Spinning premium rates
Both sides in the great Obamacare debate are distorting the facts about premium rates on the health exchanges to make their case for or against the law:
- President Obama gave false comparisons, saying that average premiums for the exchange in Illinois were 25 percent lower than current individual market rates. Illinois officials compared exchange rates with what the federal government had predicted the exchange premiums would be — not with current individual market pricing.
- Obama said the average decrease in California was 33 percent. But officials said premiums were up to 29 percent lower compared with small-employer plans — not individual plans.
- Sen. Ted Cruz claimed that the Ohio Department of Insurance announced an 88 percent average increase for the individual market. It didn’t. The department estimated a 41 percent increase on average in a press release that called for the law’s repeal.
Much has been made of what Americans can expect to pay for insurance on the state-based and federal exchanges created by the Affordable Care Act that launched on Oct. 1. Republicans and critics of the law have claimed the rates will be too expensive, while Obama and the White House have said they’ll be affordable for those needing to buy their own coverage.
In his sit-down talk with former President Bill Clinton at the Clinton Global Initiative Health Care Forum on Sept. 24, Obama claimed the rates in several states have come in lower than what is now available on the individual market:
Obama, Sept. 24: And the premiums are significantly lower than what they were able to previously get. I’ll take the example of New York State. The insurers put in their bids to participate in these marketplaces. It turns out that their rates are up to 50 percent lower than what was available previously if you just went on the open market and you tried to get health insurance. (Applause.) Fifty percent lower in this state. California — it’s about 33 percent lower. In my home state of Illinois, they just announced it’s about 25 percent lower.
Illinois officials didn’t announce that the exchange rates in that state were 25 percent lower than “what was available previously if you just went on the open market and you tried to get health insurance.” Instead, Illinois Gov. Pat Quinn announced the rates were more than a quarter lower than what the federal government had estimated they would be.
We suppose it’s noteworthy when premiums come in below what the administration expected. But the estimates were extrapolated from a nonpartisan analysis from the Congressional Budget Office and Joint Committee on Taxation, which said in a March 2012 report that the the typical premium for the second-cheapest silver plan on the exchanges would be about $15,400 for a family in 2016.
Using that figure, the administration estimated that 2014 silver plan premiums for a single person would be $4,700 per year, or $392 per month.
The Illinois press release from the governor didn’t include specific comparisons for silver-level plans. The release said: “The lowest proposed monthly rate for a bronze plan for a 25-year-old is $120 in Chicago or $128 in Peoria; for a 40-year-old it would be $152 in Chicago or $163 in Peoria; and for 60-year old consumer it would be $323 in Chicago or $346 in Peoria.” As we’ve said several times, whether those rates are more or less than what folks could pay now on the individual market depends on the person — their health condition, for instance, and whether they smoke. That bronze plan also may be one with more or less coverage compared with what someone is buying now, so their total out-of-pocket costs could be more or less, depending on how much they’d use their benefits.
Obama said that California’s rates were 33 percent lower. We can’t find that figure. However, California officials did announce in May that premiums on its exchange would be from 2 percent above to 29 percent below the average 2013 rate for small employer plans in the state’s most populous areas. So, that’s up to 29 percent lower, but the comparison is to current rates for small businesses, not individuals.
Covered California, the name of the state’s exchange, said whether these premiums were more or less than what an individual was currently paying would depend on their level of coverage. It said it believed comparing the new exchange rates to the small business rates was fair, because both markets can’t deny applicants for preexisting conditions. It attempted to find an apples-to-apples comparison for the type of coverage folks on the exchange would be getting.
We agree it’s tough to compare what individuals might be paying now (or what they could pay now, if they’re uninsured) to what they’d pay with newly published exchanges rates. In a September report on these rates, the Kaiser Family Foundation said it wouldn’t attempt to make such comparisons, noting that the exchange plans would likely offer more generous benefits, as they’re required to meet benefit standards, and plans would have to accept everyone and not charge more based on health status. “These changes,” the report said, “make direct comparisons of exchange premiums and existing individual market premiums complicated, and doing so would require speculative assumptions and data that are not publicly available.”
Obama is simply misrepresenting what Illinois and California officials have said when he attempts to make such comparisons.
As for New York, Obama is right about that state: The governor’s office said in July that the state had approved plans for the exchanges in 2014 that were at least 50 percent lower on average than 2013 rates on the individual market now. A New York Times chart showed the drop in rates between 2013 standard H.M.O. rates in Manhattan and proposed 2014 rates for the state exchange. Again, it’s not a comparison of the exact same plans, but it is the comparison Obama cited.
