Active bargain hunters who were willing to change health plans could get good prices for coverage from the typical Patient Protection and Affordable Care Act (PPACA) public exchange.
John Holahan and other researchers at the Urban Institute have put exchange qualified health plan (QHP) cost data supporting that conclusion in an analysis distributed by the Robert Wood Johnson Foundation.
The researchers calculated the average premium for the cheapest silver-level QHP available in all rating regions through a state’s public exchange program.
The researchers found that the cost of the cheapest silver exchange QHP coverage increased an average of just 2.9 percent between 2014 and 2015, to $264.
The cost of the cheapest silver coverage actually fell in 17 states: Arizona, Arkansas, Colorado, Indiana, Kansas, Maine, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Mexico, Oklahoma, Rhode Island, South Carolina, South Dakota and Washington state.
PPACA makes rich premium subsidies available for exchange users who earn from 100 percent to 250 percent of the federal poverty level, and modest subsidies available to consumers who earn from 250 percent to 400 percent of the federal poverty level.
PPACA also makes cost-sharing reduction subsidies, or subsidies that help QHP users pay their deductibles, to users who earn from 100 percent to 250 percent of the federal poverty level.
PPACA ties subsidy levels to a benchmark based on the cost of the second cheapest silver QHP available through an exchange.
Only about 15 percent of the 25 percent of the PPACA exchange customers in a typical state are paying the full cost of the coverage. Because of the way the subsidies work, the payer most affected by changes in the cost of the second cheapest silver plan is the federal government.
The Urban Institute researchers did not say why they looked at premiums for the cheapest silver QHPs rather than the second-cheapest QHPs.
Insurers in most states set their 2015 exchange QHP prices in mid-2014. In December 2014, Congress passed a law that formally requires the U.S. Department of Health and Human Services (HHS) to run the PPACA “risk corridors” program without using taxpayer money.
The risk corridors program is one of the three major PPACA risk-management programs. HHS is supposed to use cash from insurers with highly profitable QHP operations to help QHP issuers with poor underwriting results. Some insurers may have intentionally priced coverage at unsustainably low levels, with the expectation that risk corridors money would improve their net results. The new risk corridors spending law could hurt those issuers.
A court in Iowa, for example, recently cited the risk corridors spending law as one of the factors that contributed to the CoOportunity Health insolvency.
The exchange QHP issuers that are now trying to price 2016 coverage must also face the challenge that the U.S. Supreme Court is considering a case, King vs. Burwell (14-114), that could lead to major, direct changes, as early as mid-2015, in states in which HHS runs the PPACA exchanges, and could have spillover effects in other health insurance market sectors.
The authors of the Urban Institute analysis do not talk about the Supreme Court case, but they note that, however the Supreme Court rules, the risk corridors program and another PPACA program, a reinsurance program, are set to expire after the end of the 2016 plan year.
Underlying health care costs could grow faster, and consumers and others could fight back against use of popular cost-management tactics, such as use of narrow provider networks, the analysts say.
“If consumers prefer broader networks and are willing to pay for them, the market will respond by offering such products, and premiums will consequently increase,” the analysts say. “States and the federal government could also engage in greater regulation of network adequacy; this, too, could cause premiums to increase.”
For now, many QHP holders are paying less than $100 per month out-of-pocket for coverage, and the government is spending less on subsidies than some had feared.
But, in some states, silver coverage prices jumped sharply between 2014 and 2015. For a look at the states where rate shock was a problem, read on.
2015 benchmark price: $195
2014-2015 increase: +10%
2015 QHP selectors: 12,625
In Hawaii, exchange QHP sellers have faced the reality that most residents of the state already have public or private health coverage. But the number of QHP selectors was up from 8,592 in April 2014 in spite of the double-digit rate increase.
2015 benchmark price: $241
2014-2015 increase: +10%
2015 QHP selectors: 341,183
Before the PPACA exchange system and underwriting rules came along, Michigan had been saddling Blue Cross and Blue Shield of Michigan with responsibility for being the state’s insurer of last resort. People with health problems could get coverage but often had to make do with plans with skimpy benefits.
Now that PPACA has realigned the state’s market, individual coverage has been selling well. The number of QHP selectors is up from 272,539 in April 2014, in spite of the double-digit increase in the cost of the cheapest silver plan coverage.
Image: AP photo/Carlos Osorio
2015 benchmark price: $199
2014-2015 increase: +12%
2015 QHP selectors: 59,704
Like Hawaii, Minnesota is a state in which exchange plan issuers have to cope with the reality that most potential prospects had good health coverage before PPACA came along.
The number of selectors has increased modestly, from 48,495, in April 2014, and the 12 percent increase in the cost of the cheapest silver QHP coverage may not have helped.
2015 benchmark price: $276
2014-2015 increase: _+13%
2015 QHP selectors: 1.6 million
In Florida, exchange QHPs have sold like wetsuits at a surf shop.
In theory, success with reaching a broad market could have helped hold the state’s QHP costs down. In Florida, premiums for the cheapest silver plan increased substantially.
2015 benchmark price: $488
2014-2015 increase: +28%
2015 QHP selectors: 21,260
The difficulty of getting goods in and out Alaska makes many services in the state extremely expensive. The state consistently sits at the top of rankings of average nursing home costs, for example.
But the average cost of a cheapest silver exchange plan rose faster in Alaska than in any other state. Because of that, Alaska went from having the exchange with the third-most-expensive cheapest silver plan in 2014, behind Wyoming and Vermont, to having the very most expensive cheapest silver plan this year.
Image: U.S. Fish and Wildlife Service photo