In the first year of the Affordable Care Act, individual health insurance premiums rose by 49%. Or fell by 76%, due to the ACA’s subsidies. Alas, the subsidies will cost far more than the CBO projected. Or a little less…. (More)

Are ACA Premiums Down 76%, Up 49%, Over Budget, Or Less?

If yesterday’s news about the Affordable Care Act left you confused, that wasn’t an accident.

Premiums down 76% … for those with subsidies

The news began with the Department of Health and Human Services’ 28-page report titled “Premium Affordability, Competition, and Choice in the Health Insurance Marketplace.” The report stated that over 8 million Americans signed up for private health insurance through the ACA’s exchanges. Of those who enrolled through the federal exchange, and eligible for tax credits, saved an average 76% off their full premiums, from $346 per month down to an average $82 per month. Almost 70% have monthly health insurance premiums of $100 or less, and almost half pay $50 per month or less after the tax credits. About two-thirds chose Bronze or Silver plans, and over 80% lived in areas where they could choose from 3-11 insurers.

Or up 49% … compared to junk insurance

But the right-wing Manhattan Institute did their own study and found that health insurance premiums shot up 49% last year. But their methodology makes the comparison almost useless:

In order to document rate changes, we first gathered pre-ACA insurance rates using the federal government’s finder.healthcare.gov website. Our pre-ACA dataset consists of the five least expensive plans (by monthly premium) for the most populous zip code in every county. To cover a significant age range we collected rates for 27, 40, and 64-year old male and female non-smokers. We adjusted these rates to take into account those who are denied health insurance coverage as well as those who receive a surcharge. Using the “denial rate” and “surcharge rate” from the federal government’s repository, we assumed that those who are surcharged pay 75 percent more and those who are denied, find insurance elsewhere at three times the original rate. We used this to develop a weighted average of the five least expensive insurance plans for every zip code we identified. To develop a state-wide average, we took the state-wide average for every age-gender combination.

For ACA rates, we created state-level averages by averaging rates for the five cheapest plans across all counties in a state. The data was sourced from HealthSherpa.com, and because the ACA bans denials based on pre-existing conditions, there is no need to develop a weighted average of these rates. Thus, rate changes at the state-level are calculated by looking at the rate change between the average of the five cheapest plans for all counties before and after the ACA.
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We also excluded a number of plans from our calculations. Excluded plans include those which explicitly offer vision or dental coverage, child-only plans, plans that cover bariatric surgery, as well as catastrophic plans.

As Charles Gaba writes at ACASignups:

Well, here’s the thing…did those “5 least-expensive plans” pre-ACA include the so-called “junk” insurance policies which cover essentially nothing?
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I’m not sure what Roy means by “adjusted to take into account those with pre-existing conditions and other health problems”…if he means that they only used “real” policies instead of these “discount card” subscription plans, then fair enough. However, if these are included in the comparison (junk policies aren’t allowed on the ACA exchange and aren’t considered “insurance” for purposes of the penalty), then you might as well throw out the whole thing, no matter how many comprehensive it is.

“Sticker Shock” or “Small Changes?”

A new study by conservative health care economist Mark Pauly has “Sticker Shock” right in the title, but the “shock” is that there isn’t much:

Using data from the Current Population Survey, we find that the average prices increased by 14 to 28 percent, with similar changes in California and the federal exchange states; we attribute the increase primarily to higher premiums in exchanges associated with insurer expectations of a higher risk population being enrolled. The increase in total expected price is similar for age-gender population subgroups except for a larger than average increases for older women. A welfare calculation of the change in risk premium associated with moving from coverage that prevailed before reform to bronze or silver coverage finds small changes.

Note that last sentence. For the most commonly-selected exchange plans – Bronze and Silver – Pauly’s study found only “small changes” in premiums. And like the Manhattan Institute study, he didn’t factor premium tax credits into his analysis.

“It’s really difficult to compare”

Indeed it’s all but impossible, as insurance companies didn’t release data on their most popular pre-ACA plans or what those plans covered, as the Washington Post’s Jason Millman explains:

The problem with that, though, is it’s really difficult to compare the pre-ACA individual market to what exists today, which is a challenge that Pauly’s analysis in the National Bureau of Economic Research fully acknowledges. Individual health plans under ACA guidelines now offer a more robust set of 10 benefits, limit out-of-pocket spending, and can only charge customers based on geography, age and tobacco use. Notably, insurers are also banned from denying people coverage or charging them more for a pre-existing condition — that factor seems to be the main driver of the increased price in the ACA market since insurers are expecting a worse risk pool[.]
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As the authors explain, the information available for pre-ACA plans isn’t complete. It’s hard to tell just how much coverage the plans provided, or the types of plans that people purchased. So, that’s all to say this amounts to a very educated guess.

“Because of an error in calculations….”

The Los Angeles Times headline on Memeorandum looked damning:

 photo MemeorandumHeadline.jpg

That headline has since changed to “Obamacare subsidies on track to cost billions, report says.” And that’s still misleading, because the projected costs are at or below the CBO’s estimate from April.

Which the Times begrudgingly admits in an update:

Because of an error in calculations, a previous version of this article incorrectly stated that a new federal report indicates that the cost of insurance subsidies under President Obama’s healthcare law may be running above current projections. The figures in the report actually suggest that the cost of the subsidies is roughly in line with current projections from the Congressional Budget Office.

In short: “Oops.”

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Happy Thursday!