In spite of concerns about “sticker shock,” rates for individual coverage on the new health insurance marketplaces appear to be lower than expected in most states due mainly to robust competition among insurers, the Obama administration reported Wednesday.
With prices all but finalized in most states, a new report by the U.S. Department of Health and Human Services found that monthly premiums in 47 states and the District of Columbia, on average, will be 16 percent lower next year than the Congressional Budget Office projected they would be in 2016 – when the marketplaces are at full capacity.
Roughly 95 percent of uninsured people who are eligible for marketplace coverage live in states where average monthly premiums for individual coverage is lower than expected, the report found. And the states with the lowest premiums have more than twice the number of plans offering coverage than states with the highest premiums.
Administration officials were clearly buoyed by the findings, which appear to support their claims that the Affordable Care Act would give consumers more choices and better rates by bringing more insurers into the markets.
In the 36 states where the federal government will fully or jointly run the marketplaces, the report found consumers will choose from an average of 53 health plans. Overall, about 95 percent of people will be able to choose plans from two or more insurers, roughly 25 percent of which are offering individual coverage for the first time, the report finds.
HHS Secretary Kathleen Sebelius touted the report’s findings that rates would more affordable than anticipated.
“Dallas families earning $15,000 dollars a year will be able to buy quality coverage for as little as $26 a month,” Sebelius said during a press briefing. “Across the board, six in 10 uninsured Americans will be able to find coverage for less than $100 dollars per month.”
The good news about prices won’t be spread evenly among all consumers, however. The Affordable Care Act requires the lowest-income tax credit recipients to pay a minimum of 2 percent of their annual income toward health coverage. In addition, they also get the largest tax credits. But the highest-earning tax credit recipients can pay up to 9.5 percent of their earnings for health care, while receiving the smallest tax credits.
In addition, experts say it’s impossible to compare current rates in the individual market to the new proposed rates under Obamacare because insurers currently charge more for coverage or deny it altogether to people with pre-existing health problems. So rates under Obamacare may be higher for some, but the health law significantly beefs up individual coverage and forbids insurers from denying coverage because of a person’s medical conditions.
The insurance marketplaces, which begin enrolling people for 2014 coverage on Oct. 1, divide health plans into categories based on the share of medical costs they cover. Silver plans – the second lowest-priced plans – cover 70 percent of medical expenses. Tax credits that will go to low- and middle-income families are based on the price of the Silver plan, which is known as the “benchmark plan” for a given area.
The report found that the average premium for benchmark plans nationwide will be $328 a month before applying tax credits that will drive the rate down even further for people earning between 100 percent and 400 percent of the federal poverty level.
“Some Silver plans will cost $768 dollars less per year than original estimates, a 16 percent difference,” Sebelius said.
The report was based on rates submitted by insurers that have yet to be OK’d by HHS. But a department official said they were not likely to change significantly.