Cost shifting and Obamacare

A major argument of those in favor of Obamacare is that it will stop cost shifting.  The theory goes something like this…because so many people are not paying for medical care, health care providers make up that loss by increasing their prices, insurance companies pay those higher prices, and pass those higher prices on to their insureds in the form of higher premiums.  However, if everyone is forced to buy health insurance, the cost shifting will go away, and premiums will be lowered.

Here is what you should know.

In the findings made by Congress to support Obamacare we are told that in 2008 cost shifting amounted to $43 billion, increasing premiums for family insurance coverage by $1000.  (You can find the figures I will be using beginning at page 137 of the recent 11th Circuit opinion concerning the individual mandate.)

What does Obamacare do about that?  Sadly, not much.

18.9% ($8 billion) of all cost shifters are illegal aliens or non-residents, and they are exempt from the requirement to purchase insurance.  34.8% ($15 billion) are low income individuals, but, they are either “excepted” from the penalty, or will be covered under the Medicaid expansion.  So, these people will still continue to cost shift either by raising your premiums, or raising your taxes.  7.6% ($3.3 billion) have insurance, but cannot afford to pay their deductibles or co-pays, and Obamacare does nothing about that.

20.1% ($8.7 billion) are people who cannot get insurance because they have pre-existing medical conditions.  Obamacare “solves” this problem by forcing insurance companies to accept these people, and to charge them the same rate as a healthy person.  Obviously, everyone’s premiums will increase to cover the costs of insuring these people.

The other 19% ($8 billion) will continue to cost shift simply because it is far cheaper to pay the $2000 annual penalty, than what the CBO estimates will be the 2016 cost of the cheapest Obamacare “approved” policy…a $4500-5000 annual premium for an individual.

All of the above may well explain why the CBO stated that premiums:

 …in the individual market will rise by 10% to 13% more than if Congress did nothing. Family policies under the status quo are projected to cost $13,100 on average, but under ObamaCare will jump to $15,200.

So, here is the bottom line…your current premiums, let’s say, would be $13,100 per year, and include a charge of $1000 to cover the cost shifters.  But, under Obamacare , after dealing with the cost shifters, your premiums will grow to $15,200, an additional $1900 per year.

Thank you Mr. President for saving us from the cost shifters.


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The Sound Off Sister was an Assistant United States Attorney for the Southern District of Florida, and special trial attorney for the Department of Justice, Criminal Division; a partner in the Florida law firm of Shutts & Bowen, and an adjunct professor at the University of Miami, School of Law. The Sound Off Sister offers frequent commentary concerning legislation making its way through Congress, including the health reform legislation passed in early 2010.


  1. Shared Sacrifice on August 17, 2011 at 6:23 pm

    Also cost shifting as the young and healthy are forced to pay higher premiums.? And does anyone really believe that Barry cares about saving us money??

  2. cherwin on August 17, 2011 at 7:46 pm

    Exactly! The whole bill is just another name for take from the so called “rich” which really is defined as the, “the persons who do the right thing and work for a living”, and give to the “poor” which is the illegal aliens, the slouches who live off the government, the irresponsible, and the few who are really in need of help.?
    So if?the economy continues to go the way it is and more people become unemployed there will be
    no money to pay for all these people and there will be?No-bamacare.!??
    I’d like to give him a shift and it won’t cost him anything. ?

  3. Gary J on August 17, 2011 at 8:42 pm

    The correct answer to any post is simply 2012. Ct is blue but there are 49n? errrrrrrrr 56 other states.

  4. ricbee on August 17, 2011 at 11:53 pm

    ?Obamacare actually eliminates the need for insurance. Why have a middleman at all? That should cost us several million more jobs.

    • crystal4 on August 18, 2011 at 9:04 am

      Imagine if everyone paid into medicare and companies didn’t have to pay for med. insurance…imagine how many more people they could afford to employ….but congress and Obama kowtowed to the insurance lobby and that is not to be.

    • NH-Jim on August 18, 2011 at 1:12 pm

      “Imagine there’s no heaven, it’s easy if you try…Imagine all the people living for today…” (kiddin’)
      I see what you are trying to point out but think it out a little further, Crystal.
      If the companies, employers, corporations, whatever, no longer (need to) offer healthcare coverage to its employees, these employees must pay out of their own pockets for the health coverage, right?? Will these employees willingly give up 10, 20 30, 50% of their income and take a huge paycut?? No!? They will demand a raise to cover this new cost to them.? Therefore, the employer will need to pay out the same amount to cover each employee’s raise.? And, this employer will still not have new revenue to hire or expand.

    • kateinmaine on August 18, 2011 at 5:50 pm

      hello.? welcome to what used to be the insurance capital of the world.? if everyone paid into medicare, there would be no health insurance industry.? how many jobs is that?? according to the bureau of labor statistics, insurance provided 2.3 million wage and salary jobs in 2008–61% insurance carriers and the balance in agencies, brokerages and providers of other related services (i.e. small, entrepreneurial businesses).? health and medical insurance is one of the few growth areas in the insurance industry.?? those people don’t deserve to have representation and a voice in? dc?? point two–in case you don’t know–businesses only hire people if they need them.? not having to provide health insurance will not create a need for more employees.? will it free up capital for other uses?? you bet.? but people aren’t always at the top of the list for business investment.

  5. rachel on August 18, 2011 at 6:41 am

    Unless you work for a company that will generously donate to Obama’s reelection campaign in return for receiving an ocare waiver, ya may as well kiss your insurance goodbye.?? SOS, the more you expose the tiny details & unintended consequences of this (unconstitutional) law, the more I shake my head and wonder what is to become of us.? We’re soooooo screw-ed.

  6. Lynn on August 18, 2011 at 7:08 am

    Never give up, Never give in

  7. Marilyn on August 18, 2011 at 8:05 am

    What No Crystal44?

    • rachel on August 18, 2011 at 8:33 am

      Check the “High Risk Pool” blog post & you can see a comment there. lol

  8. Law-AbidingCitizen on August 18, 2011 at 8:40 am

    Overlooked is the current and growing fraud, waste and abuse the Medicare system has and is currently cost averaged into the equation. With a larger number of people enrolled in O-Care, the amount of criminal activity will rise. It would be far better to clean up the Medicare system before expanding to government mandated coverage. We all pay more for subsidizing the illegal immigrants and malfeasance of unscrupulous doctors, conman, and the waste of any large system. Why grow the problem without fixing Medicare? An analogy is fish in a tank: if there are predators in tank, enlarging the tank encourages the predators to grow larger; it only makes the situation worse. #1 Lie: “I’m from the government and I’m here too help you.”

  9. sammy22 on August 18, 2011 at 12:27 pm

    When arguments fail, always resort to the well worn fraud, waste and abuse slogan.

    • NH-Jim on August 18, 2011 at 1:36 pm

      Oh, Sam, you mean like this from the White House
      this from UPI
      this, from Senator Harry Reid
      this, from Nancy

  10. JollyRoger on August 18, 2011 at 10:44 pm

    I work in healthcare and secretly wish that all businesses were mandated to provide services to the poor- and to people whose scheme is to not pay for services.?? Imagine how things might change if everyone had to pull the wagon for free-riders!? And imagine how things might change even more if the free-riders had to actually pull the wagon and then some!?

  11. sammy22 on August 19, 2011 at 11:59 am

    NH-Jim, I don’t care who uses the slogan. It’s a slogan and it never? had traction, even in the Reagan years. I am w/ you JollyRoger: everybody should pull the wagon!


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