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New York, New York

The Left is jumping up and down over a report that insurance rates will fall by 50% or more in New York thanks to Obamacare. So is this a huge triumph?

Um, not really. Sarah Kliff throws a little bit of cold water on that:

A headline about the health care law driving down premiums, by this level of magnitude, is a rarity. But it shouldn’t be shocking: New York has, for two decades now, had the highest individual market premiums in the country. A lot of it seems to trace back to a law passed in 1993, which required insurance plans to accept all applicants, regardless of how sick or healthy they were. That law did not, however, require everyone to sign up, as the Affordable Care Act does.

New York has, for 20 years now, been a long-running experiment in what happens to universal coverage without an individual mandate. It’s the type of law the country would have if House Republicans succeeded in delaying the individual mandate, as they will vote to do this afternoon. The result: a small insurance market with very high insurance premiums.

For years New York has had one of the most heavily regulated insurance markets in the country. The 1993 reforms not only required insurers to accept all customers; they also mandated that insurers charge everyone the exact same price. Young or old, healthy or sick, it doesn’t matter in New York: Everyone gets the same deal.

This is great for someone who is sick and old who, in other states, might get charged a sky high rate or rejected altogether. It’s not great though for the young and healthy, who end up footing a bigger chunk of the bill for all those more expensive beneficiaries.

Basically, the New York insurance market — which, incidentally was the test ground for a lot of what went into Romneycare and what later went into Obamacare — was so screwed up that almost anything was an improvement. New York had the coverage mandate without the purchase mandate. It didn’t have any of the quasi-market instruments — the insurance exchanges — that are supposed to bring down prices. It was a perfectly crafted piece of wishful thinking crap. The state government just told the insurance companies to cover everyone and didn’t imagine that it would crash and burn the way anyone with two brain cells to rub together knew it would.

As Avik Roy points out, New York basically destroyed the individual insurance market. At present, only 17,000 people in the entire state have individual policies. It is expected that Obamacare will force several hundred thousand uninsured people into the markets — mostly young healthy people. So the total amount spent on insurance will actually go up. It’s just that it will be spread out among more people. And we have yet to see what this will do to the group plans that most people are covered by.

I think this story is yet another illustration of how bad the situation is for Obamacare. They are taking one of the smallest and worst markets in the country — individual policies in New York — a market was thrashed and destroyed by the precursor of Obamacare — and proclaiming a triumph because it won’t be as bad.