President Obama, President Clinton, and Senator Ted Cruz all spent a lot of time talking about Obamacare on Tuesday. But the real news came just as the day was ending, right at midnight, when the Department of Health and Human Services released data on insurance premiums available through the new Obamacare marketplaces.
Several states had already released their data. With this report, HHS provided premium information for most of the rest. Overall, the numbers are pretty consistent with previous reports, albeit with some new and interesting wrinkles. It seems like mostly good news, though the law's critics would argue it vindicates some of their arguments, as well.
As many readers know, the price of insurance will vary from state to state, within states, and on the person making the purchase. Generally speaking, older people will pay more than younger people, although the law limits how much more insurers can charge. People with household income of less than four times the poverty line, or about $91,000 a year for a family of four and $46,000 for an individual, will be eligible for federal tax credits. Another variable is the type of plan: Silver plans, which would be expected to cover 70 percent of the typical person's medical expenses, will cost more than bronze plans, which would cover just 60 percent. (Gold, which covers 80 percent, and platinum, which covers 90, will cost more still.)
The HHS report spotlighted only silver and bronze plans, which are the ones people are most likely to buy. Based on a quick skim, the most expensive unsubsidized policies I saw were in Jackson, Mississippi, and Cheyenne, Wyoming. In those places, a family of four too wealthy for subsidies will pay more than $1200 a month for the second-cheapest silver plan. The least expensive were in Nashville, Tennessee, where the full "sticker price" of the second cheapest silver plan will be $559 a month.
There's a lot less variation for families whose incomes qualify them for those subsidies. And that's very much by design: The law effectively tries to dictate what people will pay for the second-cheapest silver plans, no matter where they live. For a family of four with income of $50,000, the cost for such a plan in almost every city and state is $282 a month. But because of the way the subsidies work, applying those subsidies to even cheaper plans can reduce premiums even more—and at varying levels, depending on location. In Philadelphia, Pennsylvania, that family of four making $50,000 a year could get the cheapest bronze plan for $96 a month. A similar family living in the Virgina suburbs of Washington, D.C., could get one for nothing.
That’s right: With subsidies, a middle-class family of four in Fairfax County will be able to get a minimalist insurance policy for no premiums at all. (Weirdly, so will a similar family in Jackson, Mississippi, even though it's the same place where unsubsidized silver plans are so expensive.)
Earlier this year, release of similar numbers provoked intense debate over how these prices compare to what people pay now. It’s a difficult comparison to make, because the insurance product itself is changing: The benefits under Obamacare are more comprehensive and the policies are available to everybody, not just those who clear medical underwriting. But it’s safe to assume that there will be both “premium joy” and “premium shock”—some people will pay more than they do for insurance now, while others will pay less. Of course, those paying more will be getting better, more reliable insurance. Conversely, even those paying relatively low rates may decide it's more than they can afford. Julie Appleby of Kaiser Health News wrote about one woman in this situation on Tuesday.
Overall, according to HHS, the premium bids are lower than government actuaries had predicted when the law first passed. That’s good news for taxpayers, because it means the subsidies will be less expensive than budget projections had suggested. It’s also good news for the Obamacare enterprise as a whole, because it means insurers have faith that the new system will work. As Jonathan Chait noted in New York magazine recently, "These are real bets being laid down by private companies with money on the line."
In fact, while several large commercial carriers have opted not to participate in the exchanges, the new system has brought in some new companies and, overall, the trend seems to be towards more competition—not less. The average consumer will have more than 50 plans from which to choose, according to HHS, and in nearly every state at least two carriers will be offering insurance. And all else equal, more competition translates to better prices. “People almost everywhere will have a choice of insurers, but the degree of competition has an effect on the premiums,” says Larry Levitt, a senior vice president at the Kaiser Family Foundation who examined the numbers. “Where there are a lot insurers competing, premiums are generally lower. But where competition is scarce, in places such as Mississippi, premiums are coming in higher.”
Premiums don’t tell us everything we need to know about the insurance available on the marketplaces. The cheapest policies have seriously high out-of-pocket expenses—up to $6,350 for individuals and $12,700 for families. And while lower income people are eligible for extra assistance with such expenses, depending on which policies they buy, the cheapest policies may also have limited networks of physicians and hospitals. That’s not necessarily a bad thing. It depends entirely on what criteria plans use to select their providers, and whether people who need certain kinds of specialists can get them. In fact, a recent poll from Morning Consult suggested that the majority of people don’t mind losing some doctor choice if it holds down premiums. Then again, people may think differently when they face the choice for real—or when choosing the plan that costs least also means giving up the doctor they like or need most.
The full meaning of reports like these frequently becomes apparent only days after release, once experts have had more time to analyze them. If new and important details emerge, I'll update this item. But the report has already altered one of my own preconceptions. Based on previous reports, I had assumed that premiums would be lower in states where officials support Obamacare, because those officials had the will and the means to control health prices. That my not be the case, at least not entirely, as Levitt explains:
Some conservative, anti-Obamacare states have lower than average premiums and some pro-Obamacare states have higher than average premiums. The market matters here more than the politics, although in some cases states with more aggressive regulation have been able to push premiums lower. One surprise is Texas. That is a state that has put up roadblocks to implementation, but the premiums are coming in below average.
A surprise for sure—and a pleasant one.
Note: This item has been updated, so that the policy gobbledygook wouldn't seem quite so gobbledygooky.