Washington’s consumers got their first, preliminary look at the cost of “Obamacare” on Tuesday. And the news, for many consumers, was good: Health insurance next year will cover more and cost less.
Huge rate increases, predicted by critics and by some health insurance companies, did not materialize. Advocates of the federal reform law had hoped that rates would improve because insurers need to compete with each other on an apples-to-apples basis.
Now, the rates are out.
On Tuesday, the office of Insurance Commissioner Mike Kreidler released rate proposals from health insurance companies that plan to sell coverage on the Washington Health Plan Finder, a statewide website to be run by the government. The site is scheduled to open Oct. 1, selling coverage that will take effect Jan. 1.
On the site, insurance carriers will compete for consumers’ business, selling standardized plans with all of the benefits spelled out for easy comparison, plus a star-based rating system evaluating each company’s coverage.
Individuals who purchase coverage on the site will not, in most cases, pay the rates unveiled Tuesday. Federal subsidies, available only for policies purchased on the website, will reduce the cost to consumers. The size of the federal subsidy will be tied to household income: Subsidies will be available for those with incomes up to 400 percent of the federal poverty level, which equates to an annual income of $94,200 for a family of four.
Under federal law, the website’s mission is to make affordable health insurance available to individuals who don’t have it or who have poor coverage with limited benefits. Although most Americans get their health coverage from an employer or Medicare, those who are self-employed or work for small businesses have seen rates skyrocket and coverage diminish, if they can get coverage at all.
Kreidler has pointed out that individual health insurance policies these days often cover less than 40 percent of medical costs and often do not cover prescription drugs or maternity care.
But that’s not true of the policies on the new website. Beginning next year, the federal reform law prohibits annual or lifetime coverage caps, bans higher rates for women or the chronically ill and requires health insurance to cover 10 “essential benefits”: ambulatory services, emergency services, hospitalization, maternity and newborn care, mental health, prescription drugs, rehabilitation, laboratory services, prevention and wellness, and pediatric services including dental and vision care.
In addition, the law allows just five levels of standardized health coverage: “platinum” (90 percent), “gold” (80 percent), “silver” (70 percent), “bronze” (60 percent) and high-deductible catastrophic (only for people under age 30).
No insurance company proposed to offer platinum coverage, Kreidler said.
This federally mandated increase in coverage level must be taken into account, Kreidler’s office says, in any attempt to compare the cost of health policies available today and the more comprehensive policies to be available next year.
Who offered coverage?
Kreidler’s office unveiled rate proposals from Premera Blue Cross, Lifewise (a separate company owned by Premera), Group Health Cooperative, BridgeSpan (owned by Regence Blue Shield) and Molina Health Care of Washington. All of these insurers propose to sell policies to individuals on the state’s Health Plan Finder website. A few other companies offered plans that will not be available in Spokane County.
The dominant carriers in Washington’s health insurance market are Regence, Premera and Group Health.
In addition, these and a few other companies proposed rates for policies to be sold outside the website – although consumers who buy those will not be able to get the federal subsidies.
Jim Keogh, an economist from the insurance commissioner’s office, prepared an analysis to compare the total cost of health coverage now with the total cost in 2014 under the new rate proposals. He combined the cost of the monthly premium with the amount an average consumer would have to pay out-of-pocket for health care, due to deductibles. In his analysis, Keogh used the rates for Lifewise, whose policies are the most popular for individual coverage in Washington. Here’s what he found:
• For a 60-year-old in very good health, the total annual cost for health care this year would be $8,600 ($6,882 in premiums plus $1,719 in out-of-pocket costs). Next year, the total annual cost for health care would drop to $8,533 ($7,441 in premiums plus $1,092 in out-of-pocket costs).
• For a 40- to 44-year-old in very good health, the total annual cost this year would be $4,462 ($3,386 in premiums plus $1,076 in out-of-pocket costs). Next year, the total annual cost for health care would drop to $4,338 ($3,654 in premiums plus $684 in out-of-pocket costs).
• For a 21- to 25-year-old in very good health, the total annual cost this year would be $2,488 ($1,840 in premiums plus $648 in out-of-pocket costs). Next year, the total annual cost for health care would increase to $3,149 ($2,738 in premiums plus $411 in out-of-pocket costs).
Even though this indicates a rate increase for young adults, most may not actually pay it, Keogh said, because a majority of young adults receive low wages and would qualify for federal subsidies or Medicaid. Plus, people under 30 have the option of choosing a lower-cost catastrophic coverage plan with higher deductibles.
Rates not final
The rates unveiled Tuesday are not final. Kreidler’s office will scrutinize them for compliance with the new federal insurance rules.
If Kreidler approves the rates, next they will go to the governing board of the state Health Benefits Exchange, a federally funded public-private partnership that is building Washington’s Health Plan Finder website.
Kreidler encountered one disappointment, he said: The federal law provided for each state’s website to sell health insurance packaged for small businesses and their employees, in addition to individuals. However, only one insurance company, Kaiser, filed a rate proposal for the small business market on the website, to be available only in some parts of Western Washington.
As a result, small-business employees either can purchase health insurance from the website’s array of individual policies or their employers might make available a small-business plan outside the website.
“I’m hopeful we’ll see more progress for small employers in the near future,” Kreidler said.
On the other hand, Kreidler said, “we’re pleasantly surprised with the individual rates we’ve seen so far. … In many cases, people will get better benefits and pay less – especially if they qualify for subsidies.”
Last year, a Premera executive predicted federal reform would cause “staggering” rate increases of 50 to 70 percent, and earlier this year, a Premera spokesman was predicting increases of 16 to 47 percent.