President Barack Obama promoted the lower premiums consumers will gain from competition among health plans under the Affordable Care Act on Thursday at the White House.
Premiums are expected to be nearly 20 percent lower in 2014 than previously expected in the health insurance exchanges because of competition among health plans and increased price transparency, according to a Health and Human Services Department study released the same day.
"You're going to see competition in ways that we haven't seen before. Insurance companies will compete for your business," the president, said according to a White House transcript. "What we're seeing is that consumers are getting a hint of how much money they're potentially going to save because of this law. In states like California, Oregon, Washington, new competition, new choices, and market forces are pushing costs down."
The ACA requires that health insurers in every state publicly justify any premium rate increase 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 the 11 states and the District of Columbia that have made information available for the individual market, proposed premiums for 2014 for the lowest cost Silver plans are on average 18 percent lower and the second lowest cost Silver plans 10 percent lower than HHS' estimate of 2014 individual market premiums derived from the Congressional Budget Office (CBO).
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 ACA.
Actual premiums in 2014 may be lower when health plans are offered in the marketplace this fall. 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, HHS said in a release.
Notably, the report showed that while there is some variation across the 11 states in the second-lowest cost Silver premiums, which is used as a benchmark for comparison, the premiums are very similar in some states, such as Ohio, with a $384 average, whose politicians have railed against the law as driving up consumer costs, and California, with a $368 average, whose politicians have embraced the law as making driving down healthcare costs. The two states are even closer on lowest cost Silver premium averages.
The president's comments came on the heels of a New York Times article reporting that "State insurance regulators say they have approved rates for 2014 that are at least 50 percent lower on average than those currently available in New York."
Robert Zirkelback, a spokesman for America's Health Insurance Plans (AHIP), pointed out in a release that New York had enacted insurance market reforms in the 1990s without requiring everyone to purchase coverage, which led to some of the highest premiums in the nation.
There will likely be wide variation in the impact of ACA across states, he said, noting that a Society of Actuaries study found that consumers can expect the "average change in individual market costs varying substantially across state lines."
According to the SOA report, "the significant state-by-state variation can be attributed to many factors, including whether or not the state sponsored a high-risk pool, differences in current underwriting practices, and demographic characteristic and income level differences in state populations."
HHS also said that the 80/20 rule, or medical loss ratio, had already 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. About 8.5 million consumers can expect an average rebate of approximately $100 per family.