Blame Democrats -- not Trump -- for sabotaging ObamaCare

Premiums for health insurance plans on ObamaCare's exchanges will rise an average of 15 percent next year, according to a new report from the Congressional Budget Office.

Senate Minority Leader Chuck Schumer, D-N.Y., has blamed President Trump and congressional Republicans for the rate hikes – and for "deliberately sabotaging our health care system."

Schumer is half right – ObamaCare's insurance markets have indeed been sabotaged. But Schumer and his fellow Democrats are the saboteurs. They're the ones who wove ObamaCare's incoherent web of mandates, which are the real reason insurance premiums are soaring.

Progressives argue that two changes implemented by Republicans have led to the premium hikes: the elimination of ObamaCare's cost-sharing reduction subsidies and the repeal of the individual mandate.

The cost-sharing reduction subsidies were designed to reimburse insurance companies for losses they incur because of a provision within ObamaCare that requires them to reduce out-of-pocket costs for low-income enrollees. Congress never actually appropriated money for the payments. But the Obama administration made them anyway, even after a federal judge found them unconstitutional.

If Democrats are really interested in finding out who sabotaged the insurance market, they'll have to take a look in the mirror.

President Trump stopped the cost-sharing reduction payments last fall. If they'd continued this year, insurers would have received another $10 billion in taxpayer money. ObamaCare's proponents assert that insurers are hiking premiums to make up for that lost revenue.

The individual mandate, meanwhile, was repealed as part of the tax reform law enacted in December. The measure reduced the "tax" for going without insurance to zero, rendering the mandate moot.

ObamaCare's defenders worry that repeal of the mandate will result in an exodus of healthy customers from the exchanges.

Starting next year, people will face no penalty for purchasing low-cost coverage that doesn't comply with ObamaCare's many benefit mandates, or for going without insurance altogether. If a significant number of healthy people leave, the exchanges will be left with a sicker pool of enrollees, forcing insurers to raise premiums.

It's true that these changes will put some upward pressure on premiums. But premiums began skyrocketing long before President Trump stepped into the White House.

In 2014 – the year ObamaCare's exchanges opened for business – the least-expensive mid-level "silver" plans were roughly 50 percent more expensive, on average, than the typical individual market plan in 2013.

In 2015 and 2016, average premiums for the lowest-priced silver plans jumped 5 percent and then another 7.5 percent. In the fall of 2016, several months before President Trump took the oath of office, insurers announced premium hikes for 2017 exchange plans of another 25 percent.

Altogether, premiums for individual market plans have more than doubled since 2013. Several mandates at the heart of ObamaCare are why.

Take the guaranteed issue and community rating mandates, which prevent insurers from denying coverage to anyone and require them to charge sick and healthy people of the same age the same price.

Providing protections for people with pre-existing conditions is popular. Nobody likes the idea of being turned down for insurance coverage or being charged unaffordable premiums when they need coverage most.

But the hard truth is that sick people cost more to insure than healthier people. Patients with chronic conditions, for instance, are about five times costlier to insure than those without.

Instead of directly subsidizing care for the relatively small share of people with pre-existing conditions, the Obama administration herded everyone in the individual market into the same risk pool. Healthy Americans ended up having to pay artificially high premiums to subsidize coverage for their sicker peers.

That caused premiums to skyrocket. A 2017 McKinsey study concluded that the guaranteed issue and community rating mandates were responsible for up to 75 percent of premium increases.

It would have been far more cost-effective for the federal government to fund state-level high-risk pools, where consumers with chronic pre-existing conditions could purchase subsidized insurance. This approach would have helped sick patients secure affordable coverage without disrupting the broader insurance market for healthy people.

If Democrats are really interested in finding out who sabotaged the insurance market, they'll have to take a look in the mirror.

Sally C. Pipes is president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “The False Promise of Single-Payer Health Care.” Follow her on Twitter @sallypipes.