Approved premiums for New York's health insurance marketplace reveal two notable facts: First, premiums in the individual market are far below current rates. Second, Rochester has the lowest rates in the state.
First, the individual market: A central goal of the Patient Protection and Affordable Care Act (ACA or Obamacare) has been to get more people covered by health insurance. In most states, this has been prohibitively expensive for individuals and small groups. Insurance is all about the odds: For any randomly selected group, catastrophic illness ($$$$$!) is rare. When health insurance is optional, the share of buyers who are sick is high and premiums are, too. As premiums go up, more healthy people drop coverage and the premiums ratchet up again. That's why employer groups can be insured affordably; although these groups aren't random, neither is the "pool" biased in favor of people with health problems.
The Urban Institute reported last year (http://goo.gl/uOEbYm) that the monthly premium for an individual plan in New York was nearly $1,300. Apparently only about 32,000 people out of 14 million insured New Yorkers needed coverage badly enough to pay so much. Most analysts believe that the high rates and consequent low enrollment could be explained by a New York law requiring insurers to accept all applicants regardless of condition (called "guaranteed issue" in wonkland). As coverage wasn't required, the "pool" of buyers was small and premiums became unaffordable.
Guaranteed issue is also part of the ACA legislation. But so is a coverage mandate: As of January, you must either jump in the pool or pay a fine. So the big question is this: What will happen to rates? In New York's individual market, rates will fall significantly. The state recently released approved rates for the New York Health Benefit Exchange, and the monthly premium for individual plans was below $600 for the "gold" plan averaged across all regions and providers.
New York law is like the Affordable Care Act in two other respects: New York has long required a base level of coverage and has required insurers to charge small groups a rate based on communitywide costs (called "community rating"), not the health cost experience of the group. States that have not had guaranteed issue, a base level of coverage or community rating probably will see insurance rates rise under ACA.
How about the small group market? With community rating and minimum coverage already in effect, the premiums approved by New York seem roughly in line with current pricing. In Rochester, five insurers have approved rates for gold and silver plans (but only three submitted platinum and bronze plans).
Time out for more ACA jargon: These tiers refer to the "actuarial value" of the plans. The highest level of coverage is platinum: You pay the highest premium, but the plan is designed to cover about 90 percent of the cost of care, on average. Consumers in these plans will collectively pay about 10 percent of the total. The gold plans are designed to insure the consumer against 80 percent of costs, silver pays 70 percent and bronze plans pay 60 percent.
Back to the rates: The monthly premium for Rochester's gold plans ranges from $340 from Health Republic to $636 from UnitedHealth. The silver plans are 14 percent cheaper, on average. A silver plan from MVP or Excellus will cost between $3,800 and $4,000 a year.
Few of us are average, of course. We'll still have to pick plans that fit our circumstances. Someone who is young and healthy may choose a bronze plan, save about $800 on the premium and hope to need little care. Or maybe you hate co-payments and deductibles and are willing to pay more upfront to avoid them.
A note about Health Republic: This is a new insurer started as a co-op with the help of the Freelancers Union of New York City. If you sign up, you'll receive care through MagnaCare, a network that reports 70,000 providers in New York and New Jersey. Its website listed more than 200 primary care physicians in the Rochester area.
Finally, Rochester posts the lowest premiums: One byproduct of the health insurance marketplace is publication of rates from different parts of the state. We've long heard that the "Rochester model" keeps health care costs down. Apparently insurers believe this, because Rochester has the lowest approved premiums in the state--about 14 percent below the average for the remaining regions (excluding New York City) on the gold plans.
That's the news from the New York rollout of the Affordable Care Act. We'll watch with interest (and some apprehension) as this tremendously complex legislation is implemented.
Kent Gardner is chief economist and chief research officer of the Center for Governmental Research Inc.8/16/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.