Reverse “Sticker Shock”—Why are Insurance Rates in the State Marketplaces Lower Than Expected? — Part I

 

Even Forbes’ columnist Avik Roy is recanting.  Earlier this month he acknowledged that under Obamacare, many Americans who buy their own coverage in 2014 will find that insurance is significantly more affordable than it was in the past:  “Three states will see meaningful declines in rates: Colorado (34 percent), Ohio (30 percent), and New York (27 percent).”

Colorado, Ohio and New York are not unique. As states announce the prices that carriers will be charging in the online marketplaces (or “Exchanges”) where Americans who don’t have health benefits rate at work will be purchasing their own coverage, jaws are dropping. Rates are coming down, not only for those individuals, but for some small business owners who will be buying insurance for their employees in separate SHOP (Small Business Health Options Program) Exchanges.

What may be most surprising is that premiums will be lower, not only in liberal Blue states but in some Red states that are opposed to Obamacare.

What is making health insurance more affordable?

First, the majority of individuals shopping in the Exchanges will be eligible for government subsidies that will go a long way toward covering premiums. In the past I have written about how these tax credits will help young adults (18-34).  But older Americans also will benefit. Fully 30% of those who receive tax credits will be 35-54, and 12.5% will be 55 or older.  This is important because in the Exchanges, insurers  in every state except New York and Vermont will be allowed to charge a 60-year-old three times as much as they would charge a 20-year-old for exactly the same policy.  Without subsidies many would find insurance totally unaffordable.

The second reason premiums are significantly lower than expected is that as I have explained on null.com  in the state marketplaces insurers are forced to compete on price. All policies sold in the Exchanges must cover the same essential benefits, and follow other rules that will make the plans look very much alike. The only way for a carrier to distinguish himself from the crowd will be to charge less—or have a better network of providers. But the younger customers that carriers covet care far more about price than about the network.

Third, in many cases, state regulators have been clamping down. In Portland Oregon, for example, regulators forced insurers to cut their proposed rates by an average of nearly 10%. Three of the 12 insurance companies in that market had to lower their rates by more than 20% f

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Will “the Bros” Buy Insurance in 2014? If Your Son (or Boyfriend) is Uninsured, Please Send Him This Post

Some young men say they never go to the doctor. Why, they ask, should they buy into Obamacare?

Obamacare saboteurs are urging them to boycott the state marketplaces  (a.k.a. the “Exchanges”) where people who don’t have health benefits at work will be able to buy their own insurance.

What reform’s opponent don’t tell them is that under Obamacare, a 25-year-old waiter who lives in North Los Angeles and earns $17,200 a year will be able to purchase coverage from one of the state’s highest-rated insurers, Kaiser Permanente, for just $33 a month.

How can this be? One word: “Subsidies.”

Next year some 11 million young adults (18-34) who are now either uninsured or buying their own (usually bare-bones) insurance will be able to purchase excellent coverage in the Exchanges. Since some 9 million of the 11 million earn less than $45,960 a year ($62,040 for a couple) they will be eligible for tax credits to help cover the premiums. Fully 96% of the youngest (21-27) will qualify for subsidies, says Linda Blumberg, a health policy analyst at the bipartisan Urban Institute.

Now that states have begun to announce the rates insurers will be charging in their marketplaces, we can move past speculation to discuss what young adults in particular cities actually will be paying, after applying those tax credits.

Fear-mongers should blush.

                             Why Bronze Plans Will Be Popular

The example of a 25-year-old waiter in North L.A. buying coverage for just $33 a month assumes that he purchases Kaiser Permanente’s “Bronze plan.

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Under Obamacare, Will You Receive a Subsidy to Help You Buy Your Own Insurance? We Now Have Real Numbers That Will Let You Calculate How Much You Will Receive

 

Note to Readers: A longer version of this post appeared yesterday on HealthInsurance.org.

Up until now, when Obamacare’s supporters and reform’s opponents squabbled over what insurance will cost in 2014, they had to rely on estimates and national averages. But now we have real numbers.

Eleven states have announced the rates that insurers will be charging in their Exchanges-marketplaces where individuals who don’t have employer-sponsored coverage can shop for their own insurance.

Subsidies Will Be Based On the Cost Of A Silver Plan Where You Live,

Middle-income as well as low-income people buying coverage in the Exchanges will be eligible for government subsidies that will come in the form of tax credits. Anyone earning between 100 and 400 percent of the federal poverty level (FPL) (now $11,490 to $45,960 for a single person, and up to $126, 360 for a family of six) will qualify.

Most people who are forced to buy their own insurance earn less than 400% of FPL. More affluent Americans usually work  for companies that offer comprehensive coverage.

