4 Things to Know About Premiums Under Obamacare
By Randy Dotinga
Reviewed by Lisa Zamosky
Aug. 15, 2013 -- As the Oct. 1 launch of the new health insurance Marketplaces draws near, states are beginning to release the premiums that some Americans will pay starting in 2014. Depending on who you talk to, the numbers are great -- or grim -- and everything in between.
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Officials in Ohio are warning that rates for people with individual plans will skyrocket by 41%. But critics say the numbers are misleading. In California, officials touted lower-than-expected premiums in its Marketplace, but some people will get socked with big increases.
In a word, it's complicated. But "in the big picture, we do have a good clue now where things stand," says Uwe Reinhardt, PhD, during a webinar sponsored by the Alliance for Health Reform. Reinhardt is an economics and health policy professor at Princeton University.
Yes, premiums will go up for individuals in some states. But consumers may get a better package of benefits, and smaller deductibles and copays. And some will receive financial aid to help them pay for coverage.
"What's being offered now can be very incomparable with what was offered before," says Linda Blumberg, PhD. She is a senior fellow at The Urban Institute, a think tank in Washington, D.C.
Under the Affordable Care Act, signed into law in 2010, each state must have a health insurance Marketplace, also called an Exchange, in place by Oct. 1 for coverage starting Jan. 1, 2014. Most Americans will be required to have health insurance starting Jan. 1.
It's not clear how many people will get insurance through the Marketplaces. The Congressional Budget Office estimates that 25 million people in the U.S. will gain coverage over the next decade because of the Affordable Care Act.
Here are four things people should know about the new Marketplace premiums:
1. Despite all the hoopla, most people won't be affected.
At issue are the new Marketplaces that will provide coverage in all 50 states and Washington, D.C., as of Jan. 1. The Marketplaces will provide access to coverage from private insurance companies to people who are uninsured, people who buy insurance on the individual market, and people who work for a small company that wishes to provide coverage.
"Most Americans who now have coverage will probably not be dealing with the Exchanges," says Ed Howard, executive vice president of the Alliance for Health Reform. "If you get coverage through your employer and it's a substantial enterprise, you'll continue to get coverage through your job. You won't touch the Exchanges."
2. Premiums vary depending on where you live.
"There will be some variation across states, because the [current] insurance markets vary so much," says Benjamin Sommers, MD, PhD. He is an assistant professor of health policy and economics at Harvard School of Public Health. "In states that have traditionally had very bare-bones health insurance offerings in the individual market, premiums will go up more because they're going to be offering a much more comprehensive product."
Other states, though, had different types of regulations in place and will actually see lower premiums. New York is one, Sommers says. "But as with anything related to this health care law, politics is playing an enormous role -- both in what numbers get reported and how people interpret those numbers."
Wherever you live, Marketplace policies allow some people to get cost breaks based on their income. For example, a person making up to about $45,000 -- or a family of four making up to about $94,000 -- may be eligible for lower costs.
3. Only a few states have released premium details so far.
Preliminary or final information about Marketplace premiums is available in Washington, D.C. and these states: California, Colorado, Connecticut, Florida, Maine, Maryland, Montana, New Mexico, New York, Oregon, Rhode Island, South Dakota, Vermont, and Washington.
The states and the federal government, which will run the Marketplaces in some states, must make final rates public by Oct. 1.
Here are some sample premiums (although people who qualify for tax credits will pay less):
4. Information about premiums may be misleading.
Premiums for 2014 may cause sticker shock in some people, especially those who already pay for cheaper coverage. But premiums don't tell the whole story, Blumberg says.
For example, the premiums for healthy young men may seem high compared to current premiums, she says. But insurance policies available after Jan. 1 must provide more coverage than many of those available now.
"It's important to ask questions about how the comparison is being made when we hear premiums that sound extreme," she says. "Reasonable premium levels are being seen in the states where we have information so far."
But "there are some outliers," she says.
Not everyone shares Blumberg's view that premiums are generally reasonable.
Tom Miller, JD, a resident fellow at the American Enterprise Institute, a D.C. think tank, says some people, like those under 30 and even aged 30-39, will see increases.
Why might that be? Because the new system created by the Affordable Care Act "evens out the costs" by requiring both the healthy and the sick to get coverage, says Roberta Riportella, PhD, professor of community health at Kansas State University.
Insurers can face major financial risk if their "pool" of policyholders includes large numbers of sick people who require expensive care. For that reason, they prefer to balance things out by insuring many healthy people who don't cost as much. That allows a big chunk of their premiums to help pay for the care of the ill.
Under the Affordable Care Act, almost everyone -- from the healthy 25-year-old to the 60-year-old with cancer -- will have to get coverage or pay a fine.
Some critics warn that requiring people to get coverage is an improper intrusion of the government in insurance markets and personal freedom.
Riportella says that even if premiums on the Marketplace are higher in 2014, the new system has a variety of protections. Insurance companies will no longer be able to set limits on spending per consumer over a year or lifetime, and they won't be able to turn people away because they have pre-existing medical conditions. "When people understand them fully, I think they will be willing to accept some insecurity about premiums as long as they are within reason," she says.
SOURCES: Uwe Reinhardt, PhD, professor of economics and health policy, Princeton University. Linda Blumberg, PhD, senior fellow, The Urban Institute. Ed Howard, executive vice president, Alliance for Health Reform. Benjamin Sommers, MD, PhD, assistant professor of health policy and economics, Harvard School of Public Health. Tom Miller, JD, resident fellow, American Enterprise Institute. Roberta Riportella, PhD, professor of community health, Kansas State University. Alliance for Health Reform webinar, Aug. 13, 2013. www.oregonhealthrates.org: "Portland Area Proposed Rate Examples." Healthcare.gov: "What's the difference between Marketplace health plans and other private plans? Congressional Budget Office: "CBO's Estimate of the Net Budgetary Impact of the Affordable Care Act's Health Insurance Coverage Provisions Has Not Changed Much Over Time."