Short Takes On News & Events

GAO: Current Insurance Costs For Individual Policies Vary Widely

By Julie Appleby

July 24th, 2013, 1:40 PM

Will premiums go up or down under the health law?

It’s been one of the most contentious questions in recent weeks, as states examine the rates submitted by insurers applying to sell coverage through new online marketplaces that open for enrollment Oct. 1.  Critics of the law have argued that new rules, benefit requirements and taxes will drive up costs for many, while supporters say increased competition and transparency, enrollment of more healthy young people and subsidies will moderate premiums.

Now, the Government Accountability Office is weighing in with its own analysis of how much it costs now for policies offered in each of the 50 states.

The report released Wednesday is based on prices reported by insurers to a government database and shows that consumers face a wide range of premium prices, deductibles and annual exposure to out-of-pocket costs, often depending on their age, health history, family size and where they live.  It was requested by Sen. Orrin Hatch, R-Utah, the ranking member of the Finance Committee. Congressional Republicans say the law will increase coverage costs for many people.

With some caveats — the data used by the GAO capture only 80 percent of insurers and reflect premiums before insurers add extra charges for such things as poor health — the report is one of the broadest looks at what the estimated 14 million Americans who currently buy their own insurance face on the market today. It also doesn’t figure in the tens of thousands of people with chronic diseases who are unable to buy  insurance at any price in most states.

Some of the numbers are eye-popping. In many states, coverage offered to families often does not even kick in until medical costs of $20,000 or more are incurred by the policyholder.

Premiums range widely and the report separates them into lowest, median and highest for each state across six categories based on age and gender and family size. For example, the least expensive plan offered to a family of four in California is $2,832 a year. The median-priced plan for that family is $8,841 and the most expensive is $43,632.  Because the data did not include enrollment figures, no one knows how many people buy each of the policies.

Some premiums are quite low: $673 a year for the lowest cost plan available to a 30-year-old nonsmoking man in Colorado, for example. That policy doesn’t kick in, however, until the consumer incurs $10,000 in medical costs, and requires him to pay 50 percent of the costs after meeting that deductible, up to a maximum of $17,500. The median priced plan for that same aged man would cost $2,424 a year, while the most expensive clocks in at $11,439, according to the report.

America’s Health Insurance Plans spokesman Robert Zirkelbach said the report shows “the wide variety of choices people have on the amount of coverage they want to buy.”

Starting in January, new rules take effect that will change some of those choices, both for consumers and insurers. Insurers will be barred from rejecting applicants with health problems — or charging them more than the healthy, which they can currently do in most states.  Insurers must also include a range of “essential health benefits,” including prescription drug coverage and maternity care, which many policies currently do not offer.  The law also limits out of pocket maximums — the amounts consumers must pay in deductibles and copayments for medical care — to about $6,350 for individuals or $12,700 for family coverage.

Almost a third of plans currently offered to consumers exceed those caps, according to an earlier analysis of the government data by U.S. News & World Report and Kaiser Health News.

Some of those new rules could drive up premiums from current levels, especially for people “who purchase a low premium, high deductible” policy, said Zirkelbach. Other provisions in the law could encourage competition among insurers and more enrollment by younger, healthier people, which supporters say would help moderate premiums.

Last week, premium prices hit the news when New York State said costs for people who purchase their own coverage could fall by an average of 50 percent. Experts said that was mainly because costs in New York are currently among the highest in the country, fueled by longstanding state rules requiring insurers to take applicants regardless of their health status, without requiring everyone to buy insurance.  The Obama administration also issued a report that said average premiums in some states next year could be lower-than-expected, based on a comparison with rates projected by the Congressional Budget Office.

9 Responses to “GAO: Current Insurance Costs For Individual Policies Vary Widely”

  1. LindaBee says:

    I have a question about labor bargaining and the ACA “Cadillac” provision. I took an online class about the ACA, and thought I remembered hearing that employers aren’t allowed to offer a better salary to help pay for higher employee health care payments because that would, in essence, still be considered medical compensation. I haven’t seen news of that anywhere else, though.

