Listen to projections about premium rate increases under the Affordable Care Act, and you might not want to buy coverage on the health exchange when open enrollment begins Oct. 1. That would suit critics of the law just fine as they campaign to discourage participation and to derail full implementation of the law. But analysts assessing health plans that will be offered on the Ohio exchange are finding little indication that premium costs will climb through the roof.
Coverage under the law starts Jan. 1. As the enrollment period approaches, opponents are hyping an anticipated “rate shock.” They note that various mandates on insurers are certain to cause hikes in premium rates so steep that coverage would be unaffordable, especially for young adults.
The law does impose new requirements to increase both the rates and quality of coverage. Among the new requirements, plans must cover an essential benefits package. Insurers must issue and renew policies to all comers without regard to health status. They cannot use previous claims experience as a basis for premium charges. Limits will be imposed on how much they can charge older adults and smokers. Insurers also are required to spend at least 80 percent of premium revenues on health care or return a portion of the premium payments to buyers.
In June, the state director of insurance warned that consumers and insurers could see average premium costs rise as much as 88 percent. Last month, the department projected an average premium rate increase of 41 percent. In recent weeks, separate analyses by credible research organizations such as the Kaiser Family Foundation and the Rand Corp. have indicated otherwise.
The high projections, as these studies show, did not take into account two crucial factors that can significantly lower a buyer’s premium rate. One is that buyers can choose a tier of coverage plans compatible with their income level, ranging from low-cost “bronze” to high-cost “platinum” plans. The other is that buyers with incomes from 100 percent to 400 percent of the federal poverty level (from $23,550 to $94,200 for a family of four) may be eligible for a federal tax credit.
Estimates are that more than 60 percent of Ohioans enrolling in the exchange will qualify for the tax credit, which will be calculated based on the “silver” plan that has the second lowest cost. Apply the subsidy, and premium costs fall, a scenario illustrated in the Kaiser study. The middle-tier plan would cost a family of four in the Cleveland market earning $60,000 $745 a month, but with the tax credit, the premium drops to a reasonable $409. Individuals tuning in now to the changes ahead can be assured they won’t end up in the poorhouse as a result of buying health coverage.