The catch is that New York is a bit of a special case. As we’ve explained before, its insurance regulators already required insurers to accept everyone, regardless of health condition, and not to charge more based on gender, age and tobacco use. But the state didn’t have an individual mandate, requiring everyone to have insurance. Those conditions made prices on New York’s individual market very expensive. The Times quoted Timothy Jost, a law professor at Washington and Lee University and an expert on the ACA, saying that it wasn’t surprising that the law would lower rates in New York.
Later in his talk with Clinton, Obama made a similar comment about premiums in Arkansas:
Obama: And Arkansas just came out with its rates, and as has been true in virtually every single state, not only are premiums lower than they were, they’re a lot lower than even the most optimistic predictions were about how low they would be.
Arkansas Insurance Commissioner Jay Bradford didn’t say that rates had come in lower than what folks could get now on the individual market, but he did say in a Sept. 23 press release that the premiums were “as much as 25% below what had initially been requested [by insurance companies] for the individual market.” State officials later said two of the four insurers participating in the exchange had the same rates as they had originally proposed, and the other two had rates that were lower than originally proposed, one of them 25.1 percent lower, according to the Associated Press.
In a Sept. 25 report, the administration said rates for the second-cheapest silver plan in 47 states plus the District of Columbia were more than 16 percent lower, on average, than it had projected, based on that CBO analysis. But rates, of course, vary state to state. For instance, the cheapest plan for a 27-year-old on average in the 36 states with exchanges run or supported by the Department of Health and Human Services was $129 (a catastrophic plan available to those under 30). But that’s an average. In Kansas, that 27-year-old could pay $87 for a plan, while in Wyoming, that person would pay $259.
Cruz wrong on Ohio premiums
Democrats do not have a monopoly on premium spin. Case in point: Sen. Ted Cruz greatly exaggerated what the Ohio Department of Insurance had said about a premium increase. In his 21-hour critique of Obamacare on the Senate floor, Cruz said:
Cruz: Well, the Ohio Department of Insurance announced Obamacare will increase individual market health premiums by 88 percent. That is not a mild increase. That is not a percent or two. Eighty-eight percent is a big deal for a family struggling to pay their bills.
The Ohio Department of Insurance didn’t say that. Instead, it said that rates “are expected” to be 41 percent higher on average in 2014, compared with 2013 in the individual market. That’s an estimate based on data on 2012 rates.
Ohio Department of Insurance, Aug. 1: The Department utilized a National Association of Insurance Commissioners (NAIC) report of premiums reported by Ohio companies at the end of 2012 to compare premiums. Individual exchange plan premiums are expected to increase on average by 41 percent in 2014 compared to 2013, while exchange plans for Ohio’s small businesses will increase on average by 18 percent.
Cruz may have pulled his 88 percent figure from further down in the press release, where the department said that it had confirmed previous calculations from the Society of Actuaries that “insurance companies’ costs to provide individual health coverage will increase by 83 percent.” That’s not a premium cost, but a cost to insurance companies. As we previously wrote, that report didn’t attempt to estimate a change for premiums.
We’d note that the press release quotes Ohio Lt. Gov. Mary Taylor saying she “continue[s] to call for the repeal and replacement of this flawed law.”
The department said that the average 2014 premium would be $332.58, compared with $236.29 estimated average for 2013. Of course, an average could include a wide range of figures for different levels of coverage, and as we’ve said, whether the premiums on the exchange are higher or lower than what someone is paying now depends on age, health status, family size and other factors.
The administration’s Sept. 25 report says the cheapest plan on the Ohio exchange for a 27-year-old would be $131, without subsidies. That’s a state-wide average for a catastrophic plan; a bronze-level plan would be $177 on average for that age group. Meanwhile, a family of four would pay $768 per month on average for a silver-level plan in Ohio — again, before any subsidies. If that family had an income of $50,000, it could pay $282 for the same plan, or less if it chose a lower level of coverage.
Even though those figures are specific to age or family size, they are still averages. Actual rates may vary across the state. Our advice to those being bombarded by premium figures and political claims:
- Be wary of partisans promising big rate cuts or warning of huge price hikes, and ask “compared with what” before accepting their figures as fact.
- Wait a few days until the exchanges are open, and check out the rates for yourself.