Most individuals will pay less, not more, in Obamacare exchanges

July 22, 2013
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Note: This post has been changed to correct errors that stemmed from a misinterpretation of data provided by the Indiana Department of Insurance.

The Indiana Department of Insurance last week announced that premiums for individual health insurance will be 124 percent higher next year, on average, than they were in 2012.

And the insurance department attributed 72 percent of that increase solely to the Jan. 1 implementation of Obamacare.

Ouch, right?

Well, not so fast.

At least for the average consumer buying in the Obamacare exchanges next year, these rate hikes will be more than offset by the subsidies that Obamacare will also make available to individual health insurance consumers.

Obamacare, aka the 2010 Patient Protection & Affordable Care Act, will create a new marketplace for Hoosiers buying health insurance on their own, called an exchange. The exchange will be a web site where consumers can compare plans from various health insurers.

In Indiana, only four health insurers will offer health plans on the exchange. Anthem Blue Cross and Blue Shield will offer a plan statewide. Also, MDWise Inc. will offer a plan in 16 of 17 regions around the state.

Fort Wayne-based Physicians Health Plan will offer a plan in roughly half the state. And Coordinated Care-Celtic will offer a health plan in just three out of 17 regions of the state.

Hoosiers that buy coverage via the exchange will be eligible for federal subsidies, if their household incomes fall between 100 percent and 400 percent of the federal poverty limit.

For a single adult, that means between $11,490 and $45,960. For a family of four, that means between $23,500 and $94,200.

The Indiana insurance department said the average plan offered in the exchange will cost $570 per member per month. Now as Sarah Kliff of the Washington Post noted, the actual rates for some of the cheaper plans offered in the exchanges will be much lower than this average figure the insurance department announced.

A 47-year-old male who does not smoke would be charged, on average, $307 per month, Kliff noted, citing a sample plan filing by Indianapolis-based Anthem. A sample plan filing from Indianapolis-based MDWise predicts a 47-year-old man will be charged $294 for a bronze plan or $391 for a somewhat better silver plan.

What those rates still leave out, however, is the impact of the subsidies. Obamacare promises that customers with incomes at the federal poverty limit will pay no more than 2 percent of their income for health insurance premiums. The subsidies will cover the rest.

That exposure slides up to 9.5 percent for Hoosiers making 300 percent to 400 percent of the federal poverty limit.

So let’s take an average case, right in the middle of that income range. Let’s say a 47-year-old adult non-smoker, making 250 percent of the federal poverty limit—or $28,725 per year—buys a silver plan on the exchange. He or she will be required to pay no more than 8.05 percent of his or her income for that coverage That means he or she will pay no more than $2,312 per year, or about $193 per month. You can do the calculation for yourself here.

The average individual premium for similar coverage last year was about $210 per member per month, according my analysis of Anthem's filing with the department of insurance. So my average 47-year-old would save $17 per month, or about $204 per year.

If we used a family of four with two adults and two kids, this time making 300 percent of the federal poverty limit ($70,650 per year), they would pay no more than 9.5 percent of their income, or $6,712, on insurance premiums.

That punches out to be $140 per member per month—much lower than the $210 average from last year. See the calculation here.

Now perhaps my average cases weren't so average. That may mean my estimates of savings are too high.

The point is, however, that the Obamacare subsidies will negate most of the premium increases for most Hoosiers that qualify for a subsidy to buy individual coverage next year.

Now, is that good public policy? Maybe, maybe not.

Will it overwhelm the new streams of tax revenue created by Obamacare--not to mention the taxpayers themselves--if repeated in 50 states and allowed to continue for many years? Maybe.

But it’s important to note both the benefits as well as the costs of Obamacare if we’re going to have sensible discussions about its merits as a public policy.

