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Surveys Show Variation in Marketplace Premiums

By Rebecca Adams, CQ HealthBeat Associate Editor

September 5, 2013 -- Health care premiums in the new marketplaces will be lower than expected in many cases, according to two surveys released last week. But the costs will vary significantly for people who are getting the same kind of coverage, which could create more political problems for supporters of the law.

Younger people in many places will end up paying higher costs for some plans than people in their 60s for a similar type of coverage. In Los Angeles, for instance, healthy 25-year-olds will pay about $90 more every month for their plans than a 60-year-old for the same type of basic health plan, even when both make the same income.

In Washington, D.C., 25-year-olds will pay $95 more than 60-year-olds who earn the same. The data come from the nonpartisan Kaiser Family Foundation, which analyzed costs in 17 states and the District of Columbia in the most comprehensive look at premiums to date.
Consumers also will see differences in their costs when compared to people in other states. And people who live in one region in a state will face different costs than people in other regions.

That variability could lead to confusion or hard feelings among consumers that other people are getting a better deal, and create another political problem for supporters of the law.

"I do think you'll see a great deal of regional variability in pricing, not only between states but also within states between metro and rural areas," said Joel Ario, who previously oversaw the exchanges and is a supporter of the health care law (PL 111-148, PL 111-152). "That is going to be an issue around the country."

A separate analysis by the consulting firm Avalere Health showed big differences in the costs within a state for the same person. In New York, for instance, the cheapest silver level plan (in which insurers pick up 70 percent of the costs) for a 40-year-old nonsmoker was $276 per month and the priciest was $694 per month. That's a difference of $418 per month.

"This may be one more step in calling attention to variations in prices that may lead to further steps to addressing it" in the long term, said Mark McClellan, who ran the Centers for Medicare and Medicaid Services (CMS) during the Bush administration.

More Subsidy Dollars for Near-Seniors

The surveys show that in the places where rates are already known, the costs are lower than first projected by the Congressional Budget Office and others. More information will be revealed later this month when federal and state officials release data on rates in additional states.

One quirk about the law that the Kaiser Family Foundation data put into greater relief is that there are some cases in which young people will pay more for the same type of plan than older people who earn the same.

Although people in their 20s who do not get subsidies face lower premiums than unsubsidized 60-year-olds for the same coverage, the young adults can pay relatively more for some plans than near-seniors if they are subsidized.

Federal subsidies are available for individuals with income between about $11,490 per year and $45,960 per year in 2013.

That is because of the way the federal subsidies work.

The subsidies set a limit on the percent of a person's income that he or she would have to spend on the second-cheapest silver plan in an area, which cover 70 percent of the costs. Younger people have lower medical costs and face lower premiums for silver plans than older people. So their subsidies are a lower amount in terms of dollars than older people's subsidies.

When a younger person applies the amount of dollars that they get in subsidies to a different plan, the result is that the young person's final costs are higher.

Take the example of a 25-year-old in Washington, D.C., who earns $28,725 per year. Let's say that person wants to buy a bronze plan (which covers 60 percent of costs and has a lower monthly premium than the silver plan). The unsubsidized costs for that person are $147 per month. The subsidies don't change that very much, bringing it down to $140 per month, according to the Kaiser calculations.

For an older person, the federal subsidies are much higher. A 60-year-old in Washington earning the same income would pay $357 per month for a bronze plan, the Kaiser data show. After subsidies, the monthly cost is $29.

"That's a serious problem," said Doug Holtz-Eakin, a former Congressional Budget Office director and president of the right-leaning American Action Forum. "They're throwing more subsidies at the older people. That's going to strike some people as unfair, and the insurance markets don't work without the young people."

CMS officials have tried hard to recruit younger, healthy people to enroll in the marketplaces because their lower costs will make up for the higher costs of older people. CMS officials did not respond to a request for comment.

Location, Location, Location

As in the current markets for individuals and small companies, consumers will continue to see variations in prices depending on where they live.

A 40-year-old person earning the national median income of about $52,000 would pay $336 per month in Burlington, Vt., $308 per month in New York City, and $250 per month for the cheapest bronze plan that would cover 60 percent of the person's medical costs, according to the Kaiser survey. A person earning that amount would not get a federal subsidy.

But in places like Baltimore, Albuquerque, and Portland, the prices are lower. The cheapest bronze level plan for the same person would be $146 in Baltimore, $155 in Albuquerque and $165 in Portland.

That jibes with what other analysts are finding. Austin Bordelon, an analyst at Leavitt Partners, said in an interview that he had noticed that a Blue Shield PPO Silver plan that costs $255 for a single 40-year-old in north Los Angeles County will cost $375 in San Francisco for the same policy.

For people buying the level of plans that the subsidies are based on, the subsidized rates are much more uniform, the Kaiser report shows. For a family of four with an income of $60,000, the subsidized rate is $409 per month in all the cities that Kaiser surveyed.

The states analyzed by Avalere were California, Connecticut, Indiana, Maryland, New York, Ohio, Rhode Island, South Dakota, Vermont, Virginia, and Washington.

Kaiser also examined rates in Colorado, Maine, Montana, Nebraska, New Mexico, and Oregon.

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