Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

Obamacare prices are rising. But not for the reasons you think.

Peter Ubel, MD
Policy
March 12, 2018
Share
Tweet
Share

It has been well publicized that premiums for Obamacare insurance plans have been rising at a disturbing rate. Local news is filled with reports of 21.5%, 36.3% and even higher price hikes. President Trump complained in February that Obamacare premiums “have increased by double and triple digits,” even remarking that premiums in Arizona “went up 116% last year alone.”

If the cost of buying insurance were really rising this rapidly, we’d have a reason for bipartisan agreement that the Obamacare insurance experiment is a failure. But the rise in Obamacare premiums isn’t even close to the magnitude we are hearing about from reporters and politicians. And it is not because of fake news or dishonest discourse. It’s because everyone is looking at what’s for sale rather than what’s being sold.

Not sure what the heck I’m talking about? Then consider the Nike Mag 2016, a sneaker touted as “sensing the foot and lacing itself,” because, you know, it is so exhausting to tie your own shoes. Nike made less than a hundred pairs of these battery-powered, motor-driven sneakers, which now sell for an average of $26,000 a pair.

Suppose, for purposes of illustration, that before the Mag came to market, Nike had five lines of basketball shoes on the market. They sold for an average price of about $200. Then in 2016, it brings out the Mag. If healthcare reporters and politicians commented on these shoes, they would tell you that Nike prices have risen more than 2,000%. That’s because they’d be calculating the average price of Nike’s shoe offerings, as if people bought an equal number of each type of shoe. If you have five varieties priced at around $200 and one that’s priced at $26,000, you’ll have an average price of over $4,000.

But that’s an insane way to describe the price of Nike basketball shoes. To know how much their basketball shoes cost, on average, we need to know what shoes people actually buy. With hundreds of thousands of people buying the $200 sneakers and a handful of people buying $26,000 sneakers, the average price of Nike’s shoes won’t be much more than $200.

To return to health insurance: Suppose there were three Obamacare insurance plans for sale in your city last year, priced at $200, $300 and $400 per month. Now imagine that this year’s enrollment period arrives, and the three plans in your city are now priced at $200, $400 and $600. You would probably see a story on your local TV news station expressing dismay at the 33% increase in insurance premiums — the average price having risen from $300 to $400. The problem with this news story is that it would be estimating the average price of insurance before the reporter knew what plans people bought.

Still not sure what I’m getting at? Suppose that last year, everyone bought a $300 plan, and this year everyone bought a $200 plan. The average price of insurance would have actually declined 50% — not risen 33%. We can’t know the average price of healthcare insurance until we know how many people enroll in which plans.

If pundits accounted for this difference between for sale and sold, then we would learn that the average price of Obamacare insurance has risen quite modestly in recent years. According to a study in Health Affairs, the price of Obamacare insurance premiums rose only 2% in 2015, and 3% in 2016, once you pay attention to which plans people actually enroll in.

Next time you hear a reporter or politician bemoaning outrageous price increases on the Obamacare insurance exchanges, see if you can tell whether they are talking about insurance that’s for sale or plans that have been sold. If they are not reporting on the insurance plans people actually choose, they’re selling you a bill of goods.

Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel. He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices Together. This article originally appeared in Forbes.

Image credit: Shutterstock.com

Prev

Achieving aequanimitas and physician well-being

March 12, 2018 Kevin 3
…
Next

The doctor's emotional switch

March 12, 2018 Kevin 38
…

Tagged as: Public Health & Policy, Washington Watch

Post navigation

< Previous Post
Achieving aequanimitas and physician well-being
Next Post >
The doctor's emotional switch

ADVERTISEMENT

More by Peter Ubel, MD

  • Clinicians shouldn’t be punished for taking care of needy populations

    Peter Ubel, MD
  • Patients alone cannot combat high health care prices

    Peter Ubel, MD
  • Is the FDA too slow to handle the pandemic?

    Peter Ubel, MD

Related Posts

  • 3 reasons why health care costs are rising

    Samuel Falkson
  • 5 reasons to get involved in organized medicine

    Frances Mei Hardin, MD
  • Supporters of Obamacare should consider this Trump proposal

    Robert Laszewski
  • Patients alone cannot combat high health care prices

    Peter Ubel, MD
  • Why do people hate Obamacare?

    Julie Rovner
  • So much for repealing and replacing Obamacare. What’s next?

    Brian C. Joondeph, MD

More in Policy

  • Bundled payments in Medicare: Will fixed pricing reshape surgery costs?