  • thank you
    thank you for this well written article. very informative.
  • Obamac***
    I'm confused....where does the $$ come from the subsidies? Oh yeah....the very people who support everyone else. Spread the wealth? Since I can afford to live on less, guess I'll defer huge amount of income and move it to Belize so that I am wihin the 400% of poverty level and get subsidized coverage. Brilliant planning and I mean me not the demos who are not even participating in the plan to begin with.
    • Subsidies
      We throw around "subsidies" like it is not real money. Obama or the Federal Government is not paying the people are paying. The small business owners who already have everything on the line will pay more. How discouaging for our small business that continues to pay for more and more every year.
    • incomplete info
      This article fails to mention that just because people MIGHT be able to get cheaper insurance, it may not be as good as what they've had before. The networks may be very limited and some doctors will decide they don't want to be providers (in-network) for the holders of this "insurance" because reimbursement will be at Medicaid levels(which is horrible). So if people are used to Cadillac-type of health insurance they had before through their employer or individually, this will be a tough change for them. Yes, it may end up being cheaper, but you may get less flexibility/versatility to go to what hospital/see what doctor you want to....
      • Subsidies come from taxpayers
        Good points from reddog and Scott Tant. The Obamacare subsidies are supposed to be covered by new taxes levied on health insurers, medical device makers and drug companies (and, by extension, their customers). That's vital for the public policy discussion. But I don't expect it be in the forefront of consumers' minds when they check out the exchanges in October.
      • Richer benefits, lower reimbursements
        Gojeepdog: You also raise important issues. Health insurers are constructing "narrow networks" with fewer hospitals and doctors as the backbone of many of their exchange health plans. And since there are fewer providers in the network, the insurers are asking those providers that do participate to accept lower reimbursements rates. I haven't heard that they'll be as low as Medicaid rates, but it's safe to say they'll be lower. The idea is that the providers will take lower rates in exchange for more patients/greater market share. We''l have to see if that plays out. On the health plan side, the benefits will in most cases be richer than before because Obamacare mandates "essential benefits." Not every consumer will find those benefits "essential," but it's generally the case that consumers will see more things covered, not less. Individuals probably won't feel the cost of those additional benefits, but taxpayers collectively, via the subsidies, will.
      • Subsidies for Obamacare
        The "subsidy" is not in the form of a reduced premium to the individual. It is a Tax Credit that you take as part of you tax filings. So the family of 4 still has to pony up $12,240 ($225 X 4 x 12)which is 17& of their income before getting their tax credit at the end of the year
        • hopeful it will work
          Thanks for your "average" models and useful thought about this policy. Dept. of Insurance statement seemed suspect in its claims. Not accounting for the subsidies seems a bit disingenuous, actually. It makes sense to me that savings from preventative care and having everyone insured will bring costs down and create the savings for the subsidies of those earning less than 400% poverty level. We pay for indigent healthcare already - at high emergency room rate - using tax dollars and through higher insurance premiums. As far as how ACA affects small business owners, they too can buy employee insurance through the health exchanges. At the end of the day, some will pay more but it looks like most people will pay less ... and by having everyone covered, it makes sense that per capita healthcare costs might come down.
          • anactuary
            If you know you are going to get a tax credit, why not increase your exemptions and have less withheld from your paycheck?
          • Details please
            Why is it that I am primarily only reading about premiums? Care to discuss deductibles and co-pays? Not a pretty story there people. Get your wallets out...
            • Details please
              Deductibles and co-pays will vary based upon level of coverage chosen. Article is about averages. Most people currently have deductibles and co-pays (many are high-deductible plans), so these are not new concepts. The state govmt has been critical of this from the beginning, so not surprised that they are painting a gloomy picture. Many other states are not so pessimistic.
            • Already paying for other people...
              People with insurance and people who pay out-of-pocket for care ALREADY pay for the care and treatment of individuals who cannot afford to pay. Between Medicaid and increased costs related to non-payment and underpayment, we already have "socialized medicine." The sooner we get out of denial about that simple fact, the sooner we can move forward with a sane conversation about distributing the cost of healthcare in a more fair and equitable fashion. Otherwise, let's continue to fill emergency rooms - the most expensive care possible - with people looking for antibiotics for an ear infection and pretend that isn't costing us all hundreds of millions of dollars.
