The Finer Details of Obamacare (Part 1)

With the Patient Protection and Affordable Care Act set to be operative from tomorrow, there may be many details prospective buyers are still not aware of. In this post and the next, I’d like to try to fill in some of the blanks – also provide some advice and traps to avoid.

First, if anyone has paid compulsive attention to the political news, and especially anti-Obamacare PR from the Right (i.e FOX) you've probably bought into the dire predictions of "rate shock," i.e. the supposed sky-high health insurance premiums to be inflicted on Americans starting next year, when the new health care law starts requiring everyone to have health insurance or pay a fine. Make no mistake that these fears are all off the mark, over blown. In the 11 states where 2014 health insurance premium information is available, the average price for a plan with a middle range of benefits is coming in at $321 a month, 18 percent lower than the impartial Congressional Budget Office (CBO) estimated it would be, according to a report released not long ago by the U.S. Department of Health and Human Services

Second, these premiums are for much better coverage than consumers can purchase on the individual market in most states today. For instance, they must all cover mental health care, maternity care, and prescription drugs, essential health benefits that are absent from a lot of plans being sold to individuals today, This is a biggie, no matter what the Tea Baggers and Ted Cruz have to say! Best of all, the vast majority of people buying these plans through their state's new health insurance Marketplace (they're opening for business Oct. 1 nationwide) will receive a break on costs in the form of a new kind of tax credit that they can use right away to offset part of the premiums.

Now, let’s examine more of the details, as also made available in a new report from Consumer Reports. Org.

1)The early market reforms, such as requirements for a minimum Medical Loss Ratio and for review of proposed rate increases of 10% or greater, have clearly created value for consumers.Further, data from the Medical Expenditure Panel Survey Insurance Component (MEPS-IC) shows that the average premiums for employer sponsored insurance increased by only 3% from 2011 to 2012, the lowest rate of increase observed since the data series started in 1996. However, the major changes in the rules for individual and small group insurance will begin in plan year 2014.

2) Information on proposed premiums in the individual and small group markets has recently been made available by selected states, and it is now possible to move from theoretical arguments to data-driven analysis. This shows, for example, that for healthy young adults, who have the highest uninsurance rate of any age group and the lowest awareness of the coming reforms, premiums will be even lower. That's because the law allows younger adults to be charged lower premiums than older customers pay. In Los Angeles County, which according to HHS has more uninsured people than any other county in the country, a 25-year-old can purchase one of these mid-range plans for $174 a month, before subsidies. Young people ought to be breaking down the doors to get this insurance!

3) While the Tea Baggers have made much of the low initial penalties ($95 the first year)- and hence the "benefits" to the young of not signing up - they aren’t saying how the penalty costs will escalate reaching $2,585 per year by 2025. It therefore makes good sense to buy insurance in the initial stages – especially when financial support is also available.

4) In the eleven states for which data are already available, the lowest cost Silver plan in the individual market in 2014 is, on average, 18% less expensive than ASPE’s (Assistant Secretary for Planning and Evaluation’s )estimate of 2014 individual market premiums derived from CBO publications. The lowest cost silver plan available to small employers in 2014 in the six states with available data ( New Mexico, Colorado, Vermont, District of Columbia, Washington, Oregon) is estimated to be 18% less expensive, on average, than the average premium that small employers would be paying for a pre-Affordable Care Act silver plan trended forward.

5) These preliminary rates may be further lowered before health plans are offered in Marketplaces this fall.

-- (*Marketplaces” are also known as “American Health Benefit Exchanges” or “Exchanges” as defined by and established in Section 1311 of the Affordable Care Act. In addition, Marketplaces may be established and operated by a state (State-based Marketplaces or “SBMs”), by the federal government (Federally-facilitated Marketplaces or “FFMs”), or by the federal government with state participation (State Partnership Marketplaces or “SPMs”)

Next in Part 2 - More Details: Who Is Paying, Benefits for Young Males and Possible Missteps