Setting the Record Straight on Pre- and Post-ACA rates

It seems that bogus comparisons of health insurance premiums before and after the Affordable Care Act (a.ka. Obamacare) keep popping up.  Many of these analyses are misleading at best—comparing apples to oranges and ignoring what people will actually pay once subsidies are included.
Given that we probably  won’t see the end of these comparisons any time soon, I want to take a minute to set the record straight.  No reliable information exists on average pre-ACA rates for health insurance policies in the individual market (where people who don’t get job-based insurance buy directly from insurance companies).   In other words, there is no good price benchmark to compare ACA rates to.   When you see a report or headline that claims ‘Obamacare is raising individual market premiums by X%,’ you should wonder, compared to what?
Often the comparison point is the “teaser rate” for the cheapest policies on the pre-ACA market.  Folks who’ve had to shop directly for health insurance in the past may know about teaser rates all too well.  They are the advertised sticker prices for health insurance, that can be increased significantly once an insurance company tacks on surcharges for pre-existing conditions (assuming the insurer doesn’t deny coverage all together based on pre-existing conditions). But teaser rates and pre-existing conditions go away with the ACA.  Premiums are based only on where you live, your age, and whether you use tobacco, and premiums are reduced on a sliding-scale for people earning under 4 times the poverty level (about $46,000 a year for an individual and $94,00 for a family of four).
Using teaser rates is just one thing that makes many premium comparisons misleading.  CPPP recently outlined several stark differences in pre- and post-ACA coverage that are glossed over in rate comparisons, including:

  • Ignoring the effects of the premium tax credits that many people in the individual market, particularly young adults, will qualify for.  With tax credits factored in, some lower-income individuals will qualify for $0 premium Bronze policies, and others will pay less post-ACA for good coverage than they’d pay for pre-ACA bare bones coverage.
  • Ignoring pre-existing condition coverage exclusions.  Today,  insurers routinely exclude coverage for health care costs, associated with pre-existing conditions, leaving enrollees paying insurance premiums while they lack coverage for needed health care services.  This stops in 2014.
  • Downplaying coverage denials.  Pre-ACA, many people have been denied coverage all together due to pre-existing conditions.
  • Failing to explain just how bad the coverage is in the cheapest pre-ACA policies and how much it will improve under the ACA.  Pre-ACA coverage in the individual market is like Swiss cheese – full of holes.  Some of cheapest pre-ACA policies in Texas have $10,000 deductibles for an individual and out-of-pocket spending limits of up to $13,000.  Under the ACA, out-of-pocket spending limits for individuals are capped at $6,350 and are reduced on a sliding-scale for lower-income Marketplace enrollees.  Not only do enrollees shoulder more financial risk through deductibles and copays before the ACA, they have fewer benefits.  The cheapest pre-ACA policies often fail to cover or restrict benefits for maternity, mental health, substance use treatment, prescription drugs, and pediatric dental services—all covered post-ACA.

CPPP has released a couple of snapshots of what Texans will pay for Marketplace coverage, looking at premiums by region and by income.
Reports that imply there is any direct and fair way to compare premiums or make a blanket statement about how much premiums have increased are inaccurate and irresponsible.
Here are some facts about how rates will change:  some Texans will pay more than what they pay (or would pay) for the skimpiest pre-ACA plans (and get better coverage in return), while others will have access to much better coverage under Obamacare than what has been sold in the past, and they’ll pay less for it.

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