            • Crazy
              Nice try but the facts are the only way to beat this is to pay the penalty and buy the insurance when you get sick. Not to mention those who have been irresponsible about health insurance all these years will not suddenly buy it due to law. Just like you must carry auto insurance The fact is this is just step one of National Health Insurance.
            • Health Insurance Cost
              JK Wall - thanks for that incite - and of course, there is no cost to anyone to have the government fund health care. Now those of us who have our own coverage and have worked hard to be successful can subsidize those who choose not to apply themselves. Therefore while the "average cost" according to your jaded analysis may be lower, the cost to those of us who actually apply our talents will be markedly higher than the estimate by the Insurance commission because we get to pay our own increase with no subsidy and contribute more in taxes so that Obama can subsidize those who will not work. Ain't America great?
            • Tangled Mess
              If Obama had any guts he would have pushed through government run health care, yes socialized medicine, when he had a chance. And yes, he did PUSH through the 2010 Affordable Care Act. We are headed for universal, government paid helath care just like Canada, and I am fine with that, even though I consider myself to be a republican. Let's stop fooling ourselves this is all about taking money from the haves and giving it to the have nots. Let's just call it what it is, socialized medicine. I will gladly pay more in taxes for everyone to have sufficient health care coverage. Let's forget all about health care exchanges, employer plans and subsidies and cover everyone. That is where we are headed anyway and perhaps we can save some time, money and effort by doing it now.
            • Middle Class will NOT pay less
              So a single person who makes $45,960 a year, will pay an average of $570 per month, acc to the article above. You can bet that is MUCH higher than they are currently having deducted from their paychecks for their portion of their healthcare plan monthly. In my case, $430 higher PER MONTH. Plus higher deductibles. I am not alone. The majority of my friends and professional colleagues are in the same boat. The propaganda machine is working overtime to make you believe something that is simply not true! The middle class continues to get squeezed. Let's get Congress on this same health care plan. See how fast they start backpedaling if that were to happen.
              • Health Care
                Take the politics out of it. Healthcare system in this country is/was broken. "Obamacare" probably won't make it a perfect system but it can't be any worse than it was. Increase transparency, why does a procedure cost $35,000 at this hospital and $6,000 down the street? Hold hospitals accountable for over billing the government.
              • You Wake Up
                @wakeupindy, You do know you can keep your currnet plan, right?
              • Really ???
                Really, come on now the cost of health care is going uo for most everyone. Your example or examples are not the real world. Really. The poor will continue to not participate , the middle will be squeezed and the wealthy again will get socked. That is the real truth.
              • Pete
                You cannot keep your current plan if your employer stops offering coverage! It's cheaper for many employers to pay the buy-out, fee, whatever you want to call it. It is not however going to be cheaper for their employees.
              • It's All About Me
                I'm amazed at how many people commenting here don't care about others. It's truly an "all about me" world.
                • I Care
                  I think most people DO care about others. The issue is that the "others" need to be doing their fair share and not milking the system. We all make our own choices in life. There are too many hangers on that want a free ride. Now, I understand that many people are struggling and that they work hard. I am all for helping people in this category. But you can't tell me there are not a lot of deadbeats out there that just want a free ride. Socialize medicine and be done with it.
                • Thank You LRM
                  I'm seriously disgusted by the comments about people being forced to take care of others. Aren't we one of the richest countries in the world? Do you people really care so little about the poor that you can't even pitch in a little bit of your paycheck to help prevent them from dying? Sad thing is that most of you that are complaining claim to be good Christian people. Well guess what, you are failing your God.
                  • Reply to Wesley
                    Be disgusted all you want! My current health care insurance premium is higher than my highest mortgage payment and my TWO highest car payments COMBINED (all three payments added together!) ever were!. Any subsidies paid out to help "poor" people are coming out of taxes which I pay with money I have left over AFTER I have paid for my health insurance. This insurance now has higher co-pays and deductibles than ever, and we have already been warned to expect major changes in 2014.