    I know you are one of the experts about this law. What do you know? I work for a major university where such negotiations are underway. Would the union be blowing it if they tried to make a direct bargain between health insurance cost and wages?

  2. wilson says:

    Beginning in 2014, private health insurers will need to meet new requirements for “standardizing” health insurance plans. This is great news for consumers because when people have too many health plans to choose from, it can be confusing. Private health insurers will be required to offer plans that fit within four levels of coverage: bronze, silver, gold and platinum. Again, great news for consumers! Private insurers can no longer bombard you with thousands of different plans that contain thousands of different variations of benefits that ultimately confuse you to death and ultimately cause you to make the exact wrong choice while paying way too much for virtually no coverage whatsoever. If you are smart and if you shop for health insurance within the exchanges, you will get to choose from only four plans. No private insurer in the exchange can vary their product when compared to other private insurers in the exchange. They must all agree to the exact same rules. Believe me, they really hate that because they can’t scam the consumer any longer. To repeat, all private insurers in the exchange must offer the exact same bronze plan, the exact same silver plan, the exact same gold plan and the exact same platinum plan. Once the consumer learns what each plan offers and then decides which plan works best for them, the only thing left to do is find the cheapest price. I can’t imagine why Republicans don’t like this concept. It’s good old fashion competition in its perfect form! I guess the reason Republicans hate the idea of health exchanges so much is because they didn’t get the credit for it. President Obama did!

  3. Once insured, premiums should not change based on illness. But, I am troubled by barring insurers from charging sick people more than the healthy when signing up. I am troubled by mandated coverage (v. elective coverage) for pregnancy because it is not an illness. Coverage should be mandated only for complications of a pregnancy. But perhaps universal coverage for pregnancy is good social policy because everyone benefits from a population of healthy children?

    By limiting out of pocket maximums others must accept the liability to pay for the health consequences of self-destructive behavior of others such as obesity, smoking, alcoholism, and drug abuse. The ACA tells me we have accepted universal liability to pay for these self-imposed diseases. On the other hand, an individual with one of them will die younger, have a lower quality of life, and not benefit as much from social security. Perhaps this is a sufficient deterrent to avoid the “moral hazard” of underwriting the consequences of self-destructive behavior?

    The ACA is a covenant between all of us and an individual. What is the individual’s responsibility?

  4. Sarah says:

    You speak as if the vast majority of Americans practice self-destructive behavior when the evidence shows the opposite. Less Americans smoke today than ever before. Less Americans abuse drugs and alcohol than ever before. Membership in fitness centers is at record levels. Americans are more aware than ever before in the topic of health and wellness. The fact of the matter is, if the anticipated level of participation in the Affordable Care Act (ACA) turns out to be accurate and we see and estimated 29 million more Americans begin to attain health insurance coverage beginning in 2014, the program will be a resounding success. Republicans are in a panic. They are doing everything they can to discourage Americans from participating in the ACA. If 29 million more Americans get health insurance in 2014 with the help of the ACA, Republicans will be in deep trouble politically and they know it. That is why they have one single-minded mission. to repeal and replace the ACA. Sadly, when you ask them to produce their own version of healthcare reform, they have nothing to show. Republicans have no healthcare reform plan, otherwise they would post it on their party website.

  5. Gerald,

    To answer your question, you have to return to public health policy. The cheapest care over time is what raises overall public health. This explains the new support for preventative care. This is also why it doesn’t work (and why the CMS pushes back) to separate out health issues like pregnancy.

    The foundations of insurance were to protect the larger society from the bad luck or bad actions of the few. The ACA does that. Anything else is not really insurance.

