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August 2013
Health Insurance Exchanges Are Changing the Dynamic

     One goal of the Affordable Care Act is to increase competition and transparency in the markets for individual and small group insurance, leading to higher quality, more affordable products. Information on proposed premiums in the individual and small group markets has so far been made available by 11 states.

     A July 2013 DHHS ASPE Issue Brief analysis of those states’ proposed rates compared to those estimated by the Congressional Budget Office (CBO) show some very positive results:

 

·      The lowest cost silver plan in the individual market in 2014 is, on average, 18 percent less expensive than ASPE’s estimate of 2014 individual market premiums derived from CBO publications;

·      The lowest cost silver plan available to small employers in 2014 in the six states with available data is estimated to be 18 percent less expensive, on average, than the average premium that small employers would be paying for a pre-Affordable Care Act silver plan trended forward.

 

     The results strongly suggest that greater competition and transparency are leading to substantial benefits for both consumers and employers in these markets. The exchanges are creating a very different dynamic for insurance companies, prompting them to be more aggressive and competitive in their pricing.

     According to The New York Times, premiums in New York are set to fall by at least 50 percent: “Beginning in October, individuals in New York City who now pay $1,000 a month or more for coverage will be able to shop for health insurance for as little as $308 monthly. With federal subsidies, the cost will be even lower.” New Yorkers will be able to choose from 17 different insurance plans when enrolling in coverage in October.

     Consumers are seeing lower rates and increased competition among insurance companies in states and marketplaces across the country. In May, California released the rates that people without employer-sponsored coverage would pay on the new health care marketplace. The costs for a medium coverage plan are far below predictions.

     For example, in southern Los Angeles County Health Net is going to charge $242 a month for one of its plans while Blue Shield is charging $287 and Kaiser Permanente $325 for the same coverage. That means that the 5 million uninsured residents of California will now have more access to affordable, higher quality care than is currently available.

     The LA Times noted that “For the first time, consumers are in a position to make an informed decision about health insurance,” and “Insurers, meanwhile, are going toe to toe to win customers, keeping prices as low as possible and stepping up quality of service.”

     Private insurers vying to sell coverage on Oregon’s health marketplace this October requested to redo their rates after learning that their plans’ premiums were higher than other proposals and would not be competitive in the marketplace. One plan even requested to lower its rates by 15 percent.

     In Montana the individual and small group health plans sold on the marketplace will be cheaper and offer better coverage. Without the health law, insurance officials predicted the average premium in 2014 to rise by 10 percent to $290. Instead, the average cost for an individual plan will be $273—about five percent lower than it would have been without the health law’s marketplace. Costs are going down even as insurance companies will now have to cover 10 “essential health benefits,” including prescription drug and mental health services, that skimpy individual plans almost never cover.

     In the south, residents of Louisiana will soon see lower premiums as well. Recently Louisiana’s largest private health insurer, Blue Cross and Blue Shield of Louisiana, estimated that two-thirds of its customers who buy their own policies will pay the same premiums or less for better coverage under the federal health care overhaul.

     Washington is also seeing lower rates. After warning that premiums would go up by 50 to 70 percent under Obamacare, Premera Blue Cross released rates for individual plans that are far lower than current levels. Premera currently offers individual plans for 21-year-old non-smokers at a monthly cost of $325, with a deductible of $1,800. In the exchange, that same person in King County could purchase a similar Premera plan with a lower deductible at a rate of $276—a decrease of 15 percent.

     With 24 million Americans expected to gain coverage through the marketplaces by 2016, this is great news for Americans’ pocketbooks—as well as their health. At a time of significantly escalating health care expenditures, it seems like something is going in the right direction!

 

Sources: Center for American Progress Action, June17, 2013 Memorandum; U.S. Department of Health and Human Services, ASPE Research Brief, July 2013, ASPE Office of Health Policy; http://aspe.hhs.gov/health/reports/2013/MarketCompetitionPremiums/rb_premiums.pdf

 

 

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