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Health Law Subsidies Deliver 76 Percent Average Savings, Report Finds

By Melissa Attias, CQ Roll Call

June 19, 2014 -- People who signed up for subsidized coverage on the health care law's federal insurance marketplace are paying on average 76 percent less in premiums than they would have paid without the financial assistance, the Department of Health and Human Services (HHS) reported last week.

Senior HHS officials touted the report as evidence that the subsidies provided under the law (PL 111-148, PL 111-152) are working as intended to make premiums affordable and that the marketplace is boosting competition in the insurance market. Speaking to reporters on a conference call, they said they expect similar insurer and plan participation next year, which they said will help keep premiums down.

But some of the figures in the report are limited to the insurance marketplace run by the federal government in 36 states and exclude large states such as New York and California that operate their own marketplaces. The report also did not distinguish which individuals had paid their premiums, though the officials said they hope to have that information later this year.

"The findings in this brief represent early analyses for the first year of the marketplace, and we expect this new, competitive health insurance market will continue to evolve," the report stated.

Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former Congressional Budget Office director, said the report only tells part of the story by focusing on averages. He also said it fails to note that consumers could wind up repaying a portion of their subsidies if they provide incorrect information about their incomes.

According to HHS, about 87 percent of individuals who signed up for coverage through the federal marketplace chose plans with subsidies. For those enrollees, the report said the amount of the average subsidy was $264, bringing the average monthly premium from $346 to $82.

The report also found that 69 percent of the people who chose plans with subsidies had premiums of $100 per month or less after the subsidies kicked in and that almost half have premiums of $50 or less after the financial assistance. Sixty-five percent of the individuals who picked so-called silver plans—one of the metal tiers of plans sold in the new marketplace—chose the lowest- or second-lowest-cost option, the report noted.

In addition, HHS released figures on the number of options consumers had to choose from when they selected plans in the federal and state marketplaces. The report found that 82 percent of those who are eligible to buy marketplace coverage live in rating areas with three to 11 insurers, with that figure rising to 96 percent when areas with two or more insurers are included. Individuals eligible to purchase marketplace coverage can select from five insurers and 47 plans across all metal levels on average, the report adds.

The department also found that having an additional insurer in a rating area is linked to a 4 percent drop on average in premiums for the second-lowest-cost silver plan.

"Areas with a greater number of issuers also tend to offer a wider range of choices for consumers among plan types (e.g. PPOs, HMOs, CO-OPs) that appear to result in greater variation in premiums across the rating areas, suggesting complex competitive interactions," the report concluded. "If more issuers come into the marketplace in future years, it seems likely not only that consumers will have a greater choice of plans, but also that the benchmark plan (second-lowest-cost silver plan) will become even more affordable."

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