ObamaCare: Good for expensive insurance, bad for your health?

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This is a rush transcript from "On the Record," June 13, 2012. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: The nation awaits the Supreme Court's decision on our nation's health care, and that decision is coming any day now. A new report showing that health care costs skyrocketing at an alarming rate. Is ObamaCare to blame? Senator John Thune, Republican, says yes.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Nice to see you, sir.

SEN. JOHN THUNE, R-S.D.: Nice to see you, Greta.

VAN SUSTEREN: Thank you for letting us come to your office.

THUNE: You're welcome. All the Packer stuff here.

VAN SUSTEREN: Indeed, it is. You have been taking to your Twitter accounts and one is in 2014, health insurance costs expected to jump by 7.9 percent, 4.1 percentage points higher than without Obamacare. How do you know that?

THUNE: Well, I think that was the conclusion that they came to. And the Center for Medicare and Medicaid services, which is controlled by the administration, has also come out and said in the next 10 years health care costs will go up by 5.7 percent a year.

What is interesting -- there is a great Jonathan Gruber, an MIT economist that the Democrats relied upon, said at the time, that health insurance costs would go down by 13 percent for young people, 30 percent for seniors. And he has since done a complete 180. He is now advising states like Colorado and Minnesota, and advising them that their costs will go up anywhere from 19 to 30 percent. So it really is exactly what many of us predicted would happen. And he said at the time that -- what he is telling the states now is the mandates and the requirements. And to cover all of that, it drives your costs up.

VAN SUSTEREN: It would have gone up anyway.

THUNE: Well, health care costs go up, sure.

VAN SUSTEREN: But what specifically is driving the increased cost with the Obamacare over what is the natural progression of increased health care costs?

THUNE: Most of it comes down to mandate.

VAN SUSTEREN: Meaning what? Which mandates?

THUNE: You have certain requirements to essential minimum health benefits that have to be cover bide every plan. Medical loss ratios, certain -- so much has to go to health care coverage as opposed to administrative costs, all costs the insurance companies pass on. Community rating, which basically says that higher risk and older people, they can't charge more than two or three time what is they would charge for younger people whose costs, or coverage would be a lot less.

VAN SUSTEREN: Which I suppose anyone would expect as you broaden the coverage as more people are included, you would expect the cost to go up. I guess that the Obama administration didn't think they would go up as high as they would or there would be offsets with savings?

THUNE: I think they assumed, too, that once the -- once you have the requirement that everybody buy health insurance kick in that that would help cover the cost. But in most cases the analysis that I've seen that has been done suggests that all of these things that they have to cover, and this applies to a lot of small businesses, will force them to pay the penalty, in this case about $3,000, I think to start with, per employee, and they are going to shut people into the government-run exchanges because they're not going to be able to cover their health insurance or cover their employees because of all of these requirements.

VAN SUSTEREN: Then it's cheaper to pay the penalty than the insurance, throwing those people into the health insurance.

THUNE: Into the government exchange, yes.

VAN SUSTEREN: Has anyone looked to see whether the insurance companies are making out like bandits? Has anybody sat down to figure out if they are making a lot of money on this?

THUNE: I don't know that that has been done.

VAN SUSTEREN: You know -- they are shoving off mystery costs onto the people and on to the businesses. But I am curious whether or not anyone's zeroed in to see if they are making a killing.

THUNE: I think in most cases, what companies are going to do, if you put more taxes on them, which this does, and you have the tax on medical devices, you have taxes on pharmaceuticals, you have taxes on health insurance plans, all new taxes in the bill, we said at the time that those are going to be passed on. Of course, at that time, each CBO basically agreed with us and said you are going to see higher health care costs as a result of the taxes in the bill.

I don't think what was anticipated by the people-- the administration had hired to do their analysis of this, that all of these mandates and requirements were going to driving the costs up as much as they have. But my guess is, if you looked at what the insurance companies were doing, they were taking all of these requirements and new costs and passing them on, which is what I would expect to happen.

VAN SUSTEREN: Do you have a mental note or plan between what happens now and the end of June, let's say the mandate is struck down or kept, because that's what funds this, that is really what is thought to fund the health care? Are the Republicans ready with an idea what have they are going to do?

THUNE: I think the mandate, the individual mandate is the thing that hold its all together. In my view, that's the centerpiece of this --

VAN SUSTEREN: That's the money.

THUNE: That's the money. If that is stripped out by the courts, then the rest of it starts to unravel.

I think what the Republicans should do, if the court throws the individual mandate out is try to repeal the rest of it and get us back to where we are starting and moving in incremental step-by-step way toward a health insurance plan for this country that makes sense, as opposed to the one that we got, which is a top-down, you know, driven big bureaucracy, government mandate, and an incredibly expensive program that is going to drive up the costs of health care for most people in this country and be, I think, a terrible liability for taxpayers in the future, because when it's fully implemented, tell cost $2.5 trillion over a 10 year period.

(END VIDEOTAPE)