First clue to Obamacare insurance cost arrives

The much-anticipated first rate proposal for a health plan to be offered on the state’s new insurance marketplace is in.

But that doesn’t mean it’s clear yet what a customer will have to pay to buy insurance once the major provisions of federal health reform kick in.

For one thing, the proposal comes from HealthyCT, a new, nonprofit insurer that doesn’t yet do any business in the state. Its rates were created based on projections by the actuarial firm Milliman.

Although the federal health reform law limits variations in how much people can be charged, there will still be differences in price based on a person’s age, location and the specific plan the person selects.

And the proposals are still subject to review by the Connecticut Insurance Department, which could adjust what customers can be charged.

Still, the filing, submitted Thursday and available today on the insurance department’s website, offers the first impression of what insurance is likely to cost under the Affordable Care Act, the law known commonly as Obamacare.

As proposed, the average monthly premium for an individual would be $427, and for a small group it would be $445. But those would vary based on the specific plan the customer receives, and his or her age and county.  A HealthyCT spokeswoman said that it’s hard to tell whether this is a big change from existing rates because there really isn’t a plan with similar benefits on the Connecticut marketplace now.

No other insurers have submitted their proposals yet. The insurance department had asked carriers to submit them by April 30, although it wasn’t a hard deadline.

People in the health care industry have been eagerly awaiting a glimpse at the rate proposals for plans that will be sold on the state’s health insurance exchange, known as Access Health CT, a new marketplace for buying coverage.

The insurance industry has been warning that people will experience “rate shock,” a dramatic increase in premiums because of changes in what the law requires plans to cover and in how rates can be set. Starting next year, traditional methods for varying rates, such as by sex, age and health status, will be either limited or prohibited. In addition, plans will have to offer a standard set of benefits that goes beyond what some plans currently cover.

Consumer advocates have argued that the insurance industry is overstating the cost increases, but have acknowledged that they expect premium costs to go up. They note that many people won’t be paying the full cost since the federal government will subsidize the cost of buying plans through the exchange. For people earning up to 400 percent of the poverty level -- up to $94,200 for a family of four -- the federal government will offer subsidies to help cover the cost of the premiums.

Health plans sold on the exchange will be offered with several variations, based on “actuarial value” -- that is, how much of the health care costs the plan covers. The lowest-value plans will cover 60 percent of a person’s costs, leaving the customer to pay the rest. Those plans would likely require lower premiums than higher-value plans that cover more.

The exchange plans will be available to people who buy their own insurance, and small employers. The exchange won’t replace the state’s existing individual or small group markets; it’s just another option, although anyone who wants to use federal subsidies to buy coverage must buy their insurance through the exchange.

HealthyCT’s rates were based on projections for claims costs and the projection that the cost of paying claims would rise by 7.5 percent a year.

According to its rate proposals, 84 percent of the premium dollars collected in the small group plans would go to paying for medical care or quality improvement, as would 88 percent of the premiums collected for the individual plans. Federal health reform requires all individual and small-group plans -- not just those sold in the exchange -- to spend at least 80 percent of premiums on health care costs, rather than on administrative expenses and profits.

Concerned about the price of insurance in the exchange, Benjamin Barnes, Gov. Dannel P. Malloy’s budget director and a member of the exchange’s board, has proposed that the state further limit insurers’ administrative costs, requiring them to spend 85 percent of the premiums on medical care or quality improvement, instead of 80 percent. The exchange board approved the proposal, which would require legislative action. The idea met with sharp criticism from the insurance industry, which warned that limiting administrative costs could come at the expense of jobs in the state.

Last week, Barnes said that he had met with some insurers and legislators about the proposal, but wanted to see what the rate proposals for the exchange plans looked like before pursuing legislation. If the proposals project spending close to 85 percent of premium dollars on health care costs, he said, there might not be a need to change the law this year.