The graph below shows average Silver plan rates in the eleven states that have disclosed premiums. (Note that these are only state averages. Premiums vary widely within a state: In some cities and counties silver plan rates will be much lower, even before you apply the subsidy.

Silver plan premiums

It’s worth noting that in these 11 states the least expensive Silver Plan costs 18% less than the non-partisan Congressional Budget Office projected last year. 
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Who Will Sell Insurance In the Exchanges? Non-profit Insurers.For Consumers, This is Great News– Part 1

You may have heard that big for-profit health insurers are taking a “wait-and-see” attitude toward the Exchanges –the one-stop marketplaces where small businesses and individuals who don’t receive benefits at work will be able to buy insurance.

Both UnitedHealthGroup, the nation’s largest carrier,  and Aetna the third-largest, have told analysts that their involvement in the health insurance marketplaces across the country will depend on whether they find them “financially viable” for the companies  WellPoint, Humana and Cigna also have indicated that they will participate in a “limited” number of markets. /

Aetna is being particularly coy.  On a conference call with investors and analysts just three weeks ago Aetna officials said that if they don’t like the way the market is shaping up they “might pull their products from the online marketplaces at the last minute.”

Is this meant as a threat? One can only imagine the chaos that would ensue if Aetna began pulling out of state Exchanges at the 11th hour. The remark demonstrates how little concern Aetna has for its customers.

 Doomsters say Too Few Plans Will Mean Higher Premiums

Many have been predicting that the Exchanges will fail because the big names won’t be participating. They point out that in Illinois “only six insurance carriers have told the state of they want to sell health policies on the state’s online s marketplace. “   The  critics warn that if not enough companies offer coverage in the Exchanges, consumers won’t have enough choices, and  their won’t be enough competition to keep a lid on prices.

Former insurance executive turned industry consultant Robert Laszewski  is quick to pounce on “the Illinois numbers” as “an early indicator that insurance companies are backing away from full participation in the online marketplaces. . . I’m hearing that from other carriers in other parts of the country as well” he told Chicago’s Crain’s Business. “They are terribly fearful that if there’s a poor launch (of the marketplaces) they’re going to get blamed for a mess.”   

Laszewski has been predicting “sticker shock” in the Exchanges for some time. What he ignores is that what matters most is not the number of plans available in the Exchanges, but how good they are.  Quality, not quantity is what counts. 

 In the end, “robust competition” does not depend on the free-market chaos of 20 or 25 plans vying for market share. It turns on a few good companies offering transparent information. Then, and only then, can consumers compare them and make rational decisions.

                              California Disproves the Critics

California already has demonstrated that the doomsters are wrong.  Two days ago, the state unveiled the offerings that will be available in its Exchanges—along with the prices.  Nearly three dozen plans had submitted bids, and 13 were selected.  (California exchange officials rejected bids that were too expensive, or failed to include enough choices of doctors and hospitals.)  

Sure enough, the brand name for-profits are not going to peddle their products in the California Exchange.  

But as it turns out, they weren’t needed to create a competitive affordable market that offers Exchange customers a wide range of choices. As I discuss below, Kaiser, which ranks #1 in the state for both quality and consumer satisfaction will be part of that marketplace.

In  every region in the state, individuals who don’t have health benefits at work will be able to purchase comprehensive insurance that offers free preventive care, covers the 10 essential benefits, and caps out-of-pocket spending for less than $4,000 a year. (In North Los Angeles County, for example, Kaiser will offer a Silver Plan for just $294 a month.)  This is significantly lower than expected: the Congressional Budget Office (CBO) had estimated that such comprehensive coverage would cost $5200.

Four thousand dollars might sound pricey for a middle-class family, but keep in mind that individuals reporting modified adjusted gross income (the number at the bottom of the first page of your tax return) of less than $45,960, as well as families earning as much as $94, 200 will be eligible for federal subsidies that will help them cover their premiums.

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Health Wonk Review: Oncologists Tell the Truth about Cancer Drugs; Will There Be Enough Plans to Choose From in the Exchanges? What Does Oregon’s Research on Medicaid Tell Us? And More . . .

The newest edition of Health Wonk Review  is up on Managed Care Matters.

There, host Joe Paduda calls attention to an eye-opening post by The Health Business Group’s David E. Williams. 

Williams reports on what oncologists say about cancer drugs in “The Price of Drugs for Chronic Myeloid Leukemia (CML); A Reflection of the Unsustainable Prices of Cancer Drug.” The article, which was published in the journal, blood, includes candid comments from more than 100 experts  They tell us  that:.

