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Implementing Health Reform: Plan Choices And Premiums



September 25th, 2013

On September 25, 2013, the Department of Health and Human Services released an Issue Brief disclosing premium rates that will be available through the exchanges in 2014.  The brief contains data from 36 states including 34 with federal exchanges and 2 states (Idaho and New Mexico) where state exchanges that will use the federal system to display plans.  The brief also includes some information on 11 of the states with state exchanges (Massachusetts, Hawaii, and Kentucky are missing).

The tone of the brief is celebratory — 95 percent of consumers in the 36 states will have a choice of 2 or more health insurance issuers.  In the 36 states with federal data, from 1 to 13 insurers will be available offering from 6 to 160 plans.  On average, individuals and families will have 53 plans to choose from; young adults will have 57 plans including catastrophic plans.  Only West Virginia and some counties in other states will have only one insurer.

Ninety-five percent of consumers live in states with average premiums below the CBO’s 2012 estimate of 2014 premiums.  On average, premiums before tax credits will be 16 percent lower than the CBO’s projections.  The average premium nationally (in the 48 reporting states) for an individual before premium tax credits will be $328.  Young adults will pay an average, before tax credits, of $129 per month for a catastrophic plan, $163 for a bronze plan, and $203 for a silver plan.

The  effect of tax credits.  After tax credits are applied, however, costs drop considerably.  The average 27 year old in Texas with an income of $25,000 will pay $145 for the second lowest-cost silver plan, $133 for the lowest-cost silver plan, and $83 for the lowest-cost bronze plan.  A family of four in Texas with an income of $50,000 could pay $282 for the second lowest-cost silver plan and $57 per month for a bronze plan.  After taking tax credits into account, 56 percent of Americans will qualify for coverage for less than $100 a month, including Medicaid and CHIP in states expanding Medicaid.

The Report includes one table giving, for each of the 36 states that uses the federal data, the average number of qualified health plans; the cost of the lowest-cost bronze, silver, gold, and catastrophic plans for a 27-year-old before tax credits; the cost of the second lowest-cost silver plan and the lowest-cost bronze plan for a 27-year-old with an income of $25,000 after tax credits; and the cost of the second-lowest cost silver plans before and after tax credits, as well as the bronze after tax credits, for a family of four with an income of $50,000.  Second and third tables include the same information for the largest city and for 25 metropolitan statistical areas in those states.  A fourth table provides the weighted average premiums for the lowest-cost silver plan, second lowest-cost silver, and lowest-cost bronze plans in the 48 states for which data are available.

These are not, of course, the premiums that any particular individual or family will pay.  Premiums will be adjusted for geographic area, age, family composition, and tobacco use.  But they do give some idea of the magnitude of exchange premiums.

Premiums will vary considerably from state to state, reflecting in part the presence or absence of competition in the states.  In some places bronze plans will be available to families for free after the application of the tax credit.

Premiums higher in some cases but for broadly available and strengthened coverage.  Premiums will in many places be higher than the lowest cost plans currently available.  In Texas, for example, the lowest-cost bronze plan for a 27 year-old before tax credits will cost $139.  This is significantly more that the premium of the lowest-cost 2013 plan, which, according to a recent GAO report, cost a 30 year-old Texas male $32 a month and a female of the same age $39 a month.  After applying premium tax credits, the cost of the lowest-cost 2014 bronze plan for a 27 year-old (male or female) earning $25,000 a year drops to $83, but this is still more than the 2013 premium.

However, the $32/$39 premium was for a $10,000 deductible plan with a $17,000 out-of-pocket maximum and 50 percent coinsurance.  The 2014 bronze plan will likely have a deductible in the $3,000 to $4,400 range with 20 to 50 percent coinsurance and a $6,350 maximum; not first-dollar coverage, but at least bankruptcy protection.

In Florida, the second lowest-cost silver plan for a family of four with 40 and 38 year-old parents and an income of $50,000 would be $789 before the tax credit is applied.  The cheapest health plan in 2013 cost, according to the GAO, $332 a month.  But the 2013 plan had a $22,500 deductible and an out-of-pocket maximum of $31,500.   The 2014 plan would have a much lower deductible and a maximum out-of-pocket of $12,700.  Moreover, the family would qualify for premium tax credits that would lower its premium for a bronze plan to $104 a month.  If the families income was below 200 percent of the poverty level ($47,100), its cost sharing would drop precipitously, although its premiums might be somewhat higher, as it would have to purchase a silver plan.

It is important to remember, moreover, that the 2013 premiums are base premium rates.  If an applicant had medical problems, premiums were higher.  If an applicant had serious medical problems, he or she may not have been able to get commercial coverage at any price.  Women, of course, also generally paid more than men for 2013 coverage.  Finally, the 2014 plan will have more comprehensive coverage, covering pediatric vision and dental care, habilitative services, maternity, and mental health services, which the 2013 plan may not have covered at all or may have covered much more meagerly.

Older consumers will pay more for coverage than younger consumers.  But older enrollees will not pay more than 3 times what young enrollees pay.  Today in many states they can pay 5 or 6 times what young consumers pay.  Thus, although younger consumers may pay more than what they now pay for the lowest-cost coverage, older people may pay less.

Plan networks.  Much has been made in recent days of the fact that exchange plans may have narrower provider networks than many plans do today. This is likely to be true of many plans in many states, although broad network plans are also likely to be available in the exchanges for a higher price.  There is a particular concern that plans may not include essential community providers, such as federally qualified health clinics or safety net hospitals.  But all exchange plans must legally have a network “that is sufficient in number and types of providers, including providers that specialize in mental health and substance abuse services, to assure that all services will be accessible without unreasonable delay.”

All exchange plans must meet essential health benefit and actuarial value standards.  They have few ways to compete except on network coverage.  It is not surprising, therefore, that some plans will be narrow network plans.  It is to be hoped, however, that HHS and the states will closely monitor these plans to ensure that consumers have adequate access to providers in fact and not only on paper.

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1 Response to “Implementing Health Reform: Plan Choices And Premiums”

  1. Robert Power Says:

    OPM has not yet weighed in with its multi-state plans (MSPs) in all affected states. This is a “wild card” that will directly affect (at least a few of) the second-lowest-silver estimates made by ASPE in its policy brief.

    It is inherently unfair that OPM’s vendor(s) will have perfect advance knowledge of who-bid-what next Tuesday. OPM has a long history of operational excellence, so we can only hope that OPM will prevent its vendors from exploiting this unintended timing advantage.

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