One Week to Go: Government Finally Reveals Obamacare Premiums

Money

Drawing on pricing data for approved insurance plans in 48 states, the federal government gave Americans the number they have been waiting to hear for months. The average premium an average American will pay will pay for a mid-tier, or second-cheapest, health insurance plan when the Obamacare health exchanges open for enrollment next week is $328, according to the Department of Health and Human Services, or HHS.

However, in certain states, where a significant portion of the population lives in rural areas, that figure could be much higher because it can be more expensive to deliver healthcare. In Mississippi, average premiums will cost $448 per month, premium costs in Alaska will amount to $474, and premiums will average $516 in Wyoming. The least expensive plans were reported in Minnesota, where premiums will cost an average of $192 per month, and Tennessee, with premiums averaging $245.

HHS said the average premium price was 16 percent lower than its original projections. The majority of the data was provided by the 36 states with federally-facilitated exchanges or exchanges run in a partnership with the federal government. ”We are excited to see that rates in the Marketplace are even lower than originally projected,” said department Secretary Kathleen Sebelius in the press release.  ”In the past, consumers were too often denied or priced-out of quality health insurance options, but thanks to the Affordable Care Act consumers will be able to choose from a number of new coverage options at a price that is affordable.”

A September 5 study for the Kaiser Family Foundation authored by Cynthia Cox, Gary Claxton, Larry Levitt, and Hana Khosla provided an early indication of what premium costs will be. The study found that bronze plans — which have the most cost-sharing and represent the lowest level of coverage generally available through exchanges — would unsurprisingly have the lowest premiums.

However, data showed that the premiums for bronze plans would also vary significantly between the states analyzed. For example, the lowest cost bronze plan for a 40-year-old ranged from $146 in Baltimore, Maryland and $155 in Albuquerque, New Mexico to $308 in New York, New York and $336 in Burlington,Vermont.

Plans in all tiers — gold, silver, and bronze — will be required to offer the same coverage benefits, including free preventive care. The difference will be in the cost of deductibles and copayments. Still, all plans also will have a cap on total out-of-pocket costs: $6,350 for individuals and $12,700 for a family policy.

“While premiums will vary significantly across the country, they are generally lower than expected,” the study concluded. Its authors estimated that, “The latest projections from the Congressional Budget Office imply that the premium for a 40-year-old in the second lowest cost silver plan would average $320 per month nationally. Fifteen of the eighteen rating areas we examined have premiums below this level, suggesting that the cost of coverage for consumers and the federal budgetary cost for tax credits will be lower than anticipated.” In reality, the CBO’s estimate was much closer to the truth.

The federal government’s official figure is important because it is central to the debate currently taking place in Washington over whether the insurance policies offered on the exchanges will be affordable enough to attract millions of uninsured Americans to enroll come October 1 and purchase coverage for 2014 when the individual mandate goes into effect. According to the most recent estimates, the Obama administration expects around 7 million Americans to use the online marketplaces during the first year.

However, of those enrollees, at least 2.7 million must be younger and healthier consumers. To function as intended, the marketplaces need a broad, healthy risk pool to keep staggering rate increases from occurring. The premiums of  cheap-to-insure people cover the big bills for the relatively small number of sick people. So if the exchanges don’t enroll enough young, healthy people, insurers will have to raise everyone’s premiums “In the worst case, this could create what actuaries call a ‘death spiral’: Rising premiums prompt people to drop out, causing premiums to increase even more,” wrote the New Republic’s Jonathan Cohn in May.

Since the reform was aimed at bringing coverage to most Americans, keeping insurance premiums affordable matters immensely to the health care reform’s success. Even more to the point, insurance industry surveys have revealed that premium costs are the most important factor for consumers deciding whether to purchase insurance via the exchanges.

Republicans lawmakers have argued that Obamacare is not working — because health care costs will become more unaffordable. Senate Minority Leader Mitch McConnell said the premium costs released by HHS on Wednesday were still a more expensive proposition for Americans when compared to why they previously paid for insurance policies.

“Even the Administration is having a terrible time spinning this law,” McConnell said in a statement. “About the best they could claim was that some premiums would be lower than projected. Note that I didn’t say lower, but lower than projected.” Republicans, especially Texas Senator Ted Cruz, have stressed that Obamacare must not only be rolled back, but defunded before the exchanges open on October 1, because if not, Americans will become “addicted to the subsidies.”

To President Barack Obama, that stance indicates that the GOP fears that Americans will embrace the program. “Essentially they’re saying people will like this thing too much, and then it will be really hard to roll back,” Obama said on Tuesday in a conversation about healthcare with former President Bill Clinton.

“What we’re saying is, just look for yourself. Take a look at it, and you will discover that this is a good deal for you.” he said during his discussion with former President Bill Clinton at the Clinton Global Initiative Health Care Forum on Tuesday in New York.

The debate over the cost of premiums entered high gear after states operating their own exchanges began announcing estimates of rates. For example, California said premiums would increase, on average, by 26.5 percent, while Ohio quoted a 44 percent increase and New York reported an approximately 50 percent decrease. Georgia, Florida, and Indiana all warned consumers would face “rate shock” if they compared 2014 prices with the premiums they paid for plans bought on the individual insurance market a year ago. As HHS has revealed, premium costs will vary by state.

The Affordable Care Act was designed to make affordable health insurance accessible to most all Americans via a two-part system — the expansion of Medicaid and the creation of insurance exchanges where individuals will be able to comparison-shop for health insurance policies in online marketplaces where their collective bargaining power will theoretically foster competition and drive down prices. Subsidies in the form of tax credits will also make coverage more affordable for the exchange enrollees that qualify.

However, because of both the intrinsic qualities of the United States’ federal system of government and the very partisan reaction the legislation has produced in legislatures, how successful the health care reform will be depends largely on the state of an individual’s residence. Premiums — for those Americans already purchasing their own insurance who will not qualify for a federal subsidy — will also be vastly different depending on the state of an exchange enrollee’s residence because the insurance market was regulated at the state level for more than one hundred years and have developed different standards.

Some states prevented insurers from selling so-called bare bones plans, meaning that to adjust their plans to comply with Obamacare standards, which require insurance to cover a minimum set of benefits like maternity leave and mental health, insurers had fewer changes and fewer costs to add. In addition, the final numbers also showed that states with the lowest premiums tended to have more insurers offering policies on their exchanges.

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Follow Meghan on Twitter @MFoley_WSCS

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