Calculating premium rates is a complicated and tedious task that will vary greatly among states and is open to interpretation and manipulation by both supporters and opponents of President Obama’s health care law. Generalities are particularly hard to draw, as the law will impact Americans differently: the new regulations will lead some younger people to may pay more than they’re contributing now, but will save older and sicker people hundreds, if not thousands of dollars a month.
Still, since Republicans are politically motivated to portray the proposed premium increases in a negative light and the media is far more interested in sensational claims about Obamacare failing, coverage of the new rates often leads readers with the mistaken perception that the law is coming off the tracks. Below is a short guide that will help you identify if someone is misrepresenting how much premiums will increase under Obamacare:
1. Do the premiums account for subsidies?
Most articles about premiums for health insurance in the exchanges relegate information about the Affordable Care Act’s tax credit subsidies to the lower two thirds of the piece, thus presenting the top rates as the actual amount families and individuals will be required to pay.
In reality, the number of applicants who are eligible for sliding-scale tax credits will vary — the credits are available to people making less than four times the poverty line — but the Congressional Budget Office (CBO) estimates that out of the 7 million Americans expected to enroll in coverage in 2014, 6 million will be eligible for subsidies. Those with incomes up to 400 percent of the Federal Poverty Line (FPL) will also see reduced the out-of-pocket limits.
Maryland officials, for instance, project that three-fourths of enrollees will receive assistance. In 2014, the average subsidy will be $5,510 and will increase in the years ahead.
2. What is the state comparing the new premiums to and does it break down the increases by the available levels of coverage?
While states like New York or California have already enacted strict regulations that mirror many of the new rules in the Affordable Care Act, others (like Indiana or South Carolina) allow insurers to sell skimpy bare-bones high deductible plans that provide little actual coverage.
Comparing the comprehensive plans that will be available in the exchanges (and the individual market) to the existing coverage is like likening a Lexus to a bicycle — yes, the car is more expensive, but it is in a whole different category of transportation. Under the law, all new insurance plans have to offer essential health benefits like prescription drug and mental health services.
3. Are cheaper coverage options mentioned?
Last month, state officials in Indiana announced that premiums for individual policies would be 72 percent higher than the premiums people currently play. But a closer look at the data revealed that the state wasn’t issuing actual premiums, but calculations for “allowed cost” or “the cost of insurance before calculating how much individuals would pay out-of-pocket, because of co-payments and deductibles.” The actual premiums turned out to be much lower.
What’s more, the numbers were averages of all plans in the exchange — from bronze plans that cover 60 percent of health care costs to platinum plans, which pay for 90 percent — and were not representations of the prices actual families will pay. Past experience in Massachusetts shows that consumers are very price conscious and will gravitate towards the cheaper bronze or silver plans. (In Massachusetts, 84 percent enrolled in bronze or silver policies.)
A catastrophic plan will also be available to those up to age 30 in the individual market. In Nevada, this coverage will be available for less than $100.
4. Has the state done all it could to reduce premiums?
Approximately two dozen states allow the state insurance department or commission “the legal power of prior approval, or disapproval, of certain types of rate changes” and under the Affordable Care Act, the federal government has offered grant funding “to help with rate review activities.” States like Maryland — which has some of the strongest rate-setting laws in the country — claims to have used its authority to deny rate increases to reduce the proposed premiums by “more than 50 percent.” Oregon regulators also slashed carriers’ rate requests by as much as 35 percent.