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Administration Locks in Premiums for ObamaCare as Enrollment Drive Begins

September 26, 2013
The Hill
Sam Baker

The Obama administration on Wednesday released long-awaited information about the cost of insurance premiums under ObamaCare as officials made final preparations for the start of enrollment next week.

On average, across the 36 states where the federal government will be running new insurance marketplaces, premiums were 16 percent lower than expected, the Health and Human Services Department said. Some consumers won’t pay premiums at all because new federal subsidies will cover the cost of their coverage, HHS said.

But premiums are still certain to increase for some people — particularly the young, healthy adults the administration is aggressively targeting in its push to encourage enrollment in the law’s new coverage options.

HHS released its report on premiums less than a week before new insurance marketplaces, known as exchanges, are set to open for enrollment. The administration is embarking on a massive campaign to encourage people to sign up for coverage — or at least to explore their options. 

Some Republicans have criticized the Health Department for not releasing the rate information sooner, and the HHS report does not provide a comprehensive accounting of every plan. 

Still, the administration touted the initial rate information as a sign that the healthcare law will live up to promises of affordable care. 

“The marketplaces clearly are providing more competition,” Gary Cohen, the director of the HHS office overseeing most of the implementation effort, said during a conference call with reporters. 

A middle-of-the-road ObamaCare policy will cost about $328 per month, according to HHS’s report. The cheapest policy will cost $249 per month, on average. Neither of those figures accounts for the tax subsidies that will be available to most people who buy insurance through the exchanges. 

Premiums also will vary considerably from state to state, and will also vary according to factors such as age, smoking status and location within a state.

On Tuesday, President Obama urged the uninsured to ignore the fierce political debate over the healthcare law and check to see how much they would pay for coverage.

"Make your own decisions about whether this is good for you," Obama said. "Because what we are confident in is that, when people look and see that they can get high-quality, affordable healthcare for less than their cellphone bill, they're going to sign up."

HHS’s report does not list premiums for every plan and every set of circumstances — officials said consumers will have to plug in their specific information next week to see that information. 

Instead, the department provided premium information for two hypothetical consumers that have also been used widely in states’ rate comparisons: a young adult and a family of four.

The figures provide an indication of how much insurance will cost for some of the people the administration is trying hardest to enroll. The outreach effort has focused extensively on young adults, and officials have said one-third of their target population lives in just three states: California, Texas and Florida.

The cheapest “bronze” plan available through the exchanges would cost a 27-year-old consumer, on average, $163 per month.

“I would say that’s an affordable rate,” Cohen, of the Center for Consumer Information and Insurance Oversight, said.

A 27-year-old with an income of $25,000 would be eligible for the law’s tax subsidies. He or she would only have to pay $93 per month for a “bronze” plan, on average.

In Texas, the subsidized 27-year-old would pay $83. In Florida, it’s $96.

Those rates are lower than what HHS expected, based on projections from the Congressional Budget Office. But they still represent an increase for some consumers — especially the young adults so critical to the law’s success.

“There are literally no comparisons to current rates,” conservative economist Douglas Holtz-Eakin said. “That is, HHS has chosen to dodge the question of whose rates are going up, and how much.  Instead they try to distract with a comparison to a hypothetical number that has nothing to do with the actual experience of real people.”

The administration has generally not disputed that premiums will go up for some consumers. But it says comparisons to existing policies are often unreliable because they do not account for changes in the plans’ benefits. 

The healthcare law requires all policies sold through the exchanges to cover certain benefits.

“The health insurance people will be buying will actually cover them," Cohen said. "There have been a lot of products on the market where people thought they had insurance but then it didn’t cover hospitals, for example.”

As with all insurance plans, lower-than-expected premiums in the exchanges come with a trade-off: higher out-of-pocket costs.

“Bronze” plans — those with the lowest premiums — will carry an average deductible of $5,150 per year, according to an analysis from the consulting firm Avalere Health. A more generous silver plan would have a deductible of about $2,550, but would have higher premiums than a bronze plan.

“Consumers will need to balance lower monthly premiums against the potential for unpredictable, expensive out-of-pocket costs in plans with higher deductibles,” said Caroline Pearson, vice president of Avalere Health. “Furthermore, there is a risk that patients could forego needed care when faced with high up-front deductibles.” 

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