Reverse “Sticker Shock” Part 2 –Subsidies Mean Enormous Saving for Older Americans

In the past I have written about how government tax credits will help young adults (18-34) who must buy their own coverage because they don’t have access to “affordable, comprehensive” employer-sponsored coverage.

But older Americans forced to purchase their own insurance will save even more. Precisely because a 50-year-old’s premiums may be three times higher than a 20-year-old’s, his subsidies will be larger.

Subsidies are designed to fill the gap between the percentage of your income that you are expected to contribute toward the cost of a premium (with the government assuming that if you earn more, you can spend more on health insurance) and the actual rates that insurers in your market charge for a benchmark Silver plan..

Families USA estimates that while the majority of 18-34 year olds shopping in the Exchanges will qualify for help from the government, fully  30% of the those who receive tax credits  will be 35 to 54, and 12.5% will be 55 or older.

Note that younger Americans will not be subsidizing these tax credits  for their elders. Under the Affordable Care Act subsidies are funded by device-makers, drug-makers, hospitals—plus taxpayers earning over $200,000—and couples earning over $250,000) Very few twenty-somethings are that fortunate. A New KFF Report Offers Eye-Opening Final Numbers on Premiums and Subsidies for 40 –Year Olds and 60-Year-Olds in 17 States

In  August the Kaiser Family Foundation  (KFF) published an “Early Look at Premiums” in California, Colorado, Connecticut, DC, Indianapolis, Maryland, Maine, Montana, Nebraska, New Mexico, New York, Ohio, Oregon, Rhode Island, South Dakota, Virginia, Vermont and the state of Washington.

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Reverse “Sticker Shock”—Why are Insurance Rates in the State Marketplaces Lower Than Expected? — Part I

 

Even Forbes’ columnist Avik Roy is recanting.  Earlier this month he acknowledged that under Obamacare, many Americans who buy their own coverage in 2014 will find that insurance is significantly more affordable than it was in the past:  “Three states will see meaningful declines in rates: Colorado (34 percent), Ohio (30 percent), and New York (27 percent).”

Colorado, Ohio and New York are not unique. As states announce the prices that carriers will be charging in the online marketplaces (or “Exchanges”) where Americans who don’t have health benefits rate at work will be purchasing their own coverage, jaws are dropping. Rates are coming down, not only for those individuals, but for some small business owners who will be buying insurance for their employees in separate SHOP (Small Business Health Options Program) Exchanges.

What may be most surprising is that premiums will be lower, not only in liberal Blue states but in some Red states that are opposed to Obamacare.

What is making health insurance more affordable?

First, the majority of individuals shopping in the Exchanges will be eligible for government subsidies that will go a long way toward covering premiums. In the past I have written about how these tax credits will help young adults (18-34).  But older Americans also will benefit. Fully 30% of those who receive tax credits will be 35-54, and 12.5% will be 55 or older.  This is important because in the Exchanges, insurers  in every state except New York and Vermont will be allowed to charge a 60-year-old three times as much as they would charge a 20-year-old for exactly the same policy.  Without subsidies many would find insurance totally unaffordable.

The second reason premiums are significantly lower than expected is that as I have explained on healthinsurance.org  in the state marketplaces insurers are forced to compete on price. All policies sold in the Exchanges must cover the same essential benefits, and follow other rules that will make the plans look very much alike. The only way for a carrier to distinguish himself from the crowd will be to charge less—or have a better network of providers. But the younger customers that carriers covet care far more about price than about the network.

Third, in many cases, state regulators have been clamping down. In Portland Oregon, for example, regulators forced insurers to cut their proposed rates by an average of nearly 10%. Three of the 12 insurance companies in that market had to lower their rates by more than 20% f

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Is Obamacare “Medicaid for the Middle Class?” –A Muddled Argument

Yet another catchy phrase, “Medicaid for the middle class,” is popping up in conservative propaganda.  What are Obamacare’s opponents trying to say?

Those who have latched onto this catchphrase make two very different arguments. The arguments actually contradict each other, but they have one thing in common: Both are untrue.

#1 ) Obamacare isn’t good enough because the coverage families will receive in the exchanges will limit them to a tiny network of providers.

Originally, conservatives claimed that Obamacare would be too expensive. Americans who tried to buy insurance in the exchanges would experience “Sticker Shock!”  Now that states have begun to announce premiums, it’s becoming apparent that this isn’t true.

So conservatives have regrouped. In an about-face, they are acknowledging that some plans offered in the exchanges may be affordable, but this, they say, is because insurers are limiting their networks to providers who will accept lower fees.

Reform’s critics insinuate that “narrow networks” will exclude top-notch doctors and hospitals. The Citizens’ Council on Health Freedom (CCHF) calls exchange coverage “second-tier Medicaid for the middle class.”

Nevertheless, CHCF says, “Many people are expected to choose narrow-network plans that offer a limited choice of doctors, clinics and hospitals … because the cost will be less.”

Note that, while grousing about “limited choice,” CHCF predicts that patients will “choose” narrow networks.

When you’re fibbing, it’s easy to begin contradicting yourself. The truth is that people who have not been able to afford insurance in the past are far more interested in price than they are in the size of the network.

Moreover, many Baby Boomers already have embraced HMOs: they charge less when a patient stays “in network,” and the best focus on keeping patients healthy. I

In fact, when Consumer Reports published NCQA ratings of quality and customer satisfaction HMOs out-ranked other insurers.

“Narrow” Doesn’t Necessarily Mean “Not As Good”

Everything turns on who is included, who is left out – and why.

In the exchanges, insurers will be competing on price. As a result, carriers are pushing back against providers that over-charge – including brand-name hospitals that demand far more for very simple procedures.

The push-back could help rein in health care inflation: “As narrow networks continue to exclude high-priced, academic hospitals … we expect they will consider re-pricing,” says Jenny Kerr, Market Analyst at HealthLeaders-InterStudy.

Both insurers and “employers are sending a message that they are no longer willing to pay for hospitals that charge higher rates for routine services to cover costs of their teaching and research missions,” Kerr adds.

 For example, employers (in this case the city of Los Angeles)   as well as exchange insurers are rejecting LA’s pricey Cedars-Sinai Medical Center. Cedars-Sinai boasts a reputation as “hospital to the stars.”

Among the nation’s 50 top-grossing non-profit hospitals, it ranks third.  But this does not necessarily mean that it provides superior care. In 2012 when the Joint Commission released its list of the Top Performers on Key Quality Measures, Cedars-Sinai did not make the cut.
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