from Ben Zycher and other info rating state level regulations in 2006 from the Heritage Foundation.  

Zycher provides the number of mandates on private insurance by state.  If the different levels of states regulations can explain the large increase in insurance premiums in states with federally run exchanges, including these measures of state regulations should reduce the size of the coefficient for federally run exchanges.  In fact, when these measures are includedif anything, the coefficients for federally run exchanges increase: by either 4.3 or 6.2 percentage points.  


Heritage used a variable for whether the number of Mandated Benefits were greater than 26 in 2006, but that seems arbitrary.  But, with the more recent data from Zycher, I am not going to use his data from 2009.  Heritage also broke the regulations down into three additional categories: Health plan liability (laws create a cause of action against health plans and their employers for damages for harm done to enrollees under assorted liability theories), Direct-access-to-specialists (laws allow subscribers to go directly to a specialist without prior referral from the health care plan primary physician), and Provider due process (laws interfere with a health plan's ability to contract selectively with a provider).

Again, this rejects the notion that existing regulations can explain these results.  The coefficients here show an increase for federally run exchanges: by either 8.2 or 11 percentage points.
Some think that the federally run exchanges were particularly tough on these red states.  Todd Tiahrt, a former Republican Congressman from Kansas, told CNN:
"There was a significant rise in regulations placed on healthcare, which drove the cost of providing healthcare in Kansas up," said Todd Tiahrt, a former Republican Congressman from Kansas. "I think that was the most significant reason, that's why they departed. They felt like they were in a position where it was not profitable to do business in Kansas. So it limited our choices for healthcare providers," Tiahrt said. . . .
BTW, ignoring these increase in premiums, I loved this quote from Obama on Monday:
So here’s the bottom line.  The product, the health insurance is good.  The prices are good.  It is a good deal.  People don’t just want it; they’re showing up to buy it. . . .
The data for the increase in premiums and whether states and/or the federal government are running the exchanges is available in these two slides below.  The average increase for 27 year olds under Obamacare was 62.5 percent.


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