A new analysis of health care premiums proposed under the Affordable Care Act concludes that health plans will cost even less than originally expected. That’s likely because the insurance marketplaces will encourage more competition between insurers.
Avalere Health looked at insurers’ proposed rates for Obamacare’s statewide insurance marketplaces in nine different states, and found that premiums for a 40 year old non-smoker on a mid-level health plan will cost anywhere from a low of $205 (in one Oregon region) to a high of $413 (in one Vermont region). That high-end price is actually lower than what the Congressional Budget Office (CBO) predicted the average mid-level plan cost would be in 2016.
“The initial data suggest that competition in exchanges is working to lower premiums, which will benefit nonsubsidized enrollees and the federal government,” said Caroline Pearson, vice president at Avalere Health, in an interview with The Hill.
Avalere’s report comes with some important caveats: the analysis is limited to 2014 premiums, whereas CBO’s projections deal with 2016 rates. Critics may argue that insurers are offering deceptively low rates to attract consumers in the health law’s first year of implementation, but plan on jacking those charges up once they have a larger customer base.
But insurers wouldn’t necessarily be able to do that under Obamacare, since the law subjects any premium hike over 10 percent by insurers selling plans on a marketplace to review. Furthermore, sicker Americans are expected to take advantage of the law’s protections before healthier and younger Americans enter the individual insurance market, meaning that future rate increases could be mitigated by a less costly pool.
Some healthier, young Americans may see their premiums go up compared to current rates. But, as many analysts have pointed out, current plans on the individual market aren’t really comparable to the plans that will be available on Obamacare’s insurance marketplaces. Individual health plans tend to have outrageous out-of-pocket deductibles, skimpy coverage, and Americans don’t receive any help for paying their monthly premiums. That won’t be the case once the health law’s health insurance subsidies kick in. Even bare-bones plans on Obamacare’s marketplaces must cover “essential health benefits” such as mental health care services, prescription drug coverage, and maternity care.
There is considerable early evidence that the reform law’s marketplaces are working exactly as intended by forcing insurers to compete against each other. Comprehensive plans proposed in California, Vermont, Washington, and Oregon are largely affordable, and two Oregon insurance companies even lowered their proposed prices once they realized that their initial rates were too high to be competitive on the state’s marketplace.