Three Studies Look at Rates, Competition In Insurance Marketplaces Opening Oct. 1

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By Sara Hansard  


As health insurance premium rates are released publicly for the online marketplaces that open for enrollment Oct. 1 under the Affordable Care Act, research organizations are analyzing rates and competition in the market.

Health insurance premiums in 18 cities for which data have been publicly released vary widely, a Kaiser Family Foundation analysis released Sept. 5 found.

For a 40-year-old, the monthly premiums for plans in the second-lowest-cost “silver” tier range from $201 in Portland, Ore., to $413 in Burlington, Vt., before accounting for tax credit subsidies that are available to people with low and moderate incomes, according to the Kaiser analysis, “An Early Look at Premiums and Insurer Participation in Health Insurance Marketplaces, 2014.” The subsidies are available for people in households with income between 100 percent and 400 percent of the federal poverty level.

The analysis, by Cynthia Cox, Gary Claxton, Larry Levitt and Hana Khosla, compares premiums in the largest cities in 17 states, plus the District of Columbia, for individuals and families with different income levels to illustrate the insurance rates they might pay, with and without the tax credits. The jurisdictions include 11 operating their own state-based marketplaces, also known as exchanges, and seven states in which the marketplaces will be operated by the federal government.

Three or More Insurers in Most Areas

There are at least two insurers participating in each of the marketplaces in the rating areas analyzed by Kaiser, and three or more insurers are participating in most of the areas, it said.

For a 40-year-old with annual income of $28,725--250 percent of the federal poverty level--he or she would be eligible for tax credits that would reduce monthly premiums to $193 in any of the 18 markets, the analysis said. Those tax credits are based on the cost of silver-tier plans, which cover 70 percent of medical claims on average. The subsidies can be used to cover plans in all four tiers, which cover between 60 percent and 90 percent of claims. If the 40-year-old with income at 250 percent of the poverty level bought a bronze plan, he or she would pay between $97 per month in Hartford, Conn., and $168 per month in Sioux Falls, S.D., it said.

The analysis provides similar estimates for the cost of coverage for a 25-year-old and a 60-year-old, as well as the impact of tax credits on the rates. It includes additional examples for a family of four and an older couple in the 18 cities: Los Angeles; Denver; Hartford; Washington; Indianapolis; Baltimore; Portland, Maine; Billings, Mont.; Omaha, Neb.; Albuquerque, N.M.; New York City; Cleveland; Portland, Ore.; Providence, R.I.; Sioux Falls; Richmond, Va.; Burlington; and Seattle.

HealthPocket Research

Research released Sept. 5 by HealthPocket Inc. found that insurers not participating in the marketplaces currently have, on average, 23 percent lower premium rates than the rest of their competition, raising questions about the level of competition within the marketplaces and potentially higher costs of plans offered in them. HealthPocket is an Internet-based health plan ranking service.


“If the 2013 premium trends documented in this study continue for 2014, it is probable that exchanges will have limited appeal to consumers ineligible for subsidies due to inadequate price competitiveness on the exchange,” HealthPocket said.  



A major goal of the marketplaces is to create an environment to promote price competition among health plans, according to the research, “Many Big Brand and Lower Cost Insurers Deserting Obamacare Exchanges: Consumers Should Review Both On-Exchange & Off-Exchange Plans When Shopping.”

However, it said, “Some of the biggest names in the insurance industry, such as United Healthcare and Aetna, plan to sell insurance 'off-exchange' within many states and not participate in the government-run exchanges.”

The difference in insurance plans sold inside and outside of the marketplaces “raises the question of whether the departure of several well-known brands from the exchanges will have implications for price competitiveness on exchanges,” the research said. HealthPocket examined 1,621 health plans in 10 states where insurers have publicly announced they will not participate in the state's marketplace.

It calculated average 2013 monthly premiums for a 35-year-old male nonsmoker for the insurers that are not participating in the ACA marketplaces, and compared the premiums for the rest of the insurers in the same states. In nine of the 10 states, the insurers not participating in the marketplaces have lower average premiums than other plans, it said.

“If the 2013 premium trends documented in this study continue for 2014, it is probable that exchanges will have limited appeal to consumers ineligible for subsidies due to inadequate price competitiveness on the exchange,” HealthPocket said. If that happens, “the on-exchange health plans will have [their] risk pool skewed toward subsidy-eligible consumers,” and insurers in the marketplaces may attract more enrollees who have health problems, driving up costs and premiums, it said.

Avalere Analysis

A third analysis, released Sept. 4 by Avalere Health LLC, found monthly premiums for silver-tier plans were in the low $200-$300 range in most markets.

Avalere analyzed public rate filings released by eight states that will operate their own marketplaces and four states that will have federally facilitated or state partnership marketplaces for its report, “Avalere Analysis of Exchange Rates for 2014.”

The minimum premium for a 40-year-old nonsmoker averaged $261 for a silver plan, the analysis said. An estimated 80 percent of marketplace enrollees will qualify for premium subsidies that will further reduce the cost of coverage, it said.

Premiums ranged from $197 per month in Maryland to $383 in Vermont, it said. Silver premiums vary widely within some states, particularly in markets with many participating carriers and geographic rating regions. The difference between the minimum and maximum silver plan premiums in New York was $418 a month across the 16 carriers and eight regions within the state.

In the 12 states analyzed, average silver premiums for a 60-year-old nonsmoker were $615 compared with $327 for a 40-year-old and $271 for a 21-year-old. Some states, such as Vermont and New York, have decided to continue their rating practices, which do not allow issuers to vary rates by age, “significantly lowering the cost of premiums for older consumers, while meaningfully increasing the cost for young individuals,” it said. Community ratings have been in effect for a number of years in the two states, and Avalere did not anticipate the practice would have a “significant impact on the risk pool.”

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