Five Things to Consider When Looking at the New Online Health Insurance Rates

As one in our occasional posts to help consumers understand the Affordable Care Act (“Obamacare”) health insurance provisions that take effect in January, this week we turn to KaiserHealthNews.org (KHN) to sort out the confusion about the cost of premiums.

Conflicting news stories have forecast higher premiums, lower premiums, unchanged premiums for the individual and small group plans available as of October via online insurance exchanges in each state. These are the plans for people who don’t get coverage through large employers, Medicare or Tricare, the military plan.

According to KHN, most policy analysts agree that average premiums for the online exchange shoppers will increase for younger, healthier people (who will get better benefits than they do now) and rates may fall for older or sicker Americans. Don’t forget, as we explained a few weeks ago, that people with lower incomes can qualify for subsidies that will offset higher premiums, and that there’s a choice of plans and costs for them.

At this point, rates for individual policies look similar to what employers pay now for workers’ coverage.

When evaluating cost claims of coverage starting in 2014, consider:

1. Comparing apples to apples is difficult. Policies sold to individuals and small businesses through the online marketplaces are brand new and by law must cover certain essential benefits that weren’t necessarily covered in your old plan (if you had one). They include prescription drugs, hospitalization, maternity costs, ambulatory services (doctor’s visits and outpatient services), emergency services, mental health/substance abuse treatment, preventive/wellness services and pediatric treatment including oral and vision care. Consumers may not be denied or charged more because of pre-existing health problems, as they may be now in most states. Women may not be charged more than men. Out-of-pocket costs will be capped at $6,350 for singles and $12,700 for families. Today, nearly 1 in 3 individual policy caps exceed those amounts.

2. What premiums are state regulators using for their comparisons? Under the ACA, coverage sold through new marketplaces to individuals and small businesses ranges from the lowest-cost bronze plans with high deductibles to higher-cost platinum or gold plans, with fewer out-of-pocket costs. But premiums are only one factor in the cost of health insurance. When examining reports on rates, determine which type of coverage was highlighted and how much the deductibles and co-payments are. Was it the low-cost bronze plan price, the slightly higher priced silver plans or the highest priced platinum or gold? Or some combined average?

3. You are not average. Many of the estimates are based on averages, which don’t reflect what any individual consumer will pay. Premium prices will vary based on a person’s age, place of residence and which insurer is chosen. Generally, younger people – especially those few who buy high-deductible coverage now – may see an increase in premiums, while older or less healthy people may see their rates go down.

4. Subsidies will offset costs for many people. Many people shopping in the new marketplaces are expected to qualify for a subsidy to offset part of the cost of the premiums. Sliding-scale subsidies are available to individuals earning about $11,590 to $46,000 a year. They probably will pay a portion of their household income – from 2% to 9.5% – toward the premium cost.

5. Most people won’t encounter changes in their premiums. The exchange rates reflect coverage sold to individuals and businesses with fewer than 50 workers that are not self-insured. Currently, the vast majority of Americans with insurance coverage get it through their jobs – and they generally work for companies with more than 50 workers. Large firms generally offer coverage similar to what the health law requires insurers to offer individuals and small firms. The new rates generally will affect people who buy their own coverage. That’s about 15 million now, with about 7 million more expected to do so next year because of the health law.

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