Is Obamacare providing competitive choices at prices people can afford?
Yes it is, according to an analysis carried out by Innovative Solutions that gathered and examined country-level health care data at HealthCare.gov and demographic data at Synergos Technologies.
Study author, Abhay Padgaonkar, President of Innovative Solutions Consulting, found that Obamacare is providing affordable and competitive choices of health plans that do meet people’s minimum requirements.
The health exchange, which is federally run, offers plans in 34 states in a total of 2,512 counties which make up 200 million of the United States’ population.
According to the study, an average adult aged at least 50 years who opted for the Silver premium is able to get coverage for $386. The Bronze plan, the country’s cheapest premium costs (on average) $174 for people under 50 years of age.
Is Obamacare providing competitive choices everywhere?
Per county there are on average:
- Bronze plans – 2.5 insurers and 9 Bronze plans covering 60% of care costs.
- Silver plans – 2.6 insurers and 10 Silver plans covering 70% of care costs.
The availability of plans and insurers is unevenly distributed, with a wider choice available in areas with higher populations.
Counties with over 500,000 people have an average of more than 4 insurers to choose from, compared to an average of just over 2 insurers in areas with a population below 50,000.
Is Obamacare providing competitive choices in low population counties?
In 454 low-population counties there is just one insurer offering a Silver plan, while in 517 counties there is only one insurer offering a Bronze plan.
The majority of these low-choice counties are located in Mississippi, Alabama, Texas and some other southern states.
Only 10% of the population across the 34 states are facing a single insurer choice. In other words, at least two insurers and 10 Bronze or 10 Silver plans are being offered to over 90% of the population.
What effect does limited competition have on premiums?
Padgaonkar writes that even though competition among insurers tends to bring premium prices down, it is not the only contributory factor.
Lack of competition does not necessarily drive up premium prices. The study found that in Texas, the average price for a 50+ year old on the second-lowest premium Silver plan was $335 in 74 counties, compared to $585 in 54 counties in Georgia, $502 in 77 counties in Mississippi and $353 in 64 counties in Alabama – in all these cases, just a single insurer was on offer.
In Texas, regardless of how many insurers were on offer, Padgaonkar found that the least-expensive Bronze premium did not veer much from $135 throughout the state for adults under 50 years of age.
Padgaonkar said “This disparity in premiums among different states indicates that some states may have been more diligent than others in challenging higher premiums through rate reviews.”
In states with lower median incomes, lower populations and fewer insurers, premiums tend to be higher.
Padgaonkar writes “It is arguable that lower median income—and therefore higher likelihood of federal subsidies – may be one of the motivating factors for insurers to charge higher premiums.”
Are plans more affordable because of subsidies?
Federal subsidies may reduce monthly premiums for low income households considerably, this is an important aspect of affordability, the author writes.
In some cases low income consumers who qualify for subsidies may not even have to pay monthly premiums, because the Affordable Care Act limits the amount people pay as a proportion of their annual income.
An adult on a Silver plan who earns $25,000 per year would have his premium capped at $144 per month (6.92% of income), according to the Kaiser Family Foundation’s subsidy calculator. For those on the same income on a Bronze plan, their premiums would be reduced to $82 per month.
Comparing current premiums to health exchange premiums
Padgaonkar says it is not possible to compare health exchange premiums to current ones. Plans offered through the exchange have to offer the same essential health benefits related to maternity and newborn care, preventive care, hospitalization, prescription medications and doctor visits. Many people on current plans may be “grossly underinsured” and do not have similar coverage.
Padgaonkar wrote “While canceled polices will provide fodder for political theater, it is an inevitable outcome of a major policy change of this scope and complexity. The government routinely fails vehicles that do not meet emission testing standards. Why shouldn’t the same hold true for substandard healthcare plans that underinsure people?”
The study’s conclusion
According to Padgaonkar’s analysis “Obamacare’s federal exchange offers competitive and affordable choices while providing essential health benefits and meeting minimum actuarial value thresholds.”
In order to bring down overall healthcare costs, widening access to health care for millions of people in the United States in the individual market is “an excellent first step.”
”On average, however, hospitals charge 370% of Medicare payments nationally. It is not uncommon for hospitals to report a charge-to-cost ratio of 700-800%. The high cost of the healthcare system as a whole is driven primarily by opaque and exorbitant provider prices – tempered only by illusory discounts hidden inside insurance products. To truly bend the healthcare cost curve down, these excessive cost markups will need to be challenged.”
“Employers of all sizes, as fiduciaries of self-funded plans, will need to implement a Cost Plus Model to procure healthcare services in a transparent manner,” said Abhay Padgaonkar. “The focus should be on reducing the actual healthcare spend without reducing health benefits or increasing employees’ premiums.”