As I wrote earlier, California is going to be a major test case for the implementation of President Obama’s health care law. Though major insurers have decided to opt out of the state’s subsidized insurance exchange, the authority tasked with managing the program is now touting number of choices it is bringing Californians at a competitive cost.
“The rates submitted to Covered California for the 2014 individual market ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California’s most populous regions,” Covered California, the entity running the exchange, announced in a press release. But the suggestion that, at worst, premiums will be rising 2 percent, and at best, falling 29 percent, is misleading.
Earlier in the press release, Covered California explains:
It is difficult to make a direct comparison of these rates to existing premiums in the commercial individual market because in 2014, there will be new standard benefit designs under the Affordable Care Act, and the actual change in an individual’s premium will depend on the person’s current insurance coverage.
What this means is that the federal government is now requiring all individuals to carry insurance policies that offer a slew of benefits dictated by the secretary of Health and Human Services, regardless of whether they would prefer to purchase policies with lower premiums and fewer benefits — or to go without insurance altogether. California, essentially, is saying that the exchanges will give participants more benefits for their money so the cost of the new offerings should be compared to more comprehensive plans. But what if individuals don’t want more coverage? For many young and healthy individuals, insurance on the exchanges will be a much more costly option than what they have now.
In 2012, the average individual insurance plan cost Californians $177 per month, according to online insurance marketplace ehealthinsurance.com. Yet the report put out by Covered California lists the average “silver” plan on the exchange as costing individuals $321 per month. That’s an 80 percent increase — or even more for those who still have the freedom to go without insurance and currently pay $0 in premiums. That freedom will disappear come January.
In 2014, the penalty for not purchasing an insurance policy that meets HHS standards is $95, or possibly a few hundred dollars, depending on taxable income. Either way, for individuals who do not qualify for generous subsidies, the mandate penalty will be a lot lower than the thousands of dollars it would cost to maintain HHS-acceptable insurance for the year. One of the key questions determining the fate of Obamacare will be whether young and healthy individuals decide to actually purchase insurance, which is necessary to offset the costs of forcing insurers to cover older and sicker individuals and those with pre-existing conditions. If there aren’t low-cost options available to entice the young and healthy crowd, Obamacare is going to run into a lot of problems.