The health insurance exchange Covered California has been making headlines recently. Thirteen insurance carriers have submitted plans to be offered on the state-based health insurance exchange come 2014 and the premium rates released for these plans are lower than federal actuaries and budget forecasters had expected. Covered California has predicted that rates for individuals in 2014 will range from two percent above to 29% below average small-employer premiums this year.
These rates are surprising given the recent flood of studies performed by independent entities such as the Academy of Actuaries, the Congressional Budget Office and the Milliman Index, which all predict that, once the health reform law is implemented, insurance premiums in the exchanges, especially those for the young and healthy, are likely to spike in most states.
But are they? The California data release compares individual plan coverage rates to small-employer plan rates—an apples-to-oranges comparison. The pure, unsubsidized premium costs of individual coverage versus employer coverage normally shows that individual market rates are lower, given that group purchasers often opt for richer plan designs. A more appropriate comparison might have been the cost of projected individual rates in California for this year versus next year. Forbes’ Avik Roy did such an analysis and found that the difference in mandated benefits and rating changes will result in individual-market price increases of between 64% and 146% when you compare 2013 individual premium rates with proposed 2014 exchange rates. It’s true that the availability of subsidies will reduce the amount many exchange consumers will pay out of pocket for their coverage, but that doesn’t mean the actual premiums will be reduced--far from it.
Clearly, the Obama Administration will take what it can get when it comes to positive press surrounding the health reform law. To further draw attention to the news of California’s lowered premiums, President Obama travelled to San Jose today to give a speech touting the law’s benefits. But even during that address, Obama acknowledged that some Americans are likely to see their premiums rise, although he encouraged them to blame their employers rather than PPACA. “Employers may be shifting costs through higher premiums or higher deductibles or higher copays,” he said. “There may still be folks out there who are feeling higher costs.”