05 Feb 2015 New Study: Three Ways Consumers Could Pay Exorbitantly Higher Premiums on the ObamaCare Exchanges in 2015

Back in September, the Indiana Business Journal noted that, although some new insurers were offering lower-priced plans on Indiana’s ObamaCare exchanges, consumers wouldn’t necessarily save money:  ”Because of wrinkles in how Obamacare’s generous tax subsidies are calculated, the entrance of new insurers in the Indiana market will likely push down the size of those tax credits and push up the amount consumers receiving those credits must pay.”

In October, the Denver Postfound a similar problem for Colorado: “Colorado health-insurance consumers relying on tax credits will see their share of premiums rise an average of 77 percent next year if they keep the same plans, according to the state’s preliminary analysis. While premiums overall are not expected to increase significantly in 2015, the way tax credits are calculated under the Affordable Care Act is creating challenges for Colorado consumers.”

Those concerns are confirmed by my new study, released today by NCPPR.  The study examined how changes in exchange subsidies affected consumers in 51 metropolitan areas who purchased the cheapest bronze plan in 2014 and kept that same plan in 2015.  It examined the effects on a 27-year-old single person making $25,000 annually and a 57-year-old couple earning $50,000 annually.

In Indianapolis, the subsidy declined $18 per month for a 27-year-old while the bronze plan increased $13 per month, for an annual premium increase of $365 (numbers may not add up due to rounding.)  For a 57-year-old couple, the subsidy dropped $95 per month while the bronze plan increased $52 per month, for an annual premium increase of $1,764.

In Denver, the subsidy declined $31 per month for a 27-year-old and $159 per month for a 57-year-old couple, while the bronze plan rose $13 and $61 per month, respectively.  The 27-year-old will pay about $535 more a year while the 57-year-old couple will pay $2,640 more a year.

Denver was not the worst.  That honor went to Jackson, Mississippi, where a 27-year-old will pay $1,168 more annually and a 57-year-old couple will pay $3,292 more a year!  (To see how an area in your state fared, see Tables 5 and 6 near the end of the study.)

A consumer might be able to avoids such hikes by shopping around for a new plan, but as John Merline states in Investor’s Business Daily, “While the federal government hasn’t released numbers on how many automatically re-enrolled in last year’s plans, some states have. In California, roughly 61% simply kept their same ObamaCare plans from the year before.”

In all three of the above cases, premiums rose because the subsidy declined and the bronze plan increased. But there are two other ways that exchange consumers could see their premiums increase.

Consumers could also pay higher premiums is if they have a policy that decreased in price but did not decrease as much as the subsidy. That happened in New Hampshire.  For a 57-year-old couple, the subsidy declined $163 per month while the bronze plan dropped $11 per month, resulting in a premium increase of $152 per month, or $1,824 annually.

Finally, it is even possible for consumers to pay higher premiums on an exchange in which the subsidy increased.  Consumers on those exchanges who own a policy that increases more than the subsidy increases will pay higher premiums.  In Miami, Florida, a 57-year-old couple with the cheapest bronze plan in 2014 is seeing a monthly premium increase of $129 ($1,548 annually) because the subsidy increased $18 per month but the cheapest bronze plan rose $147 per month.

Here are a few other highlights:

-There were exchanges in 26 areas where a 27-year-old who bought the cheapest bronze plan in 2014 and kept it in 2015 would pay at least $100 more annually, and 12 areas where he would pay at least $300 more annually.

-In 36 areas, a 57-year-old could would pay at least $500 more annually, and in 16 areas, they would pay at least $1,000 more annually.

-Switching to a cheaper plan would save money in most areas.  But even if consumers switched to the cheapest bronze plan of 2015, they would still end up paying more in most areas.  There were 29 such areas for a 27-year-old and 33 for a 57-year-old couple.  Additionally, there were 16 areas where a 27-year-old would pay at least $100 more annually and a 57-year-old couple would pay $500 more annually even after switching to the cheapest bronze plan.