State regulators have warned Ohio consumers to brace for huge premium spikes when the Patient Protection and Affordable Care Act begins next year.
But some experts say the rate-shock has been overstated, largely because the state’s premium calculations don’t include the impact of federal subsidies.
The Ohio Department of Insurance estimates that premiums for individual insurance policies purchased through a state-based health exchange will climb next year to $332.58 — up 41 percent from the $236.29 average monthly premium for all plans available in the individual market today.
But premium assistance in the form of income-based federal tax credits will hold prices down on the exchange, according to an independent analysis of publicly available rate filings from the price comparison website, ValuePenguin.com.
“On face value, the premium calculations (from the Ohio Department of Insurance) may be pretty accurate,” said Jonathan Wu, chief analyst at ValuePenguin. “But, obviously, that is before subsidies. Even though premiums are going up for everyone, the subsidies will definitely help a lot of Ohioans.”
ValuePenguin calculated rates and subsidies based on age and income for the benchmark plan to be sold on Ohio’s exchange — an online marketplace created by the ACA where individuals, families and small businesses can begin buying insurance next year.
The company found individuals between the ages of 27 and 55, earning $28,725 a year would pay no more than $192.70 in monthly premiums — although prices may vary slightly depending on where consumers live.
Moving closer to the high end of the subsidy eligibility range, individuals from 27 to 55, earning $34,470 a year would pay monthly premiums ranging from $228.51 to $272.89 for the same coverage.
Premium subsidies will be available to anyone enrolling in the exchange with income no more than four times the federal poverty level. That’s $45,960 for an individual or $94,200 for a family of four this year.
Will it work?
Insurance department officials are quick to point out that not everyone will qualify for a subsidy.
But Families USA, a national nonprofit advocacy organization, estimates about 916,000 Ohioans would qualify for the tax credits. That’s about 60 percent of the nearly 1.5 million uninsured Ohioans.
Still, the impact of the subsidies will vary widely, according to Wu, who said older and sicker consumers who can no longer be denied coverage and who will be charged the highest premiums will realize the greatest benefit from the subsidy offsets. Many young adults will receive little, if any, assistance with their premiums.
“If you’re 27, 28 or 30 years old, your premiums are probably not expensive enough for the subsidies to kick in significantly,” Wu said.
Most Americans, regardless of age, will be required to purchase insurance coverage next year or face a tax penalty of $95 or 1 percent of their income, whichever is greater.
Allison Wood, 29, of Dayton, said she’d rather pay the penalty than sink money into an insurance policy she doesn’t want or need. And she’s peeved by the prospect of being “taxed” for not buying insurance.
“When I go to the doctor, I just pay per visit, but I don’t really get sick,” said Wood, a cell phone store clerk at the Dayton Mall who doesn’t have insurance. “You’re telling me I have to pay almost $100 whether I want insurance or not? That’s not cool.”
While subsidies will help mitigate the cost, premiums will still be higher than current rates.
Lt. Governor Mary Taylor, who heads the state insurance department and is a vocal critic of the Affordable Care Act, placed the blame squarely on the shoulders of President Barack Obama and his signature health care law.
The law requires all insurance policies sold on the exchange to provide a comprehensive package of items and services, known as essential health benefits, which will drive up insurers’ costs by 83 percent, according to Taylor.
Requiring insurers to provide essential benefits — including maternity care, mental health and substance abuse treatment — will also eliminate less expensive options, such as high-deductible, low-premium plans, she said.
“Ohio has traditionally had a more competitive health insurance market than other states with a wider range of prices and choices — from simple, high-deductible coverage to comprehensive, full service plans,” Taylor said. “That level of diversity is essentially outlawed under Obamacare (as the health care law is commonly known) so Ohio’s rates and premiums are going up significantly.”
Enrollment date looms
Extreme price hikes may have been avoided if the state had acted on its own to implement the health care law, according to at least one expert.
Ohio is one of 36 states that has deferred to the federal government to set up and run its health exchange.
By allowing the federal government to take control, the state has essentially killed the competition that Taylor credited with keeping insurance prices relatively low in Ohio, said John Bowblis, a professor and health economist at Miami University.
“If the state had created its own exchange, it might have been able to create its own health plans or induce more firms to enter into the exchange market,” he said. “The exchange we have now is much more restrictive with fewer companies offering fewer products than what we have in the market today.”
The insurance department has approved a dozen companies offering 200 different plans to sell individual health insurance on the state’s health exchange. Six companies offering 184 different plans have been approved for the exchange’s small business market.
Open enrollment begins Oct. 1.
Health plans will be sold in four tiers: bronze, silver, gold and platinum. The tiers reflect the level of coverage, or the percentage of health care costs each plan will cover, ranging from 60 percent for least expensive bronze plan to 90 percent for the most expensive platinum plan.
Supporters of the health care law say that even if the premiums for exchange plans are more expensive than health plans offered today, consumers will get more for their money because the plans are required to offer richer benefits.
But more isn’t always better, Bowblis said.
“It’s like buying a car,” he said. “Some people just want to have a car, and so they’re willing to take the cheapest car around. But if the government mandates that every car now has to have power windows and power locks, now everybody has to pay more for that even if they don’t want it. So in terms of the health care law, you can’t say coverage is better, necessarily, it’s just more comprehensive.”
Dayton Daily News health care reporter Randy Tucker took a closer look at the impact of federal premium subsidies on the cost of health plans submitted to the Ohio Department of Insurance for sale under the Affordable Care Act.
More online: Calculate your costs for new health insurance premiums and subsidies created by the Affordable Care Act by visiting our website at MyDaytonDailyNews.com.