    AMA Committee on Economics and Quality in Medicine, Medical Student Section
  • Who gets to be well in America: Immigrant health is on the line

    Joshua Vasquez, MD
  • Online eye exams spark legal battle over health care access

    Joshua Windham, JD and Daryl James
  • The One Big Beautiful Bill and the fragile heart of rural health care

    Holland Haynie, MD
  • Why health care leaders fail at execution—and how to fix it

    Dave Cummings, RN
  • Healing the doctor-patient relationship by attacking administrative inefficiencies

    Allen Fredrickson
  • Most Popular

  • Past Week

    • Who gets to be well in America: Immigrant health is on the line

      Joshua Vasquez, MD | Policy
    • Why specialist pain clinics and addiction treatment services require strong primary care

      Olumuyiwa Bamgbade, MD | Conditions
    • Harassment and overreach are driving physicians to quit

      Olumuyiwa Bamgbade, MD | Physician
    • Why peer support can save lives in high-pressure medical careers

      Maire Daugharty, MD | Conditions
    • When a medical office sublease turns into a legal nightmare

      Ralph Messo, DO | Physician
    • Addressing menstrual health inequities in adolescents

      Callia Georgoulis | Conditions
  • Past 6 Months

    • Forced voicemail and diagnosis codes are endangering patient access to medications

      Arthur Lazarus, MD, MBA | Meds
    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions
    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • The One Big Beautiful Bill and the fragile heart of rural health care

      Holland Haynie, MD | Policy
    • Who gets to be well in America: Immigrant health is on the line

      Joshua Vasquez, MD | Policy
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
  • Recent Posts

    • Deep transcranial magnetic stimulation for depression [PODCAST]

      The Podcast by KevinMD | Podcast
    • How declining MMR vaccination rates put future generations at risk

      Ambika Sharma, Onyi Oligbo, and Katrina Green, MD | Conditions
    • The physician who turned burnout into a mission for change

      Jessie Mahoney, MD | Physician
    • Time theft: the unseen harm of abusive oversight

      Kayvan Haddadan, MD | Physician
    • How one unforgettable ER patient taught a nurse about resilience

      Kristen Cline, BSN, RN | Conditions
    • The future of clinical care: AI’s role in easing physician workload

      Michael Wakeman | Tech

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

View 6 Comments >

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

ADVERTISEMENT

  • Most Popular

  • Past Week

    • Who gets to be well in America: Immigrant health is on the line

      Joshua Vasquez, MD | Policy
    • Why specialist pain clinics and addiction treatment services require strong primary care

      Olumuyiwa Bamgbade, MD | Conditions
    • Harassment and overreach are driving physicians to quit

      Olumuyiwa Bamgbade, MD | Physician
    • Why peer support can save lives in high-pressure medical careers

      Maire Daugharty, MD | Conditions
    • When a medical office sublease turns into a legal nightmare

      Ralph Messo, DO | Physician
    • Addressing menstrual health inequities in adolescents

      Callia Georgoulis | Conditions
  • Past 6 Months

    • Forced voicemail and diagnosis codes are endangering patient access to medications

      Arthur Lazarus, MD, MBA | Meds
    • How President Biden’s cognitive health shapes political and legal trust

      Muhamad Aly Rifai, MD | Conditions
    • Why are medical students turning away from primary care? [PODCAST]

      The Podcast by KevinMD | Podcast
    • The One Big Beautiful Bill and the fragile heart of rural health care

      Holland Haynie, MD | Policy
    • Who gets to be well in America: Immigrant health is on the line

      Joshua Vasquez, MD | Policy
    • Why “do no harm” might be harming modern medicine

      Sabooh S. Mubbashar, MD | Physician
  • Recent Posts

    • Deep transcranial magnetic stimulation for depression [PODCAST]

      The Podcast by KevinMD | Podcast
    • How declining MMR vaccination rates put future generations at risk

      Ambika Sharma, Onyi Oligbo, and Katrina Green, MD | Conditions
    • The physician who turned burnout into a mission for change

      Jessie Mahoney, MD | Physician
    • Time theft: the unseen harm of abusive oversight

      Kayvan Haddadan, MD | Physician
    • How one unforgettable ER patient taught a nurse about resilience

      Kristen Cline, BSN, RN | Conditions
    • The future of clinical care: AI’s role in easing physician workload

      Michael Wakeman | Tech

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Obamacare prices are rising. But not for the reasons you think.
6 comments

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...