Good news today on the national healthcare front, and especially good news for Arkansas. A report released by the federal Department of Health and Human Services (HHS) shows that premiums for a midgrade insurance policy purchased on the Health Insurance Marketplace (aka “the exchange”) in the 35 states analyzed will increase by “only a modest 2 percent” before consumer subsidies are applied. A 2 percent increase is trivial compared to the double-digit premium price hikes that consumers have grown to expect in recent years.
But in Arkansas, premiums will actually decline by 3 percent on average in 2015 (again, before subsidies are applied — more on that below). Back in August, David Ramsey reported on the significance of a projected 2 percent drop in premium cost for plans sold on the exchange in Arkansas. As he noted then, “it’s become almost axiomatic in health care that insurance premiums will go up every year, so a potential decline is huge news.”
Note that these are averages. There are a range of individual policies available through the exchange, ranging from bare-bones Bronze plans to pricier Gold plans. The HHS report uses as its benchmark the second-cheapest Silver plan sold in a given region. Costs may also vary from region to region within a state, a function of different demographics and varying levels of competition between providers (a customer like myself in Little Rock, for example, can choose between four different insurance companies — Arkansas BlueCross, national BlueCross, QualChoice and Ambetter — but not all four operate in every Arkansas county).
Most importantly, the cost of plans varies between the companies offering policies. This was really the entire point of the exchange in the first place: It’s supposed to put downward pressure on the ever-inflating cost of health insurance by introducing added competition between insurance providers.
Before the Affordable Care Act, when companies priced individual policies based on the health of a given individual — and people with preexisting conditions could simply be denied coverage altogether — customers didn’t have the ability to shop around. The HHS release urges consumers to do just that, noting that even folks who bought an ACA-subsidized plan in 2014 should compare prices again during open enrollment this year. Open enrollment in the marketplace runs from Nov. 15, 2014, through Feb. 15, 2015:
“For returning customers, it pays to shop. More than 7 in 10 current Marketplace enrollees can find a lower premium plan in the same metal level—before tax credits—by returning to shop. If all returning consumers switched from their current plan to the lowest-cost premium plan in the same metal level, the total savings in premiums would be over $2 billion. How much consumers can save if they shop varies from area to area, so consumers should go to HealthCare.gov to see what savings are available to them.”
In October, David also reported on the detailed 2015 marketplace rates released by the Arkansas Insurance Department, which breaks down premium costs by region, by company and by metallic tier.
There’s one big group on the exchange in Arkansas for whom shopping around is less relevant: the 200,000+ beneficiaries of the private option, which is comprised mostly of adults below 138 percent of the federal poverty line. In other states, that population is offered insurance via an expansion of the Medicaid program — or, as in states like Texas which have rejected Medicaid expansion, they simply don’t get any help whatsoever. But under the private option, Arkansas uses Medicaid expansion dollars to buy Silver plans for these low-income individuals on the exchange. Private option beneficiaries still have a choice in which Silver plan to purchase. Yet because the full cost of their premium is paid for, they’re probably less inclined to shop around for a better deal.
(UPDATE: Earlier, I posed the question of whether the Arkansas Department of Human Services (DHS) will have the ability to nudge private option beneficiaries into less expensive policies as prices fluctuate in the future. It looks like the short answer is no, at least for the time being. It’s up to the consumer which Silver-tier plan he or she purchases. However, one thing that is changing is which Silver plans are private option-eligible. Not all Silver-level plans are created equal; some may also carry vision or dental benefits, for example, and have a correspondingly higher premium. The tricky thing is that because the private option pays for the full cost of a beneficiary’s premium, if he or she chooses a fancier, pricier Silver plan, the state would still have to pay the cost. A good deal for the consumer, and for the company; a less-good deal for the state. Dave Ramsey informed me that in 2015 and future years, the private option can only be used to purchase Silver plans without bells and whistles like dental coverage — that is, private option beneficiaries are limited to plans that cover only the 10 “Essential Health Benefits” outlined by the ACA.)
Meanwhile, 38,000 other Arkansans buy individual policies on the exchange but are not on the private option. These are people who make between 138 percent and 400 percent of the poverty line. Most of those folks (I’m one of them at the moment) receive a tax credit to defray some of their costs; exactly how much help varies based on income. For these people, shopping around is key — that is, even though the government subsidizes a portion of my individual premium, I still pay a good chunk of it myself. If I can find a cheaper plan on the exchange for 2015, I’ll take it. Cheaper for me, cheaper for the government.
The release notes that about 80 percent of customers on the exchange can get coverage for $100 or less per month after subsidy. Here’s the full report.