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Health Insurance Rates Steady Under Obamacare

June 25, 2013

HELENA, Mont. – Montanans buying health insurance in the state's federally built insurance Marketplace can expect to pay a little less on average than what they would have paid had "Obamacare" never passed, according to statistics released this week from Montana Insurance Commissioner Monica J. Lindeen.

The situation is similar for small business owners looking to buy health insurance for themselves and their employees through the Marketplace's small group section: Those rates are, on average, lower than what those same consumers would have expected to pay had Obamacare not passed.

"A lot of Montanans have been worried about how Obamacare would affect the cost of health insurance," said Lindeen Monday."These preliminary figures show that rates haven't skyrocketed. Rates are actually lower than projections, which is a relief to a lot of Montanans, including me."

Lindeen will be giving an overview of the online Marketplace aspect of Obamacare at a meeting of the Economic Affairs Interim Committee Tuesday morning. She will talk more about the study, which was conducted by an independent actuary commissioned by her office. Lindeen is expected to speak around 11:20 a.m. Tuesday. The committee will be meeting in Room 137 at the Montana Capitol.

The figures are especially significant because the Affordable Care Act – widely known as Obamacare – changed the way insurance companies can set their rates and set standards for products sold in the Marketplace. Previously, insurance companies could "underwrite" their policies, meaning they could refuse to sell policies to unhealthy people. Under the Affordable Care Act that is no longer allowed. Also, all products sold in the Marketplace must cover what are called "essential health benefits," like prescription drugs and other services that were not necessarily covered under every insurance policy sold in Montana's individual market.

That means the products sold in Montana's Marketplace potentially cover more services and more people with fewer exclusions – yet still cost the same or less than what some Montanans could have expected to pay without Obamacare.

Due to actions of the 2011 Legislature, Montana's Marketplace is being built by the federal government – not the state. Three companies – Blue Cross Blue Shield, PacificSource and the Montana Health Co-Op – submitted plans to sell products in the Marketplace.

Lindeen's office asked its independent actuary to analyze the companies' rates, creating an average range of prices for individuals and businesses. They then compared those averages with figures Montanans would have expected to pay for similar insurance products had Obamacare not become law.

According to Lindeen's study, a Montanan buying health insurance in the individual market can expect to pay an average of $273 a month for comprehensive health insurance purchased in the Marketplace, compared to an estimated average of $290 a month had Obamacare not passed. A small business consumer can expect to pay and average of $375 a month per employee for a comprehensive small group plan in the Marketplace, compared to an average of $450 a month per employee had Obamacare not passed.

None of these figures include the federal purchasing assistance available to both individuals and small businesses buying in the Marketplace. Many Montanans – up to 80 percent in the individual market -- are expected to qualify for and use such assistance, meaning their actual out-of-pocket expenses on health insurance could be significantly lower.

Beginning on Oct. 1, 2013, Montanans can begin shopping for health insurance in the state's Marketplace – an online insurance store that includes products sold by different insurance companies. Any policies purchased there will not go into effect until Jan. 1, 2014.

Products sold in the Marketplace are separated by the level of coverage they provide, so Montanans can easily identify similar insurance products. For example, Bronze plans are required to have an actuarial value of 60 percent. That means that customer pays about 40 percent of the total cost of care through deductibles, co-pays and coinsurance, while the company will cover on average the remaining 60 percent.

The actuaries also looked at projections of what Montanans may have expected to pay for health insurance – both in the individual market and the small business market – in the absence of Obamacare 2014 rating reforms.

Individual MarketSmall Group Market
Age 25$141 to $299$178 to $327
Age 40$179 to $381$227 to $417
Age 55$313 to $664$396 to $727

In 2012, the average monthly premium for comprehensive health coverage in the Montana individual market was $240 per person. Based on recent survey data, half the individual market was under age 40 and half over, and the average actuarial value was approximately 70 percent. Following trends in rate hikes before Obamacare, the actuaries estimated the 2014 average premium would be about $290 without the reform law. Comparing that to the age 40 Silver plan rates submitted for the Marketplace, the average rate appears to be slightly lower than would have been expected for 2014.

In 2011, the average premium for comprehensive health coverage in the Montana small group market was $340. Based on survey data collected about a year ago, approximately 55 percent of the small group market was under age 40, and the aggregate average actuarial value was approximately 80 percent. Assuming a 10 percent average annual trend, as has been seen in recent years, that would make the 2014 average premiums approximately $410. Comparing that to the age 40 Gold plan rates proposed for the Montana Marketplace, the average rate of $375 is lower than may have been otherwise expected in 2014.