How Affordable are Obamacare Premiums and Do They Tell the Whole Story?

by | Mar 29, 2014 | Articles, Insurance Verification, Resources | 0 comments

According to the report published by the U.S. Department of Health and Human Services (HHS), the average monthly premium for Obamacare will be around $328. This is considered the broadest national estimate for coverage cost when Obamacare becomes effective next year. HHS says that this average cost is 16 percent lower than its own predictions. Moreover, those who qualify for federal subsidies will pay much less as premium. The consumers who earn not more than 400 percent of the federal poverty level or a couple earning up to $62,040 are eligible for subsidies.

How the Pricing Was Determined

The average cost of premiums was determined on the basis of data for approved insurance plans in 48 U.S. states. However, most of the data is from 36 states where the federal government has set up insurance exchanges. It also includes that data from 11 other states and the District of Columbia which operate their own exchanges. Three states, including Hawaii, Kentucky and Massachusetts, had not released their premium information at the time of HHS report.

As per HHS report, the major factor that influenced the average price was the competition among insurance companies, with rates significantly higher in states with fewer players.

A Look into Pricing Variations

Industry experts are pointing out that though the average premium has been estimated as $328 monthly, the actual average premium cost may vary based on the following factors:

  • Variations by Plan Type – The cost of premiums are different for various types of health plans such as platinum (in some areas), gold, silver, bronze and catastrophic coverage. The national average refers to the second lowest silver plan. This plan is popular for its balanced coverage and moderate out-of-pocket costs, say healthcare economists. That’s why it’s considered the national average. The average premium for lowest cost silver plan is $310 (higher than national average) and for the lowest cost bronze plan, $249 (lower than national average).
  • Variations among States – The least expensive plans for the second-cheapest silver plan were reported in Tennessee ($245) and Minnesota ($192).  At the same time, state with large rural population are more likely to have a higher premium cost for this category such as Mississippi with $448, Wyoming with $516 and Alaska with $474.
  • Variations by Community – There are 67 different geographical rating areas in Florida. According to the HSS report, the premium for the second lowest cost silver plan ranges from $239 to $352 a month for a 40-year-old. In Texas, a 27-year-old would need to pay a monthly premium of $169 per month for the lowest cost mid-tier plan in Austin and $217 for the same plan in Dallas-Fort Worth.

U.S. Senate Republican Leader Mitch McConnell points out that the new plan prices were still an expensive proposition for Americans, based on the cost of individual plans in the past. Under the Affordable Care Act, insurance plans must cover a wider range of preventive and other medical services and cannot refuse cover based on the applicant’s prior illnesses.

As per insurance industry surveys, premium rates plays a crucial role in driving consumers to the health insurance exchanges. People are still not aware of what the plans offered will look like, the type of coverage they will offer, and whether the actual coverage will be as good as a plan available outside of the exchange. Moreover, the premium is just one dimension of the health insurance cost. What about the deductibles, coinsurance and out-of-pocket costs? If prescription costs are not covered, the effect can be quite devastating – even seriously ill patients may skip their medication.