September 5, 2013 10:24:44 AM
WASHINGTON -- Coverage under President Barack Obama's health care law won't be cheap, but cost-conscious consumers hunting for lower premiums will have plenty of options, according to two independent private studies.
A study released today by the nonprofit Kaiser Family Foundation found that government tax credits would lower the sticker price on a benchmark "silver" policy to a little over $190 a month for single people making about $29,000, regardless of their age.
By pairing their tax credit with a stripped-down "bronze" policy, some younger consumers can bring their premiums down to the range of $100 to $140 a month, while older people can drive their monthly cost even lower -- well below $100 -- if they are willing to take a chance with higher deductibles and copays.
A separate study released Wednesday from Avalere Health, a private data analysis firm, took a wide-angle view, averaging the sticker prices of policies at different coverage levels.
Before tax credits that act like a discount, premiums for a 21-year-old buying a mid-range "silver" policy would be about $270 a month, the Avalere study found. List-price premiums for a 40-year-old buying a mid-range plan will average close to $330. For a 60-year-old, they were nearly double that at $615 a month.
Starting Oct. 1, those who don't have health care coverage on the job can go to new online insurance markets in their states to shop for a private plan and find out if they qualify for a tax credit. An estimated 4 out 5 consumers in the new markets will be eligible for some level of tax credit.
Come Jan. 1, virtually all Americans will be required to have coverage, or face fines. At the same time, insurance companies will no longer be able to turn away people in poor health.
The Obama administration, which is running the markets or taking the lead in 35 states, is not expected to release final premiums until close to the Oct. 1 launch date. But the two private studies provide an early look at the emerging market.
Caroline Pearson, lead author of the Avalere study, said it will be competitive, but there will be big price differences among age groups, states and even within states.
The bottom line is mixed: Many consumers will like their new options, particularly if they qualify for a tax credit. But others may have to stretch to afford coverage.
"We are seeing competitive offerings in every market if you buy toward the low end of what's available," said Pearson, a vice president of Avalere.
However, for uninsured people who are paying nothing today, "this is still a big cost that they're expected to fit into their budgets," Pearson added.
The Obama administration said consumers will have options that are cheaper than the averages presented in the Avalere study. "We're consistently seeing that premiums will be lower than expected," she said. "For the many people that qualify for a tax credit, the cost will be even lower."
The Kaiser study found that while premiums will vary significantly across the country, they are generally coming in lower than forecast by the government's own experts. It cautioned against comparing premiums under Obama's law to what individually insured people currently pay, because the new coverage is more robust.
Avalere crunched the numbers on premiums filed by insurers in 11 states and Washington, D.C. Kaiser analyzed 17 states and the District of Columbia. Both studies included a mix of states running their own insurance markets and ones in which the federal government will take charge.
The states analyzed by Avalere were California, Connecticut, Indiana, Maryland, New York, Ohio, Rhode Island, South Dakota, Vermont, Virginia and Washington.
In addition to those, Kaiser included Colorado, Maine, Montana, Nebraska, New Mexico and Oregon.
No data on premiums were publicly available for Texas and Florida -- together they are home to more than 10 million of the nation's nearly 50 million uninsured people -- and key to the law's success.
However, Pearson said she's confident the premiums in the Avalere study will be "quite representative" of other states, because clear pricing patterns emerged.
Four levels of plans will be available under Obama's law: bronze, silver, gold and platinum. Bronze plans will cover 60 percent of expected medical costs; silver plans will cover 70 percent; gold will cover 80 percent and platinum 90 percent.
All plans cover the same benefits, but bronze features the lowest premiums, paired with higher deductibles and copays. Platinum plans would have the lowest out-of-pocket costs and the highest premiums.
Mid-range silver plans are considered the benchmark, because the tax credits will be keyed to the cost of the second-lowest-cost silver plan in a local area.
And there's another important detail for consumers to be aware of: People with modest incomes may come out ahead by sticking with a silver plan instead of going for the lower premiums with bronze. Additional help with out-of-pocket costs like copays will only be available to people enrolling in a silver plan.
Although the sticker price for premiums rises dramatically above age 40, the tax credits are shaping up as a powerful equalizer for older consumers. That's because they work by limiting what you pay for premiums to a given percentage of your income.
For example, someone making $23,000 would pay no more than 6.3 percent of his or her annual income -- $1,450 -- for a benchmark silver plan. The amount you pay stays the same whether the total premium is $3,000 or $9,000.
However, those tax credits taper off rapidly for people with solid middle-class incomes, above $30,000 for an individual and $60,000 for a family of four.
The Avalere study also found some striking price differences within certain states, generally larger ones. In New York, with 16 insurers participating, the difference between the cheapest and priciest silver premium was $418.