    The immediate problem we have to address is the most expensive 10%….you know…the ones that spend 80% of every health care dollar. It appears that you have some judgement around “self-destructive behavior”. I do as well…but too bad for us. The smart policy solution is to drive out costs from the most expensive 10% by making it possible for them to get healthier.

    Be philosophical if you like…but it doesn’t serve the national interests. Everybody’s new job is to create value for consumers…who…by the way….have replaced insurers as your new boss.

  6. wilson says:

    Americans spend twice as much for their healthcare as any other nation on the face of the earth and yet America’s healthcare ranks, at best, 37th worldwide by any healthcare metric. To put more salt in the wound, over 50 million Americans are uninsured and get their healthcare from random sources such as hospital emergency rooms and emergency clinics while the insured each pay an estimated $1200 more per person per year in hidden premiums to pay for that uncompensated care. This is the healthcare plan that Republicans want to keep. If you vote for Republican politicians in Congress, then you vote to repeal Obamacare and return to the broken system as described above. As indicated in a previous post, if Obamacare continues, then consumers will take their rightful place at the top of the healthcare food chain while private insurers will go to the back of the bus where they belong. The level playing field that the health exchanges will provide beginning in 2014 will weed out the corrupt and unscrupulous health insurance companies while rewarding the health insurance companies that treat the consumer with much needed respect. The consumer is the customer. The consumer should be king! Obamacare benefits the consumer. Today’s broken fee-for-service system doesn’t. Obamacare is our only hope for America’s healthcare future. We can’t let Republicans take us back to the dark ages ever again.

  7. Edward H. says:

    The “wide variety” of choices is a huge plus for consumers (assuming they have the help of an experienced broker or understand and compare on their own).

    Here in Ohio, there are very few mandates and rates are low. We are definitely going to miss that scenario in 2014 and beyond.

  8. marian says:

    Wilson, what unreal utopian world are you living in? Health insurance does not equal health care. Mandatory insurance puts all moral power to determine health needs & health care delivery squarely in the hands of insurance administrators, practically dissolving the doctor-patient relationship. There will be even fewer consequences for acts of gross negligence and extreme departures of care; as large group practices shield their employee physicians practicing cookbook medicine from medical board scrutiny or discipline. Such events will be absorbed as the cost of doing business. Depersonalization of medical care under the ACA does not treat the consumer with more respect, but less. It only works in a one-size-fits-all-patients world; where all possible diseases & maladies have already been discovered and planned for. This, of course, is not the case.

  9. William says:

    Marian, I agree with the premise of your comment. The less health insurance administrators getting in the way of healthcare delivery, the better. The less health insurance brokers getting in the way of healthcare delivery, the better. In fact eliminating health insurance completely, eliminating health insurance brokers completely, eliminating health insurance administrators completely, now that is healthcare nirvana! In my opinion, Edward apparently thinks that we should be exposed to thousands of different health insurance plans and thousands of specific benefit options in each specific plan. Then in the next breath, Edward indicates that consumers can’t possibly understand the complex nature of health insurance without a broker to explain things. How insane is that? If anything, Obamacare makes healthcare selection much more simple. The exchanges offer four levels of coverage, Bronze, Silver, Gold and Platinum. Each of these four levels of coverage has comprehensive coverage. None of the four levels of coverage offered in the exchanges is the kind of “cheap” and “lousy” coverage that we see today that is virtually useless if you get sick or injured. All of the four plans offered in the exchanges has comprehensive value and you don’t need Albert Einstein to explain things to you. In my opinion, Edward believes that lots of complex choices is better for the consumer. In my opinion, Edward believes that if you need a broker to explain things, it must be good. Yeah! Right! Fact is, America has seen enough of how the health insurance industry has screwed things up for several decades. America has had enough of their corrupt business practices. It’s time for a change. The sooner we eliminate the health insurance industry from participation in our healthcare system, the better. Private health insurers are shysters! We need a single-payer system like Medicare that covers everybody. Private health insurance must be eliminated!