Double your premiums and call me in the morning.

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Obamacare Isn't Driving Up Health Costs. Really.

Christopher Flavelle writes editorials on health care, energy and environment for Bloomberg View. He was a senior policy analyst for Bloomberg Government and chief speechwriter for the leader of the Liberal Party of Canada.
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After I wrote last week that the Affordable Care Act is achieving its goals without raising the cost of employer-based insurance, many readers wrote to tell me I was out of my mind.

"My family workplace premium went up last year 30 percent and is going up again in January another 21 percent," wrote Bill Alston. "I had better insurance and much lower rates before all this mess started."

"What world do you live in to think the costs of Obamacare are reasonable?" e-mailed Mark Seger, who said his premiums had gone from $587 a month to $1,089. "The cost of premiums has tripled since the approval of [the] ACA and doubled in the last year." 

Another reader, Michael Bono, made a similar assessment of the law's effect: "It's a disaster. Premiums are high and deductibles are ridiculous."

Those complaints are at odds with the top-line numbers from the Kaiser Family Foundation's annual survey of employer health benefits. The report shows that premiums for employer-sponsored plans have increased at a slower rate since the law was enacted in 2010. So what explains this seemingly widespread belief that Obamacare is driving up costs?

Obamacare, Assessed

Start with the basics. On average, the cost of employer-sponsored health insurance increased 26 percent from 2009 to 2014. But costs increased faster before the law was enacted: From 2004 to 2009, costs increased 34 percent. From 1999 to 2004, they went up 72 percent.

Those are averages; are premiums rising faster for small employers? Actually, the opposite is true. For companies with 200 workers or more, average 2014 premiums were $17,265, or 3.3 percent higher than in 2013. At companies with 3 to 199 workers, annual premiums in 2014 averaged $15,849 -- 1.7 percent more than in 2013, when average premiums were 2.2 percent higher than in 2012.

But Kaiser is defining small businesses more broadly than some. Could that category be obscuring larger increases among the smallest businesses, say those with 50 workers or fewer? Gary Claxton, the Kaiser report's lead author, said premiums aren't rising faster for those businesses; if anything, they're flatter, though he doesn't yet know if that reflects a blip or a trend.

So how should we account for the apparently widespread perception of higher costs under Obamacare? There are at least two answers.

The first, Claxton said, is that although average premiums aren't rising any faster, the premiums differ less from company to company. Before the law was passed, those premiums were based in part on the health and age of the employees using the plan, which meant that employers with younger or healthier workers could pay significantly less.

By barring that practice, known as medical underwriting, for small employers, and by tightening age-based rate-setting, Obamacare increased costs for those companies, Claxton said. If you work at a company that employs 10 healthy workers in their 20s, it's possible that the premiums you pay have risen considerably.  

But remember: The fact that the average increase has remained mostly unchanged suggests premium increases for some were offset by premium decreases for others. That's more likely to be your experience if you work at a company that has older workers, or a few with expensive medical conditions.

As Claxton notes, you don't tend to hear from those employees -- either because they haven't noticed the dip in premiums, haven't attributed that dip to the law or because people generally don't react as strongly to good news as to bad.

The second explanation has nothing to do with premiums; it attributes rising costs to the way employers attempt to shift premiums to workers. On that count, the numbers are clear: Workers are getting hit harder than they have in years.

In 2006, 6 percent of workers insured through a small employer faced an annual deductible of $2,000 or more, according to Kaiser. By this year, that had risen almost six-fold, to 34 percent. (Just 11 percent of workers covered by large employers face deductibles that high.)

Copayments have jumped, too. In 2006, 51 percent of people with employer-sponsored health insurance could see a primary-care doctor for $20 or less; by this year, that figure had fallen to 19 percent. And the average out-of-pocket maximum for single coverage has doubled, from $1,510 in 2006 to $3,011 in 2014.

When I asked Claxton what's causing employers to shift more costs onto their workers, he said the weak labor market was to blame. "When the job market is tight, you want to make your employees happy," he said. "So you don't push as hard on things like that."

None of that takes away from the economic hardship imposed on people whose premiums have gone up since the law was passed. The complaints are a reminder that looking only at averages can obscure those individual stories. But when people argue that Obamacare has led to higher overall costs for employer-based insurance, the data show they're mostly wrong.  

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Christopher Flavelle at cflavelle@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net