Obama’s Health-Law Premiums Test Limits of AffordabilityAlex Wayne and Alex Nussbaum
Health insurance under Obamacare will cost individuals at least $2,988 a year on average, a price that Republican opponents may target as out-of-reach for many Americans who don’t qualify for U.S. subsidies.
While the $249 monthly payment is intended to be discounted through tax credits, less than half of people now buying insurance on their own may get that help. The release of the data by the Obama administration comes just six days before the Affordable Care Act’s insurance exchanges open for enrollment, and a day after Ted Cruz, a Texas Republican, took the floor of the U.S. Senate to oppose the law.
The affordability of the overhaul has polarized debate since the act passed in 2010. While the law’s cheapest plans offer more care than minimal policies available today, including guaranteed coverage for people with pre-existing conditions, their cost may persist as an issue even though it affects only a relatively small percentage of people.
The law’s long-term success “will depend on the changes that are made over the next couple of years to address the affordability issue,” said Brian Wright, an insurance analyst at Monness Crespi Hardt & Co. in New York. “If you have modifications that can help address those issues, then it will ultimately be successful. If not, then it’s an open question.”
Premiums nationally are about 16 percent less than the Congressional Budget Office projected in 2012, the government said today in its report, a factor that may reduce the total cost for the law, now estimated at $1.4 trillion over a decade.
The act was created to benefit low-income people, including 48 million now uninsured -- about 15 percent of the population, according to the Census Bureau. To help offset the cost of older, sicker individuals in this group, the law mandates that every American buy insurance, including young, healthy adults who pay for health plans but rarely use them.
People who have insurance through their jobs, about 55 percent of Americans, aren’t directly affected by the law and are automatically considered in compliance with the mandate.
About 60 percent of the uninsured will find coverage for no more than $100 a month when taking into account subsidies and the effect of Medicaid programs for the poor, according to the U.S. Department of Health and Human Services.
“The prices are affordable,” Gary Cohen, director of the agency’s Center for Consumer Information and Insurance Oversight, said on a conference call with reporters.
There are four levels of coverage on the exchanges -- bronze, silver, gold and platinum. Bronze plans, the cheapest and least generous, are designed to cover about 60 percent of medical costs and carry higher deductibles. Platinum plans, the most expensive, cover about 90 percent of costs. They charge higher monthly premiums.
The report today outlined rates for exchanges in 47 states and illustrates the effect of subsidies available for people earning less than four times the poverty level -- about $94,000 for a family of four. None of the companies selling plans in the states were identified.
The rates vary widely by state. The highest prices noted in the data are in Wyoming, where the cheapest bronze plan averages $425 a month for an individual and the cheapest silver plan $489. In Minnesota, prices average $192 a month for the cheapest silver plan and $144 for the lowest bronze plan.
Republicans, who have said the individual mandate curtails personal liberty, have argued that many Americans will pay more for insurance as a result of the law and that added benefits it brings may not be worth the cost.
The release of exchange premiums comes after the U.S. Government Accountability Office reported in July on the cost of insurance individuals buy today. Those data show that Americans who are young and healthy are able to buy inexpensive policies. A 30-year-old nonsmoker can pay as little as $373 a year in Georgia or $1,027 in Alaska, the GAO reported.
The release of prices by HHS was the last major public step for the government as it anticipates that at least 7 million people will buy plans in the health law’s insurance exchanges during the open enrollment period that starts Oct. 1 and runs through March 2014.
Republicans have been persistent in their attack of the health law, which passed Congress with no support from their political party. Senator Cruz, the Texas Republican, has been leading an effort to force a spending bill through Congress that eliminates funding for the health law. President Obama has said he would veto any such legislation.
“I intend to speak in support of defunding Obamacare until I am no longer able to stand, to do everything that I can to help Americans stand together and recognize this grand experiment three and a half years ago is quite simply not working,” Cruz said late yesterday on the Senate floor.
The exchanges will still open Oct. 1 even if Cruz and House Republicans force a partial shutdown of the federal government. The exchanges rely on funding that isn’t dependent on Congress, according to the Congressional Research Service, meaning inaction by lawmakers isn’t enough to stop them.
While some individual consumers may pay more for coverage, average prices in the new exchanges are still lower than what the government expected. That may signal a turn in the debate as the Obama administration asserts itself against Republicans, said Dan Mendelson, the chief executive officer of Washington-based consulting company Avalere Health LLC.
“There are going to be a lot of people who are getting big subsidies, and for the first time in their lives have insurance,” Mendelson said by phone. “At that point it becomes harder to politicize this.”
Administration officials working on the health-care law privately expressed confidence that the lower cost of insurance after subsidies and easier access to care for people with pre-existing conditions will bolster support. They anticipate gaining an entrenched constituency that protects Obamacare from political attack along the lines of Medicare or Social Security.
“Just look for yourself,” Obama said in a speech yesterday at the Clinton Global Initiative in New York, summarizing the pitch. “You will discover that this is a good deal for you.”
Obama also has claimed credit for helping to contain medical spending, saying in his February state of the union speech that “already, the Affordable Care Act is helping to slow the growth of health-care costs.”
Medical costs have moderated in the U.S. the past three years, offering relief to the public and private sector alike. Prices for medical care rose 1 percent in July compared with a year earlier, the lowest growth rate since the 1960s, according to U.S. Commerce Department data. Economists have credited the health-care law, a weak economy and less-generous health plans.
At the same time, debate over the law since 2009 has caused businesses and governments to reexamine their role as costs soar and national priorities shift, contributing to a decline in employer-sponsored insurance already underway.
For weeks, headlines have cataloged the upheaval at private employers: United Parcel Service Inc. dropping coverage for employed spouses, International Business Machines Corp. reworking retiree benefits, and Walgreen Co. telling 160,000 workers they must buy insurance through a private exchange rather than having the company arrange their coverage.
About 19 million Americans buy insurance for themselves today, and an estimated 48 percent of them will be eligible for subsidies on the exchanges next year, according to the Kaiser Family Foundation, a Menlo Park, California-based nonprofit research group.
Avalere Health has calculated that better than 80 percent of customers at the exchanges will receive subsidies, figuring that many people who don’t get a discount won’t make a purchase.
Surveys, however, indicate the White House has a lot of work to do convincing people that it is in their best interest to enroll. Even among people without insurance, only 50 percent are aware that subsidies are available, according to a Pew Research Center survey conducted Sept. 4-8.
Uninsured Americans are evenly split on whether the health law will benefit them or their families, with 32 percent anticipating a positive impact, 33 percent a negative impact and 30 percent not much effect.