Washington – A report released Wednesday by the White House said the average price of insurance premiums offered in state exchanges will be lower than expected. But, according to the same report, Connecticut's exchange will offer some of the highest premiums in the nation.
Eager to sell Americans on the Affordable Care Act , the Obama administration touted the lower than anticipated prices. “The bottom line is that January 1st will be a new day for most Americans,” said Health and Human Services Secretary Kathleen Sebelius.
Although HHS said premiums would be, on average, $768 less a year than the Congressional Budget Office had estimated, there will be a wide disparity among the states in the cost of insurance policies offered in state exchanges, the new insurance marketplaces that will operate in every state.
According to the White House report, the second-lowest “silver,” or medium-range, plan for an individual buying insurance on Connecticut’s exchange would cost an average of $436 a month. Only in Alaska, Mississippi and Wyoming would the average premium for a similar plan be higher. The national monthly average is $328.
Americans will begin to be covered under policies they purchase in exchanges Jan. 1. But they can begin to shop for a policy Tuesday, Oct. 1, when all state exchanges are required to be up and running.
State exchanges, including Connecticut's Access Health CT, will offer “bronze,” “silver“ and “gold” policies. The latter are the most expensive and offer the fullest coverage and lowest copays and deductibles. Some states, but not Connecticut, will offer premium “platinum” plans.
All states will offer “catastrophic” plans. These have low premiums with high out-of-pocket costs, but they provide some primary care and cover major accidents or illnesses.
Few will pay an “average” premium. Insurance will cost more for older people than younger ones and is also rated by geography, with those in urban areas usually paying more than those in rural areas. The cost of medicine and cost of living is also factored into a premium.
Yet Sebelius said the new marketplaces will keep insurance costs down, through “more choice and more competition.”
But only three insurers will sell coverage in Connecticut’s exchange, offering a limited number of policies. People living in the Miami metropolitan area, meanwhile, will be able to choose from 137 qualified policies through the Florida exchange.
The Obama administration will offer tax credits to help defray the cost of insurance for individuals and families who earn up to four times the federal poverty level. The federal poverty level for an individual is $11, 490 and $23,550 for a family of four.
Athough this may help low-income young people pay for insurance, whose premiums will be on the low end of the scale, a middle-class, middle-aged person may struggle to purchase insurance on the exchanges.
A 50-year-old living in Hartford who earns $50,000 a year, for example, would have to pay annual costs of between $5,507 and $6,086 for a silver plan and would not qualify for a tax break. That’s 11 percent to 13 percent of pre-tax income.
The insurance industry praised the White House report.
"We're encouraged by what we've seen. Health plans are doing their best to hold costs down," said Robert Zirkelbach, spokesman for America’s Health Insurance Plans (AHIP), the trade association for health insurers.
Yet the premiums heralded by the Obama administration Wednesday are good only for 2014. They are expected to rise in subsequent years by a still undetermined amount.
Gary Cohen, deputy administrator for insurance oversight at the Centers for Medicare & Medicaid Services, predicted that rates will go up very slowly because they were rising slowly before the ACA was implemented.
But, beginning Jan. 1, the ACA will require all health policies to offer certain coverage -- such as for mental health care --and end bans on pre-existing conditions.
Insurers will also have to cap out-of-pocket expenses, eliminate claim limits and pay new fees and taxes.
While those factors, and others, could push up insurance costs in the coming years, according to AHIP, other provisions of the law will make health care coverage more affordable, including a transitional reinsurance program that provides insurers with money to help offset the impact of high-cost enrollees.
Other factors could keep premiums down. “There is broad recognition that for health care to work, there has to be wide participation, especially for the young and healthy," Zirkelbach said.