What happens in New York won’t happen in the rest of the country. No one should expect premiums to drop by 50 percent anywhere else. New York is an anomaly. It’s big. It’s expensive. It’s a place where people use a lot of health care services, and there are a lot of insurers in the game. It’s also highly regulated. People who buy their own insurance can easily pay $20,000 a year for coverage; Cut that in half, and the prices are still exorbitant
But the main thing that’s different about New York is that the state passed many of the health insurance reforms that are part of Obamacare (along with some that are not) many years ago, only without an individual mandate.
“New York is like the poster child for why you need an individual mandate,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reform. “They implemented all the reforms without the individual mandate, and premiums just went through the roof.”
Health insurers in New York were already barred from canceling someone’s policy because they get sick or make too many claims. They could not charge people different premium rates based on whether they have diabetes or breast cancer or AIDS, or because they are women and might become pregnant (they also cannot charge people in their 50s or 60s more than they charge 20-somethings, which is allowed under Obamacare). Coverage for pre-existing conditions can be restricted, but only under certain conditions and only for up to 12 months.
But while requiring insurers to sell to all comers, New York never required everyone in the state to buy health insurance, and that turned out to be a fatal flaw. As sick people with chronic conditions like AIDS and cancer who were buying policies on their own, without an employer group, flocked to the direct pay market, young and healthy people were deterred by the price. They fled.
The pool of payers shrank, and the proportion of sick people in the group grew. Costs increased, rates climbed, more young and healthy people dropped out, rates climbed some more, and a self-perpetuating cycle was created that some have called a death spiral.
“New York has been “a classic case of market failure,” said Paul Ginsburg, of the Center for Studying Health System Change, a Washington nonprofit. “It’s impossible to run an insurance market under those conditions.”
The case of New York, in other words, illustrates why the individual mandate is not just a cog in the wheel of a complex health care law, but rather, the axle around which the whole enterprise turns.
Politics, though, operates by very different rules.