Exchange Premiums: A Few Initial Insights on Costs

A graphic released yesterday by the Kaiser Family Foundation provides a snapshot of what an average family looking to purchase health care insurance from an exchange might expect. Kaiser estimated the premium using Congressional Budget Office premium estimates and provides a full methodoloy in their report.

The Affordable Care Act pegs the amount of subsidy individuals and families will be eligible for to the second lowest cost silver plan in their state and their income. A sliding scale sets the maximum premium cost between 2 and 9.5 percent of income. The rest of the premium cost will be covered by the tax subsidy. Consumers may choose to make their tax subsidies go farther by purchasing a lower cost bronze plan. Exchanges will offer four “metal” level of plans – bronze, silver, gold and platinum. Each plan covers the same minimum essential health benefits but the amount of cost-sharing by the consumer will differ – the most for bronze level (with lower monthly premiums) and the least for platinum (with the highest monthly premiums).

In 17 states, initial information is available about the costs of premiums for the health insurance plans that will be available beginning October 1 through the exchanges. The National Academy for State Health Policy’s State Refor[u]m website has a map with live links to the state data.

For those looking for a deeper analysis of premium prices so far, a blog posting in Health Affairs is useful.  Authors Joel Ario, Adam Block and Ian Spatz compare prices in four major cities. They found substantial variance in premiums in Baltimore and New York City and little variance in San Francisco and San Diego. They offer these explanations, that also may be useful to consider as premium prices in all the exchanges become available.

  1. Plan actuaries are working in the dark. They don’t know who will purchase insurance. They don’t know about pent-up demand for services.
  2. Plan members are loyal. This may lead to underpricing premiums at first to attract purchasers. Inertia will keep them even if premiums go up later.
  3. Plan sponsors are not all the same. New players, including Medicaid managed care organizations, may be in the market.
  4. Plans are not the same. Even with the “metal” levels, benefits may differ. Networks may be limited. Prescription drug benefits may offer fewer brand name benefits or different co-pay tiers.
  5. Active purchasing works. In California, where the premiums hardly differed at all, the exchange negotiated rates with the implicit threat that it would exclude insurers who did not offer acceptable rates.