                    • Read the article
                      Steve, If you read the article, you would realize that the major changes you have been warned to expect are not accurate. They are misinformation designed to scare people. The discussion we are having would be much better informed if Governor Pence were not using hyperbole in his attempt to crush health care for millions of people who currently can't afford it.
                    • Tax credit info
                      Jahall - the health care tax credit does not work like the the typical tax credit, ie paid as a refund after you file your taxes. Since most lowincome people wont be able to afford the monthly health insurance up front, the tax credit will be paid periodically directly to the health insurance companies. Re the state insurance dept disclosure last week, how disingenuous and amatuerish. The clown who made that presentation should be fired for incompetence and stupidity. This is what happens when you get a bunch of amateur idealogues in the pence administration. I am just astonished at how bad this pence crew is.
                    • You Have No Clue
                      Steve, you have no clue what's going to happen in 2014. Everything you're typing on your computer has probably come out of Rush Limbaugh's mouth.
                      • Alan & Wesley
                        I know exactly what I am paying now, what I used to pay, what my coverages are (and what they USED to be!) We were told (warned, in fact) by Human Resources, to be prepared for 2014, to read ANY and ALL materials we receive in the next few months regarding coverage for next year as decisions we make will be very important. This is for a company that is a Fortune 500 company, and one of the largest employers in both the city and the state. Finally, YOU should probably spend a little more time listening to Rush... you will learn something eventually.
                        • Alan & Wesley
                          The last part of my previous comment was directed only at Wesley.
                        • subsidizing
                          As a single person in my mid 30s, I have been subsidizing all you middle-class family folks' lives for years. List of Government programs you are currently benefiting from: Mortgage Deduction Each Child Deduction Employer-Sponsored Health Insurance Net Pension Contributions Capital Gains and Assets transferred at Death Charitable Contributions (I'm subsidizing your church) You all need to stop sucking off the government teat before you go around attacking others for taking advantage of government programs!! You're just a bunch of hypocrites! Your entire life has been subsidized by people like me. I pay more taxes than you do! So go jump in a lake with your Fox News talking points.
                        • Opportunity cost?
                          JK - your "average scenarios" don't include a situation where the individuals / families in question simply don't sign up for any health insurance. What would the federal fines be for the "average" examples be? Since guaranteed issue will be the law of the land now, people can simply pay the fine and wait until they get sick to sign up for insurance - with no penalty, since the exchanges have to cover everyone and can't charge a higher rate for people with pre-existing conditions. This would be a much cheaper option for a lot of people, particularly healthy people who in the past could get a simple bare bones insurance catastropic coverage policy for $100 or less a month.
                          • Delay enrollment
                            DAC, I'm not positive, but I don't think you can delay enrolling without some kind of penalty. That just does not make sense. Why would anyone enroll in advance if there were no penalty for waiting? Maybe there is a limited time period when you can enroll? If you don't enroll during this time period, you have to wait until the next enrollment period and, in addition, pay a penalty. That would make sense to me. But I must emphasize that I'm speculating on this. Does anyone have authoritative information on this? I would be interested in an ACCURATE answer. (So, Steve, no need to apply.)
                            • Alan
                              Geez, Alan, you're a riot. Ironically enough, though, your question raises, in all seriousness, an interesting point. As Nancy Pelosi pointed out, to paraphrase her, the bill had to be passed in order to find out what was in it. Now, years later, many people, some fairly intelligent people, still have no idea how this whole thing is going to work, and still have many questions about how certain parts of it are going to be implemented. You brought up some excellent questions, which I'm guessing very few people, including those who voted to pass the bill, know the answers to. As to your snide comment directed to me, feel free to point out anything in my previous posts that wasn't accurate.
                              • Amazed at the ignorance
                                @ Single Person : Very well stated. I sincerely hope the extremely angry people who have posted here will look in the mirror and see themselves for who they truly are. We really are a country full of selfish people who want all they can get, yet don't hesitate at all to go ballistic if your subsidized benefits might be shared with those who have been paying higher tax rates to subsidize your tax breaks.
