I’m referring to the fact that people in the individual market are sicker than those in the group market and insurers are not permitted to use premiums from the group market to subsidize* the premiums for those in the individual market. Only people in the individual market can do that. It got so bad in Iowa that every single insurer pulled out of the individual market because they couldn’t charge a high enough premium to cover the risk. You & I weren’t paying higher group rates to cover Member X in Iowa, only Iowans in the individual market were.
*Now the word subsidy is confusing here because it means different things in different contexts.
Let’s assume that group has claim costs of X per member, underwritten individuals have claims costs of 0.5X and individuals where underwriting is forbidden have claims costs of 1.5X. The insurer needs 20% to cover their expenses and turn a profit. Obviously this is hugely simplistic. Let’s also ignore inflation.
The premium for folks with group coverage will be 1.2X, pre-Obamacare the individual insurance would have been 0.6X, and post-Obamacare it’s 1.8X. And maybe on average an employer covers 75% of the premium meaning people in the group market are only seeing 0.3X coming out of their paychecks.
Now poor people in the individual market might get premium subsidies that reduce the amount that they pay. The insurer is both charging and getting 1.8X for each covered individual even though some individuals might be paying 1.2X or 0.6X or even $0. You and I are paying for that through our federal tax dollars, sure. So are people making actuary-level money who are in the individual market. That’s not what I’m talking about. Whether we’re in the individual or group market has no impact on that whatsoever.
What I’m talking about is that individuals making too much to qualify for a premium subsidy are paying 1.8X for insurance whereas you and I are only paying 1.2X. And those people are really feeling the pinch because they’re accustomed to paying 0.6X. And even the 0.6X felt like a lot to them because they see you & I “paying” 0.3X. Even if you account for the piece our employers cover though, our insurance is still a lot cheaper because the insurance company isn’t charging us in the group space for the extra sickness.
The federal government is charging all of us for the subsidies that go to the poor. Yes. Individuals are paying that too. But they expressly forbid the insurer from charging 1.5X to everyone. (Or since there’s more of us in the group market than the individual market they could probably get away with charging everyone 1.3X.) The insurer must charge you & me (plus our employers) 1.2X and they must charge the individual folks 1.8X.
It’s the 1.2X vs 1.8X that is unfair.