The Truth Behind The Obamacare Headlines
In anticipation of the release of Connecticut’s health insurance rates offered through Obamacare next week, the head of Connecticut’s Insurance Exchange called for a little more truth in reporting about the Affordable Care Act.
Last week, a front page story in the New York Times declared rates for individuals in New York state would decrease 50 percent under Obamacare.
But that’s not the full story.
Access Health CT CEO Kevin Counihan said New York has no pre-existing condition restrictions and doesn’t set rates based on demographic data, such as age or gender. As a result, sicker individuals tend to purchase it. Counihan said those “higher utilizers” increase premiums. This leads healthier individuals to opt out of the individual marketplace, forgoing health insurance, and sending the plan into an actuarial “death spiral” of high rates.
As a result, New York’s population of nearly 20 million includes only about 17,000 in the individual market where average premiums were about $1,000 per month. In Connecticut, with its population of 3.5 million, there are about 175,000 who currently buy their insurance in the individual market. The average monthly premium is roughly $540 for an individual.
Karen Pollitz, a senior fellow at the Kaiser Family Foundation, said Monday that rates offered in the exchange will continue to vary on a state-by-state basis depending upon which health insurance companies agree to participate and just how much competition there will be in the marketplace.
She said at the moment New York is a voluntary market so people can wait until they’re sick to purchase insurance, which keeps rates high in that state. Under Obamacare, all individuals not covered by their employers will be mandated to purchase coverage or pay a penalty equal to 1 percent of their annual income and not less than $95.
“The thing to remember is hardly anybody buying through the exchanges will pay the sticker price,” Pollitz said.
Anyone who makes under 400 percent of the federal poverty level — which is $94,200 for a family of four — will receive a subsidy from the federal government for purchasing insurance on the exchange.
In his presentation to insurance executives Tuesday, Counihan didn’t only single out New York for telling half-truths about what will happen to rates under Obamacare. He also pointed to California, where he worked briefly before coming to Connecticut.
California announced in May that their rates were going down 28 percent under Obamacare, but they were comparing the individual market to the existing small group market.
“If you know anything about underwriting you know that in that state they’re underwritten very differently,” Counihan said. “To me it’s a little bit of apples and oranges.”
In this Forbes article, Forbes’ Avik Roy explains that in California a non-smoking, 25-year-old male will pay 100 to 123 percent more on monthly premiums in the exchange than he currently pays in the individual market. That number increases as the age of the individual increases and only those under the age of 30 can buy catastrophic plans in the exchange.
“This is the world we’re living in,” Counihan said. “We’re living in soundbytes. We’re living in snapshots, and dealing with people who don’t want to do hard analysis.”
He said it’s “tempting” to operate that way, but “that’s not the approach we’re going to take as a state.”
Having recently returned from a meeting with White House staff, Counihan said he understands the pressure of elections and the desire to show that there was a decrease in rates, but “at the same time the risk of that has the potential for undercutting other things.”
“I’m not sure if it’s right or wrong, that’s just what we’ve decided to do,” Counihan said Tuesday.
The Access Health CT Board of Directors is expected to learn from actuaries what the cost of the plans participating in Connecticut’s exchange may be at its special meeting on Tuesday, July 30.
Five companies have submitted plans to the state Insurance Department for review:
—Anthem (small group)
—ConnectiCare Benefits Inc. (individual)
—ConnectiCare Benefits Inc. (small group)
—HealthyCT (small group)
—United Healthcare (small group)