                              • Still A Gap for Low Income People
                                While off the topic of insurance premiums, I wanted to note that the crafters of the Affordable Care Act anticipated that low income people, those single people making less than the $12K level, were expected to be covered by the expanded Medicaid program. Since Indiana's governor has elected not to participate in the expanded Medicaid program, many Hoosiers will be left out in the cold because they do not make enough money to participate in the exchanges. This seems to be OK with both the Governor and both houses of the Republican dominated legislature. Too bad for those left out in the cold. No wonder Indiana ranks so poorly in health compared to other states.
                              • Wake up Indy & Steve
                                A couple of thoughts, kids - How about quit being a freeloader and pay income tax on that insurance benefit your company pays (this isn't WWII any more)? If your (Fortune 500) employers stops your coverage and pays the penalty, how great is that job, and do you get the balance? I was self-employed at a time when there was NO tax benefit for carrying your own water, and if you think we're in an era of extraordinary premium increases, use your interweb thingy and do some research. This was a very big deal during the '92 election, and the reason action was required 18 years later. BTW, projected real premiums WILL be lower, for you or your employer, with universal participation, just as the insurance companies harped about for 30 years.
                              • @Single person
                                Thanks for that brief interlude of sanity.
                              • Updated information
                                I did find some information on what happens to people eligible for health care under an Exchange but who choose against getting coverage. None of this information comes from an Indiana cite because Indiana seems to have no information. This reinforces what someone earlier said about neither Pence nor the Republican controlled General Assembly caring about how to expand health care coverage for the millions of Hoosiers who currently (and apparently, at least for the near future) won't have coverage. Some of my information comes from Wisconsin. Here is a quote: "Will individuals be able to purchase coverage in the individual market at any time?" Answer: "No. Insurers are only required to offer coverage during specified open-enrollment time frames. There are certain 'special enrollment' time frames depending on specific circumstances." Me: I don't know the special circumstances for enrollment outside the specified open enrollment time frames. Here are the open-enrollment periods: October 1 2013 through March 31 2014. After that, the annual enrollment period starting on or after January 1 2015 will be October 15 through December 7 of the preceding year. Me: I think this means that if you don't enroll during the enrollment period, you don't have coverage under the exchange. You can still get coverage, but it would be through the current insurance sector for individuals...which is a lot more expensive and, often, for a lot less coverage. "What happens if I don't sign up for health insurance, decide to just pay the penalty and then sometime during the year I get sick?" Answer: "There are several qualifying events that make it possible for people to enroll in a ACA qualified health plan outside of the open enrollment period. Accidents and illness ARE NOT QUALIFYING EVENTS." Me: I don't know what would count as a qualifying event but clearly being in an accident or contracting an illness won't count. So people who think they can wait to apply until after they are sick will be seriously disappointed. One option suggested by an insurance company web cite is: "An alternative for those who want to keep insurance costs low and still maintain coverage is short term major medical coverage. It is typically 40% to 60% cheaper than exchange plans, provides $2,000,000 worth of coverage and renews every year. It is the ideal choice for those who are reasonably healthy and want to provide basic coverage for themselves and their families." Me: This is pure conjecture on my part but I suspect the reason this policy costs so much less is because its coverage is so much less.
                                • Update Alan
                                  My experience with "qualifying events" out of the enrollment period are marriage or divorce,birth of a child, or death of a spouse or child, which allow you to adjust your coverage during the year. Also,my employer changed our options a couple years ago.The cheapest option was high deductible, high copay plan like the major medical plan you described. My premiums were higher than the PPO plan I had the year before, and required several thousand dollars to be paid out before any significant benefits were realized.
                                • Single Person
                                  Don't forget property taxes--those without children pay the same as the neighbor with 4 kids in public school. Who is getting a 'free' ride here? Sounds like we have had 'socialized' education all of our lives, but that is ok.
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