Avik Roy, writing in Forbes, explains that New York Governor Mario Cuomo (father of current New York Governor Andrew Cuomo) destroyed the state’s insurance market.
Our story begins in 1992, during the third term of Gov. Mario Cuomo, the liberal lion of his day. In July of that year, Gov. Cuomo signed into law the most draconian health insurance regulations drafted in recent times. Insurers were barred from charging different rates based on age, gender, or health or smoking status, what wonks will call pure community rating. In addition, insurers were not allowed to deny coverage based on pre-existing conditions, a.k.a. guaranteed issue. The state mandated that all plans cover a specified set of benefits, and restricted certain cost-sharing practices.
Within four years, these changes resulted in a mass exodus of health insurers from the individual market, for all the reasons that will be familiar to regular readers of this blog. If you charge the same amount to healthy and sick people, and to young and old people, young and healthy people suddenly find themselves paying thousands of dollars for insurance they don’t need. They recognize this as a bad deal, and drop out of the market. Only the sickest people, who need the insurance, stay in the pool, leading prices to go up and up in an adverse selection death spiral.
Even after Obamacare “helps” New York’s insurance market, the state will have rates three times higher than California’s.
New York, today, is in worse shape than Washington, and far worse shape than California. In 2010, according to the Kaiser Family Foundation, the average premium in the New York individual market was $357 a month. By my calculations—aided by my Manhattan Institute associate Yevgeniy Feyman and our summer intern Paul Chung—today, that figure has climbed to $495 a month.
As a result, Obamacare does have the effect of lowering premiums in New York, to a weighted average of $301 a month: a 39 percent decrease from 2013 rates, and a 16 percent decrease from 2010 rates. According to several studies of the New York market, the biggest driver of the improvement is the fact that the mandate and the subsidies will encourage healthier people into the insurance pool, driving average costs down.
It’s always better to see rates go down rather than up, but you have to remember the context. New York’s rates will still be three times higher than those found in California before Obamacare. And the Times inflated the impact of the ACA, implying that average premiums in New York City exceed $1,000 today vs. $308 under Obamacare; by our analysis, using a fairer comparison, the five-borough average for affordable coverage was $695, with a much lower average upstate.
All the regulation and mandates have left New York’s insurance market in shambles, with rates so high New Yorkers can barely afford coverage.
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