Most Ohioans buying insurance next year on a statewide health exchange created by the Affordable Care Act will avoid the sticker shock that state officials and others have warned them about, based on premium calculations for exchange plans submitted to the state for approval.
Under the ACA, insurers will be required to offer plans on the exchanges that fit within four levels of coverage: bronze, silver, gold and platinum.
Using the second-lowest cost silver plan for baseline comparisons, the average monthly premium for a 40-year-old nonsmoker to buy what is expected to be the most popular level of coverage on the exchange was $282, according to the analysis from Avalere Health, a Washington, D.C.-based consulting firm that follows state and federal health programs.
That’s more than $100 lower than the Congressional Budget Office’s estimate that the average monthly premium for the same level of coverage nationwide would be about $433 a month in 2016.
While the premium estimate in Ohio is lower than the national average, it’s still higher than premium costs for most individual plans on the market today. That’s mainly because insurers’ costs to provide health coverage on the exchange will be significantly higher as a result of minimum benefits requirements that are typically more generous that what most individual health plans offer today.
A preliminary analysis of filings from 14 insurers seeking approval for 214 different plans on Ohio’s exchange found the average cost to to cover health care expenses would rise 88 percent next year compared to current market rates, according the Ohio Department of Insurance.
“The department’s initial analysis of the proposed rates show consumers will have fewer choices and pay much higher premiums for their health insurance starting in 2014,” Ohio Lt. Gov. Mary Taylor said in a press release.
But anyone earning up to 400 percent of the poverty level — or just under $45,000 a year in 2012 — will be eligible for generous tax credit subsidies that will offset premium costs for many of the estimated 1.5 million uninsured Ohioans who could sign up for insurance on Ohio’s health exchange.
“Premiums will certainly be higher than what they are today,” said Caroline Pearson, vice president at Avalere Health. “But anybody who’s already buying coverage in the open market is most likely paying more than what they will pay with a subsidy.”
About 916,000 Ohioans — including nearly 200,000 residents in southwest Ohio — would qualify for subsidies, which would be paid directly to insurers to help offset plan premiums, according to Families USA, a national nonprofit advocacy organization.
The subsidies are designed to offer the lowest-income enrollees the biggest benefit.
For example, a subsidized 40-year-old nonsmoker earning $27,925 a year would pay $147 a month for the second lowest-cost silver plan in Ohio, according Avalere’s calculations. Meanwhile, someone with the same profile earning just over minimum wage, or $16,755 annually, would pay $42 for the same coverage, the company found.
Costs to vary
Ohio insurance officials have not calculated premiums or the impact of subsidies for the exchange plans under review. They it is difficult to arrive at a precise average for premium across the state, because each insurance company makes adjustments to the price of plans based on age and health status and the demographic profile of the regions where the plans are offered.
In addition, not everyone who enrolls in health insurance on the exchange will be eligible for subsidies.
“Premiums will vary widely for a lot of people depending on where you fall on the income scale,” said Chris Brock, a spokesman for the state insurance department.
But the vast majority of people most likely to sign up for health coverage on the exchanges will fall well within the income range to qualify for a subsidy, said John Bowblis, a health economist at Miami University.
“The majority of people who are not self-employed, earning $40,000 a year or more, probably already have some form of health insurance that is offered to them through an employer,” Bowblis said. “It’s those people earning just above minimum wage or in the $25,000-to-$40,000-a-year range for whom health insurance is more of an issue and would be likely to sign up on the exchange.”
Still, premiums do not tell the whole story.
ValuePenguin.com, a consumer finance website, calculated premiums, deductibles, coinsurance and out-of-pocket maximums for a proposed Ohio exchange plan from Aetna and an existing plan with similar coverage that the company sells.
ValuePenguin found that not only did premiums increase from 5 percent to 56 percent, but other costs rose, including the cost of deductibles — the portion of a claim under an insurance policy that must be paid before the insurance company pays the balance —and percentage of coinsurance, or the total cost of covered medical services shared after the deductible has been paid.
The deductible was a third higher, climbing from $1,500 to $2,000 when comparing the Aetna plans, and coinsurance rose from 20 percent to 30 percent.
“It’s important to note that premiums aren’t the only cost you pay for health insurance,” said ValuePenguin’s Brian Quinn.