On Monday, the Arkansas Insurance Department released the plans that will be available on the Arkansas Health Insurance Marketplace, the new regulated marketplace where consumers will buy private health insurance, with enrollment beginning next month. The prices came in lower than expected, though some people who currently buy insurance on the private market will see higher premiums than the cheapest plans they can find today.
There will be 71 plans offered, divided into levels based on coverage and price — bronze, silver, gold — with gold being the most expensive and offering the most coverage. Bronze plans are cheaper but could lead to more out-of-pocket costs when consumers use medical services. Specific details of the plans, such as deductibles and provider networks, had not been released as the Times goes to press, but should be available from the Insurance Department this week.
Premium prices depend on age and region of the state (see map) so there is a lot of variance. Here are just a couple of examples:
• For a 25-year-old non-smoker in Central Arkansas, a bronze plan is available for a monthly premium of $182, a silver for $231, gold for $264. We'll call him Gus, and we'll return to him in a minute.
• For a family of four in Central Arkansas — mom and dad are 40-year-old non-smokers and they have two kids — a bronze plan for the whole family is available for a monthly premium of $693, silver for $879, gold for $1,007. We'll call this family the Joneses.
Those rates are the sticker prices, but many consumers will qualify for subsidies and end up paying less (more on that below). You can get a full look at all the rates online at arktimes.com/rates.
The Arkansas Health Insurance Marketplace was created as part of the national healthcare law and as a handy shorthand, these plans are often called Obamacare plans. Here's what that means: Four private insurance companies, Arkansas Blue Cross and Blue Shield; the national Blue Cross and Blue Shield, QualChoice and Centene, are offering plans on the marketplace. Because of Obamacare, all of these plans must cover 10 essential health benefits (stuff like maternity care and prescription drugs), and insurance companies are no longer allowed to deny coverage or charge higher prices based on pre-existing health conditions. They're also no longer allowed to charge higher prices for women — all of the rates released on Monday apply to either gender.
These plans are for people buying their own insurance on the private market, either directly from an insurance company or through a broker. This doesn't impact the overwhelming majority of people — 80 percent of Americans — who get insurance either from an employer or from a big public program like Medicaid or Medicare. There are three major takeaways from the plan prices:
1. The premiums appear to be in line with — or lower than — the actuarial projections that the Department of Human Services used to predict the cost of the "private option," the state's unique plan for Medicaid expansion. DHS has not yet begun an analysis comparing the projections with the premiums; the comparison is complicated because of the variance between ages and regions. If the premiums are lower than the actuarial predictions, then the total gross cost of expanding Medicaid via the "private option" would be significantly less than projected during the legislative debate. For the state of Arkansas, that would mean the total net projected savings to the state's bottom line would be even higher than the current projection of almost $670 million in savings over 10 years. For the federal government, it would mean a lower net cost.
2. Arkansas continues the national trend of premiums coming in lower than the average rate predicted by the Congressional Budget Office. That means the cost to consumers and the overall cost of Obamacare is less than expected.
3. For some healthy people currently buying cheap plans on the private market, rates are going up.
That last bit is already being trumpeted by Obamacare opponents. But simply comparing premium prices pre- and post-Obamacare obscures some key points.
The plans released show the sticker prices, but most people shopping on the marketplace will pay less than that, sometimes dramatically so. That's because subsidies will automatically lower the price. Subsidies are available on a sliding scale to people between 139 and 400 percent of the federal poverty level (approximately $15,000 to $46,000 for an individual, or $31,000 to $94,000 for a family of four). People below 139 percent FPL will pay zero for premiums, via the "private option." Most of the currently uninsured that will shop on the exchange will qualify for subsidies and about half of those who currently have private insurance will qualify for subsidies (see more here.)
To get an idea of how the subsidies work in practice, imagine that the 25-year-old mentioned above, Gus, is making $25,000. If he chose the cheapest bronze plan, the subsidies would drop his premium from $182 to just $85.54 a month. Or imagine that the Joneses, our family of four, have a household income of $75,000. If they wanted to buy a silver plan for the whole family, the sticker price would be $879 per month. But after subsidies, the family would only have to pay $556. And if they applied their subsidies to the cheapest bronze plan, the price would drop from $693 per month all the way down to $370.13.
The second thing to keep in mind is that while healthy people will likely see rates go up, people with pre-existing conditions will often see rates go down, or find that they can now get coverage when they were previously denied. The cheapest rates available on the private market pre-Obamacare only exist because the market excludes or price gouges people that are sick. There's a tradeoff here: the law aims to provide coverage and security for everyone, but that means sacrificing the cheapest rates for currently healthy people.
Finally, if comparing Obamacare plans to the cheapest plans now available, it's important to note that the Obamacare plans will offer more coverage and more protections. In fact, if people end up having health issues, they will often save on total health costs, including out of pocket costs, even if they're paying more for premiums. And people will no longer risk losing coverage if they become sick.
Even taking all of that context into consideration, it's still the case that many healthy people will have to pay more for private insurance.
Let's take one last look at Gus and the Joneses. Currently, on the pre-Obamacare private market, what rates are offered by the dominant carrier, Arkansas Blue Cross Blue Shield? Using the Blue Cross Blue Shield website, it's possible to get premium quotes by age and gender to find out. These quotes assume that Gus and the Joneses have no health issues that might bring up their premiums. The premium varies depending on deductible, so we'll look at a high-deductible and a low-deductible plan. For Gus, Arkansas Blue Cross Blue Shield offers a plan with a monthly premium of $71 ($1,000 deductible) or $47 ($5,000 deductible). For the Joneses, it offers a plan for $433.19 ($1,000 deductible) or $290.67 ($5,000 deductible).
Those are much lower than the sticker price for Obamacare plans. Healthy people that are too affluent to qualify for subsidies will see a major rate hike, particularly those that benefit most from price discrimination on the current market: men and young people. Even some lower-income people receiving subsidies to offset the cost will see an increase on net. Much will depend on each consumer's individual situation, but some may experience "rate shock."
Consumers that don't get health insurance through an employer or a public program have a few options. They can sign up for one of the Obamacare plans. They can renew or enroll in a 2013 private plan and hang on to the old plan at the old rate for one last year. Or they can go without health insurance and pay a penalty. That penalty is whichever is greater: $95 or one percent of income above the tax-filing threshold ($10,000 for an individual, $20,000 for a married couple). The penalty gets higher in future years.
Here's the big question, the one that goes to the heart of whether Obamacare will work or not: Will consumers who don't get health insurance through a job or a public program think that the Obamacare plans are a good deal? Or a good enough deal given that the alternative is paying a penalty?
The fate of Obamacare comes down not to the pundits and policymakers shouting on both sides, but to those consumers. Enrollment starts Oct. 1 and goes through the end of March.