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HHS report says 2014 premiums coming in lower than expected


By Jonathan Block
Posted: July 18, 2013 - 12:30 pm ET
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Despite critics' predictions that health insurance premiums would be higher in 2014 compared with 2013 because of provisions of the healthcare reform law, proposed 2014 premiums for individual-market and small-group plans offered on state insurance exchanges in 11 states have come in 18% lower on average than HHS had projected, according to an HHS report released today.

“In the 11 states for which data are available, the lowest cost silver plan in the individual market in 2014 is, on average, 18% less expensive than (HHS' Office of the Assistant Secretary for Planning and Evaluation's) estimate of 2014 individual market premiums derived from CBO publications,” according to the report.

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The average 2014 individual-market premium in the 11 states is $321 for the lowest-cost silver-tier plan, compared with the current $450 a month for comparable plans.

The report also found proposed premiums for small employers for the lowest-cost silver-tier plan in the state Small Business Health Options Program exchanges in those 11 states were 18% lower than expected.

The report's findings bolsters the Obama administration's argument that the exchanges created by the Patient Protection and Affordable Care Act are leading to increased competition among health plans and lower rates for consumers.

“These preliminary rates may be further lowered before health plans are offered in Marketplaces this fall,” the report added, using the administration's term for the state exchanges. “Already, in a number of states (D.C., Oregon, Rhode Island and Vermont), the rate review process and competition are resulting in final rates that are significantly below rates proposed this spring.

The report contended that concerns voiced by opponents over consumers experiencing “rate shock”—unexpectedly high rates for younger and healthier consumers previously accustomed to lower rates based on their lower risk—are unfounded. Under the ACA, insurers can only charge older individuals up to three times as much as younger people; this is expected to raise rates somewhat for younger consumers while moderating them for older people.

“Preliminary premiums appear to be affordable even for young men—a group about which there has been concern about 'rate shock,'” the report said. “There are approximately 750,000 young men (ages 18-34) who will not qualify for a premium tax credit who are currently enrolled in the individual market. In Los Angeles County, (the county with the largest number of uninsured Americans in the nation), the lowest cost silver plan in 2014 for a 25-year-old individual costs $174 per month without a tax credit, $34 per month for an individual whose income is $17,235 (or 150% of the Federal Poverty Level), and a catastrophic plan can be purchased for $117 per month for an individual.”

The report said that while “there are many hypotheses that might account for the finding that actual premiums appear to be substantially below ASPE-derived CBO estimates, a likely explanation is that greater competition and greater transparency are driving down prices in the Marketplace.”

The report acknowledged that it is “theoretically possible” that the 11 states are not representative of the rest of the nation, and that when data are available from all states that the national averages will be closer to the CBO estimates.

President Barack Obama addressed the report and other benefits seen with the ACA at an East Room news conference today.

Follow Jonathan Block on Twitter: @MHjblock


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