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Competition Lowers Insurance Premiums by Nearly 20 Percent in the Health Insurance Marketplace: HHS Report

July 19, 2013
by John DeGaspari
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ACA gives consumers access to better coverage at greater value in 2014, according to HHS

A new report released by the Department of Health and Human Services finds premiums in the Health Insurance Marketplace will be nearly 20 percent lower in 2014 than previously expected.

The Affordable Care Act requires health insurers in every state to publicly justify any premium rate increases of 10 percent or more. Health insurance companies now generally have to spend at least 80 cents of every premium dollar on health care or improvements to care, or provide a rebate to their policy holders. In addition, when the Health Insurance Marketplace opens for enrollment on October 1, 2013 consumers will be able to make apples to apples comparisons of quality health insurance plans.

“Today’s report shows that the Affordable Care Act is working to increase transparency and competition among health insurance plans and drive premiums down,” said Secretary Sebelius in a prepared statement. “The reforms in the health care law ensure consumers will have access to better coverage at a lower cost in 2014.”

Specifically the report finds that:

  • In the 11 states (including the District of Columbia) that have made information available for the individual market, proposed premiums for 2014 are on average 18 percent lower than HHS’ estimate of 2014 individual market premiums derived from CBO publications.
  • In the six states that have made information available in the small group market, proposed premiums are estimated to be on average 18 percent lower than the premium a small employer would pay for similar coverage without the Affordable Care Act.
  • Both estimates are based on premium proposals for the lowest cost silver plan in the individual and small group markets. Actual premiums in 2014 may be even lower when health plans are offered in the Marketplace this fall. Already, in a number of states (DC, OR, RI, VT), the rate review process and competition are resulting in final rates that are significantly below what was proposed earlier this spring.
  • Preliminary premiums appear to be affordable even for young men. For example, in Los Angeles - the county with the largest number of uninsured Americans in the nation - the lowest cost silver plan in 2014 for a 25-year-old individual costs $174 per month without a tax credit, $34 per month for an individual whose income is $17,235, and a catastrophic plan can be purchased for $117 per month for an individual.
  • Further, data from the Medical Expenditure Panel Survey Insurance Component shows that the average premiums for employer sponsored insurance increased by only 3 percent from 2011 to 2012, the lowest rate of increase observed since the data series started in 1996.
  • Already the 80/20 rule, or medical loss ratio, has saved 77.8 million consumers $3.4 billion up front on their premiums as insurance companies operated more efficiently and spent more on health care than administrative expenses, and 8.5 million consumers can expect an average rebate of approximately $100 per family. Since the health law’s rate review provisions were implemented, the number of requests for insurance premium increases of 10 percent or more has dropped dramatically, from 75 percent to 14 percent. To date, the rate review program has helped save Americans an estimated $1 billion.
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