Maryland regulators have released the details of the rates they have approved for the nine companies that want to sell policies on the state's new health insurance exchange as part of the Affordable Care Act, and the average rates for individuals buying coverage are expected to jump by as much as 25 percent. Another horror story about the train wreck of Obamacare? Hardly. That figure represents an apples-to-oranges comparison that says little about what health care will cost for any particular individual or family once the exchange starts selling policies this fall. The truth is that Maryland appears to have some of the lowest projected rates in the nation — a tribute to a well-regulated state health care system and officials who are determined to see the Affordable Care Act succeed, not fail.
There are several reasons why the 25 percent increase figure is misleading. The first is a bit technical but important. That average refers not to the average increase for any individual who buys a policy now versus post-Obamacare. It refers to the average cost of all the policies sold by a particular carrier. Because the Affordable Care Act eliminates exclusions for pre-existing conditions and lifetime caps on benefits, it is expected, at least in the early stages, to attract a disproportionate share of older and sicker patients into the insurance exchange. Thus, at least in the short term, a larger share of the policies purchased on the exchange may be more costly than is now the case. The better a state does at encouraging younger, healthier people to buy into the insurance pool — as required by law — the more those figures will eventually even out. But in the meantime, it's important to understand that if you buy a policy from Aetna now, it won't necessarily be 25 percent more expensive in the fall.
In fact, the amount you pay out of pocket for your health care costs may well be lower under Obamacare, even if your premiums go up. That's because the insurance policies allowed in the health care exchange all must meet certain minimum qualifications in terms of their benefits and covered services. Most preventive care under the Affordable Care Act will be included in the price of insurance premiums, without deductibles or co-pays. People who previously bought low-rate, high deductible, low-benefit plans may find that they will now not only get a more comprehensive set of services but also pay less in the end, even if their premiums go up.
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And that's not counting the fact that most — state officials estimate three-fourths — of the people buying coverage on the exchange will be eligible for federal subsidies. Those credits are available on a sliding scale for people earning up to four times the federal poverty level, or about $94,000 for a family of four.
Finally, it's important to consider that if a consumer thinks the rate he or she is paying is too high, the exchange makes it easy to shop around. Maryland and other states are busy creating web portals that allow consumers to compare prices and services for health insurance the way they now shop for airline tickets on sites like Expedia. And there is a significant variation in the projected costs from one company to another. According to the Maryland Insurance Administration rates for a basic, "bronze" level plan for a 25-year-old non-smoker range from $124 a month (BlueChoice) to $237 (All Savers). The premium for a higher-quality "silver" plan for a 50-year-old non-smoker would range from $267 a month (Coventry) to $470 (All Savers).
The rates announced on Friday represent significant reductions from the initial proposals made by the nine companies seeking to do business on the exchange. Regulators found fault with a number of assumptions the insurers made with regard to the workings of Obamacare, with projected administrative expenses and with the expected customer population for the exchange. They reduced the proposed rates by at least 20 percent for four of the nine insurers. One analyst for the conservative-leaning Heritage Foundation fretted that Maryland's approved rates may actually be too low to foster a healthy competition among insurers. Maryland's rates are either the lowest or close to it among the states that have published their projected premiums so far.
As tempting as it is to look for a single, bottom-line number to say whether health insurance will be more or less expensive under Obamacare, the truth is that such a comparison is ultimately imperfect, if not meaningless, because of the changes in the way the health insurance marketplace will be structured. Some people will doubtless wind up paying more and others less, but for a different set of services than before. The real questions about Obamacare are whether more people will have coverage, whether people will be healthier, and whether the nation's out-of-control rise in health care costs can be checked. It will take years to get definitive answers, but the signs from Maryland and other states that have embraced the reforms are encouraging.