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Healthcare Progress or California Dreamin'?

In the seemingly endless war over the Affordable Care Act, President Obama was able to claim a significant victory last Friday during what amounted to a campaign stop in California. The President chose the occasion to tout California as a model of the new healthcare law’s effectiveness.

The President has chosen to portray the continuing unpopularity of the ACA as the result of misunderstanding and misinformationon the part of the law’s detractors. And he may be right. Even for healthcare professionals this is a tough bill to figure out. So, when California’s healthcare exchange announced that the individual coverage plans to be offered next year by the exchange would be cheaper by up to 30% than comparable private sector plans today, it was time to celebrate.

But not so fast. The Lobster Shift wouldn’t be the Lobster Shift if it didn’t take a contrarian look at things (See our January 10, 2013 post). And if there is anything in this world that requires a skeptical look, it’s healthcare insurance.

Upon further review, it now looks like the optimistic projections of insurance offered at 2% to 29% below current markets was a case of California Dreamin’. Here’s why:

The California exchange regulators were comparing apples to oranges. They chose to compare the projected exchange rates to California’s current small-business market, where the heavy hand of state regulators has already distorted the market to the point where the exchange rates look good by comparison.

A more accurate comparisonwould have been comparing the exchange’s individual insurance plans with today’s individual plan market, which in California is more lightly regulated than the small-business market, and as a result functions fairly well.

If you compare apples to apples, or in this case, the current individual market to the individual plans to be offered next year through the state’s ACA exchange, there’s little to celebrate. According to the Wall Street Journal, there are five plans today that are 64% to 117% cheaper than what the state expects to market in the public exchange. That’s hardly worth gassing up Air Force One to fly across the country.

The narrative is now shifting. OK, say the regulators, we goofed. The individual market will be more expensive, but beneficiaries will be getting a lot more benefits. However, the cost-benefit of paying for birth control, fertility coverage and to have his children covered till they’re 26 may escape that 25-year old male whose focus may be restricted to hot cars and weekends at the beach.

The President is probably right about the misunderstanding and misinformation when it comes to the ACA. All the more reason when one side or the other claims victory in the healthcare battle to take a second look at the claim.