What do you want first, the good news or the bad news?

July 25, 2013

With open enrollment on the state exchanges beginning in less than four months, the states are kicking into high gear, announcing carriers, establishing navigator networks, and of course, revealing rates. Premium rates on the exchanges have been seen by commenters as the harbingers of either success or failure. States that announce lower rates are deemed “ACA poster children,” and those with rate increases, disasters, but it’s all more complicated than that.

Recent media coverage surrounding two states, New York (the poster child) and Indiana (the disaster), paint a picture of the disparity in exchanges across the country. But when we look a bit deeper, the success stories aren’t all that remarkable, and the disasters are only slight disappointments.

We’ll start with the good(ish) news:

Last week, New York announced that premium rates on their exchange would be 50% lower than the rates for individual insurance plans available today. This breaking news served as a valuable talking point for proponents of the health care law, illustrating that it will cause carriers to compete and result in affordable insurance premiums. Although a 50% decline in prices is certainly a nothing to sneeze at, consumers in other states probably won’t experience the same level of reductions.

So how did New York’s premiums manage to fall so dramatically? Well, New York’s health care system started off differently than most other states in the country. Even before the 2010 health care reforms were put into place, New York maintained a system of regulations that looked very similar to the reforms under the ACA. No New Yorker could be turned away because of a preexisting condition; insurers couldn’t cancel policies because you got sick, or charge more because of your health status or gender.

The one major difference between the New York health care system and the ACA is that New York never instituted a universal mandate. Because of this, old and sick people purchased care, while young and healthy people chose not to. This led to very high premiums, with no healthy population to balance out the sick and expensive one. Rates in New York spiraled upwards of $1000 for individual plans, and excessive prices further deterred young and healthy people from purchasing on the exchange.

So, beginning in 2014, the health care law will require everyone to purchase coverage, aiming to include young people to better stabilize costs. The individual mandate was a vital piece of the health care puzzle that was missing in New York and its instatement will allow thousands more New Yorkers to afford coverage. But a 50% drop in costs in New York still amounts to a hefty premium for some consumers. Rates on the New York exchange are projected to land between $170 and $965 a month. And while that is a drastic decrease for some buyers it’s not all that cheap for others.

Now onto the bad(ish) news:

In Indiana, rates are projected to jump by 72% and could cost as much as $570 for monthly premiums for the most comprehensive plans. A rate increase this large is never good news, but it doesn’t look too dismal when we view Indiana’s rates alongside premiums for the rest of the nation.

The Physicians Health Plan of Indiana estimates that 45 percent of its enrollees will pick bronze level plans and 38 percent will take up silver plans. This means that the vast majority of enrollees in Indiana are opting for less comprehensive plans with rates that are on the lower end of the spectrum. While Indiana has not released exact rates for metal-level plans, the average, $570, probably won’t be what most people end up spending.

When we look at Anthem Blue Cross’s projections for average bronze level plan, $307 for a 47 year old non-smoker, it comes out roughly in line with rate projections for the rest of the country. What we’ve seen so far is that most “second lowest cost silver plans” are between $300 and $400 across the nation. So while rate increases never sound appealing, when compared to the behavior of the rest of the country, nothing catastrophic seems to be happening in Indiana.

Take a look at the premium rates for other states: State Exchange Table

http://www.kaiserhealthnews.org/Stories/2013/July/19/new-york-health-insurance consumers.aspx
http://www.kaiserhealthnews.org/Stories/2013/July/19/new-york-and-individual-mandate.aspx
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/20/indiana-says-health-plan-costs-will-spike-to-570-thats-not-the-full-story/

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