  • Many costly treatments aren’t worth the money
  • New treatments with tiny orno benefits often cost a multiple of existing therapies
  • Despite their reputation for penny-pinching, health plans are often not aggressive in negotiating price
  • Patients are already suffering mightily from high costs –and it impacts quality of life and survival as well as financial health
  • Society as a whole cannot afford to pay the high prices charged for so many of the new therapies

 (I’m reminded of “A Very Open Letter from an Oncologist published on HealthBeat in 2009.)  It’s encouraging to see more oncologist stepping forward to telll the truth about cancer drugs..)

.As Williams observes these insights “come from people who know what they’re talking about and who have traditionally been sympathetic to drug makers and unperturbed about costs.”  

But now, the companies that make these drugs have taken greed too far.

 Paduda also highlights Health Affairs just-released research indicating that the decline in inflation could result in a reduction of $770 billion (yup, that’s “billion” with a B) in public program health care costs over ten years. “

But is the trend sustainable? John Holahan and Stacy McMorrow of the Urban Institute are “cautiously optimistic.” Paduda agrees: “there’s no question there are fundamental changes occurring that are affecting care delivery, pricing, and reimbursement.”

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Navigators: The Folks Who Will Help You Surf the New Insurance Exchanges

Over at Healthinsurance.org, I’ve addressed some “frequently asked questions” about the “navigators” who will help individuals and small business find the coverage they want in the new Exchanges. 

— Who Will Become Navigators?

—  Can Insurance Agents and Brokers Apply to Be Navigators? (Wouldn’t that create a conflict of interest?)

—  Just How Will Navigators Help People Sort Out Their Options in the Exchanges?

—  How Much Training Will They Receive?

–Finally, many people worry that the “navigators” just won’t be able to handle the heavy traffic. Giving the American public the information it will need about Obamacare is an enormous task. Will these navigators be up to it?

The answer to that last question is that the navigators will have help.  Patient advocacy groups, the states, and county health agencies will pitch in.  The federal government  also is launching a marketing program, “Enroll America” that will urge mothers to nag their uninsured 20-something and 30-something sons. (Seriously– and I expect that in many cases, this will be effective.)

Meanwhile insurers will be eager to draw young, healthy customers into the Exchanges. This means that they will invest in marketing campaigns designed to let 20-somethings and 30-somethings know that the vast majority will be eligible for generous government subsidies.

Just one example: Blue Cross and Blue Shield of Illinois already has launched a “Be Covered Illinois” campaign. The campaign is being funded by the insurer, and carried out by various community groups:  

Keep in mind that if insurers mislead customers about their offerings, those customers will have an opportunity to pick a different plan a year later. And under the ACA, they will have “navigators” to help them make a better choice.

Insurers know this. They  also are well aware  that under the new ACA rules that regulate them, a health insurance company will have to draw—and keep—a large share of the market’s customers in order to survive financially. For that reason, I suspect that savvy insurers will make a major effort to provide information about specific plans that will attract customers who will want to stick with those plans.

For my answers to the first four questions above, go to Health Insurance.org, click on the question and the answer will pop up.

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Problems with Health Insurance? Under the Affordable Care Act You Will No Longer Be Alone

If you sent in your health insurance payment on time, and paid it the way you always have (as a direct withdrawal from you checking count), but made a mistake when you put the checking account number on your payment,  would you expect that your insurer would drop you?

What if your insurer sent you an email a few days after you sent in your payment saying “Your payment has been received? Wouldn’t you assume that you were still insured?

Mike Holden did. He was wrong.

Yesterday, he sent an email explaining his story.  

 “On March 16, I paid my family’s monthly health insurance bill to United Healthcare (UHC) the same way I have for almost a year now. But I was using a new bank account that we set up after a recent move. Unfortunately, I entered the account number incorrectly. It turns out I left off three digits that are part of the account number but listed separately on the checks.”

Holden had no idea that he had made a mistake. On March 20, he received an email from UHC saying “Your payment has been received.”

Yet in April, when he went online to pay his family’s April bill, he was told his coverage had been terminated. He then talked to a customer service representative at UHC and received a letter explaining that he had until March 31 to correct his mistake.

Unfortunately, the letter, which was postmarked March 27, went to his old address. .

He appealed to UHC, explaining the problem and asking that his insurance be reinstated,

He then received a letter telling him that his appeal had been denied:  “United Healthcare Benefit Services follows the guidelines for payments and grace periods defined by the Department of Labor. Your account has been reviewed and the termination remains, as payment was not received within the guidelines provided.”

                          How the Affordable Care Act Brings Us Together

Beginning in 2014, people like Mike Holden will no longer be alone, trying to stand up to insurance companies. Individuals and families who buy their own insurance will be able to purchase coverage in “Exchanges”—marketplaces where insures will be regulated and individuals and families who purchase their own insurance will become part of a large group. There, they will have far more clout than they do now.
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Health Wonk Review Posts Investigate

Nursing Homes, Nurse-Practitioners Developing More  Expertise, Efforts to Block Exchanges, How Patients Respond to Evidence that Some Tests are Unnecessary, and Whether Obamacare “Screws” Young Americans  . . . 

