On November 20, 2012, the Obama administration chose to release long-awaited regulations that would have the most impact on the shape, and the price, of health coverage when Obamacare’s major provisions are slated to take effect a little over a year from now, on January 1, 2014.

The new rules demonstrate how we are headed for a world of rising health insurance premiums, shortages of physicians and hospital beds, and possibly a future “solution” based on bureaucratic rationing and restricted eligibility for life-saving treatments.

“Insurers will not be able to charge someone more just because they are sick or because they were sick,” as Health and Human Services Secretary, Kathleen Sebelius describes the law’s ban on surcharges and exclusions for pre-existing conditions.

So how much could this add to the premiums? We can get an idea by looking at premiums for the “guaranteed issue” type of insurance that already exists as a result of the HIPAA law passed in 1996 (by a Republican Congress, and signed by President Clinton).

HIPAA requires guaranteed issue insurance with no surcharges or exclusions for pre-existing conditions to individuals and families who have lost employer-sponsored coverage and exhausted their COBRA continuation coverage (if any).

To take an example, in Virginia, CareFirst BlueCross charges $1978 per month for “guaranteed issue” coverage (with variations depending on the deductible the customer selects). An equivalent plan without “guaranteed issue” costs $333 per month.

That’s a difference of $1645 per month, or almost $20,000 per year more.

As it stands now, people with pre-existing conditions might find it worthwhile to pay that much, but others can get coverage at a much lower rate. However, for 2014 and forward, only the more expensive coverage will be available.

This means that healthy families buying coverage on their own could see premium increases of $20,000 – a far cry from the decrease of $2500 promised by candidate Obama in 2008.

It is possible in theory that with more people, including healthy people, enrolling in guaranteed-issue insurance, the average health of the insurance pool would improve, and the premium increase could be lower than the full $20,000. But it is not likely to be much lower.

Consider the decision from the point of view of a healthy customer with no pre-existing conditions.

Would they rather pay an extra $20,000 for insurance, or pay a penalty of a few hundred dollars for not having “qualified” insurance?

Especially if they know that if they ever develop a serious health problem, they can always get insurance at the same “guaranteed issue” rate they they would pay without it.

Even if they have to wait until the next calendar year to begin coverage, most people would have saved more then enough in the years before to pay out-of-pocket until the following year and still come out ahead.

In other words, the same ban on surcharges and exclusions for pre-existing conditions that makes it easier for those with pre-existing conditions to obtain coverage simultaneously makes going without insurance much more attractive for those without pre-existing conditions.

In addition, the new rules also require plan benefits in each state to be equivalent to those of a benchmark “typical employer plan” offered in that state now.

The rules provide three options for selecting this benchmark plan, and in all cases the benchmark plan is likely to be more generous than a typical individually-purchased plan today. In other words, the most generous (expensive) plan of today will be the minimum plan in 2014. Lower-cost options would not be available.

More seriously, this combination of factors could lead to a collapse of the insurance market.

Starting in 2014, the Department of Health and Human Services will have to approve the premiums of “qualified” health plans.

Would Secretary Sebelius approve premiums of $24,000 per year? If so, she would be subject to criticism for raising nearly everyone’s premiums – and if not, insurance companies might not have enough money to pay claims in the new environment.

Your comments are always welcome!