In a Washington Post
op-ed
titled “The Affordable Care Act, helping Americans curb costs,”
Health and Human Services Secretary Kathleen Sebelius touts
ObamaCare’s alleged cost-control provisions, noting that “one of
the major reasons we passed the Affordable Care Act was
to bring down costs.”

Sebelius highlights two of the law’s insurance regulations: a
medical loss ratio (MLR) rule that requires insurers spend at least
80 percent of premium revenue on clinical services and a
rate-review provision which gives her agency the power to deem
health insurance rate hikes “unreasonable.” These two regulations,
which substantially increase the federal government’s power and
discretion over the entire health insurance market, are “putting
consumers back in charge.” (Maybe she meant bureaucrats rather than
consumers?)

You’ll notice, however, that there’s something missing from the
op-ed: any mention of actual health insurance premium prices.
That’s not particularly surprising, I suppose, given that the
premise of the piece is that the law helps make health care
cheaper, yet since the law passed, family health insurance premiums
have risen
substantially faster than in the years before the law went into
effect, rising nine percent following several years of three to
five percent rises. 

But what about those shiny new insurance regulations Sebelius
mentions? Aren’t they supposed to have an effect on the cost of
care? Given the state-level history with similar rules, I wouldn’t
count on it. Prior to ObamaCare, 34 states had some sort of MLR
rule in place. But they didn’t contain health spending or improve
care. According to a 2009 American Academy of Actuaries report,
“minimum loss ratios do not help contain health care spending
growth…or address directly the quality and efficiency of health
care services.” If anything, MLR rules create an incentive for
insurers to increase premiums by limiting the amount of money that
can be spent on administrative costs and profits to a percentage of
the total premium: Want more money to spend on administrative
expenses? Higher premiums are the only way to go. Insurance rate
review—essentially an explicit form of price controls—mostly served
to make
a mess of
the Massachusetts insurance market when the state rejected 90
percent of proposed hikes in 2010.

But those two rules aren’t the only supposed savings tricks
Sebelius has up her sleeve:

The law emphasizes prevention because we know it is far less
expensive to prevent disease than to treat it. Under the Affordable
Care Act, many preventive services are available without
cost-sharing so patients avoid chronic conditions and the painful
and costly complications they often lead to.

Sebelius has tried this line before, but the research disagrees
with her claim. According to a 2008 metastudy published
in The New England Journal of Medicine, the “vast
majority” of preventive measures don’t save money. The
Congressional Budget Office, meanwhile, has
reported that in fact, government-funded prevention efforts can
actually cost more money overall because they don’t have any
effective way to target only the narrow slices of the population
for whom prevention might actually create savings.

Before ObamaCare was passed, President Obama declared that it
would lower the cost family insurance premiums by
an average of $2,500. Perhaps understandably, the
administration tends not to mention that particular promise
anymore, preferring vague pitches that suggest the possibility of
savings without pointing to any real numbers about the health
insurance market. The possibility of savings is all they really
have. And they don’t even really have that, because the evidence
suggests that the policies the administration is counting on to
produce those savings probably won’t have the desired
effect. 

Previously in “Kathleen
Sebelius is wrong about ObamaCare.”