Don’t believe what you hear about the health care exchanges, from either side.
When California announced that individual premiums in its health insurance exchange could be 29% lower than expected, President Obama cheered. When Indiana announced premiums might be 72% higher than before, state officials predicted doom. So who is right? Are health insurance premiums going up or down?
- First, when the math suits your agenda, there is a tendency to conflate premiums for insurance purchased on ObamaCare’s new exchanges with those in the private market. Next year, only about 2.5% of us will pay the exchange rates for purchasing our insurance. Since the vast majority of Americans will continue to receive health coverage through their employer, Medicare or Medicaid, the issue is smaller than we’re led to believe.
- Second, the impact of the Affordable Care Act varies widely for different subsets of the population. Opponents of ObamaCare tend to focus on the demographic least likely to benefit: young, healthy males, many of whom don’t buy insurance now and might pay higher premiums when entering the market next year than they’d pay today. Supporters, on the other hand, concentrate on older individuals and people with chronic conditions who are currently unable to buy insurance or forced to pay exorbitantly high premiums.
- Third, the estimated cost of purchasing insurance on the exchanges depends greatly on whether you take into account the federal subsidies that many people will receive. When reporting projected premium increases in Indiana, officials chose not to include credits available to individuals making up to 400% of the poverty line. For instance, a family of four earning $80,000 could still receive subsidies.
- Fourth, whether premiums appear attractive depends on what you compare them with. The health law requires plans sold on the exchanges to cover a certain share of medical expenses. A recent study in Health Affairs found that more than half of plans now sold in the individual and small group markets do not meet new minimum requirements. Thus, comparing premiums of generous ObamaCare plans with premiums of less generous plans sold today stacks the deck against the exchanges.
Conversely, comparing exchange premiums with a pricier baseline yields more favorable results. That’s the knock on California’s recent report. State officials compared next year’s predicted individual premiums rates with current premiums in the state’s more expensive small employer market, making California’s new premiums appear artificially low.
- Last, the effect of the exchanges depends on how you compare premiums. For example, it makes sense to compare average current premiums to average newpremiums, or lowest premium to lowest premium, which is what last month’s report released by the Department of Health and Human Services did for the individual market. But because of data limitations in the group market analysis, the authors compared average premiums now with the lowest cost premiums next year, exaggerating the savings. At least the report was transparent about it.
Buyers of health insurance — and news coverage— beware.<
Dhruv Khullar attends the Yale School of Medicine and Harvard’s Kennedy School.
In addition to its own editorials, USA TODAY publishes diverse opinions
from outside writers, including our Board of Contributors.