This  time around Peggy Salvatore hosts a Valentine’s Day Edition of  Health Wonk Review –over at Healthcare Talent Transformation . Her round-up of some of the best of recent HealthCare posts includes:

—  A piece on Health Affairs Blog by David Rothman investigating how Americans respond to “evidence that certain medical tests and screenings might be unnecessary, harmful, and not worth the money.”  How do they react to research showing that some drugs are harmful? To find out, you’ll have to read the post.  (You will find the link to this post, and all of the posts discussed below, here )

—  Good news from Louise at Colorado Health Insurance Insider:  A bill that would have repealed the 2011 law that created Colorado’s health insurance exchange/ marketplace, died in committee in a 9-2 vote. “Republicans and Democrats on the Committee on the committee rejected his portrayal of the Exchange– which has already made a lot of progress towards an opening date this fall.”

Louise adds: “Given the progress that Colorado has made over the past two years in creating the state’s marketplace and implementing various other healthcare reforms (both state-based, like maternity coverage and gender-neutral premiums, and ACA-related, including the recent push to expand Medicaid), I would say that Colorado is on track to greatly improve its overall healthcare outcomes.

She also includes a useful map showing the states that have defaulted on setting up Exchanges. As she notes “this doesn’t mean they will get a pass on Obamacare.”  By law, the federal government will set up Exchanges for them.

—  A post by Disease Management Care Blog’s Dr. Jaan Sidorov pointing out that non-physician professionals and lay-persons are managing to achieve a remarkable degree of medical expertise. This is, as Peggy notes, a controversial subject.

— A report that asks “do non-profit nursing homes really provide better care than their for-profit counterparts”?   Over at Healthcare Economist Jason Shafrin analyzes a study that suggests the answer is  “Yes.”   How do they arrive at that conclusion? Again, you’ll  have to read the post.

— A post that takes on “a recent infamous article on Buzzhead ”  claiming  that Obamacare “screws” young Americans.  Over at California Access Health’s Anthony Wright observes:  “there are some obvious and non-obvious reasons why Obamacare is a boon to young adults. “ The non-obvious reasons are worth thinking about.

These are just a few of the treats in this Valentine’s Day Edition.  I recommend that you read the entire Review here.

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Ignore the Hype: Why Health Insurance Premiums Won’t Skyrocket in 2014

Health reform’s critics are sounding the alarm: in 2014, they say, health insurance premiums will climb, both for small businesses and for individuals who purchase their own coverage. “Hold onto your hat,” writes  Bob Laszewski, editor of Health Care Policy and Market Place Review. “There Will Be Sticker Shock!” 

Laszweski’s piece has been cross-posted on popular blogs, and his forecasts have been popping up in mainstream newspapers, including  USA Today Such wide circulation makes Laszewski’s warnings worthy of attention, and compels me to ask an important, if impertinent, question: Is what he says true?

Cherry-picking a CBO report

The Congressional Budget Office expects  that the ACA will have a “negligible” effect on the premiums that large employers pay for insurance, and most experts agree. But in the individual market, Laszewski claims that CBO projections show “10% to 13% premium increases.”

Here is what the CBO actually said:

About 57 percent of people buying [their own] insurance would receive subsidies  via the new insurance exchanges, and those subsidies, on average, would cover nearly two-thirds of the total premium.

“Thus, the amount that subsidized enrollees would pay would be roughly 56 percent to 59 percent lower, on average, than the premiums charged under current law.”

Wait a minute: “56 to 59 percent lower?” Where does Laszweski get “10 percent to 13 percent higher?

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Subsidies: Will You Receive a Tax Credit to Help You Buy Insurance in 2014? How Much?

Beginning in 2014, millions of Americans will discover that they qualify for subsidies designed to help them purchase their own health insurance. The aid will come in the form of tax credits, and many will be surprised by how generous they are.

Not only low-income, but moderate-income families earning up to 400 percent of the federal poverty level (FPL) – currently $44,680 for a single person and $92,200 for a family of four – will make the cut.

Yesterday, I posted about subsidies on null.com. The post includes a calculator which tells you whether you would be eligible, and how much you would receive. Even if your employer offers health benefits, you might qualify for a tax credit  if the plan too expensive, or too skimpy. (I explain how the government defines those terms.) I also explain how the government calculates subsidies, and what happens if you live a place where healthcare is particularly expensive.

Click here for the full post   If you like, come back here to comment.

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