There are two recent studies on Obamacare exchanges that shed light on Ohio’s insurance market. They both show that uninsured Ohioans will be getting a better deal, and that there’s plenty of room for improvement.

The more interesting study was from Kaiser Family Foundation, offering the best look yet at Ohio’s exchange offerings. It looked at the plans and subsidies in Cleveland’s market. It shows that my calculations were pretty close.

As always, it’s hard to talk about premiums on the exchange because you pay in based on your income, rather than based on your health. But Kaiser gives a pretty good idea for what to expect:

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Your after-tax premium is basically PLAN PREMIUM – SUBSIDY, where SUBSIDY = SILVER PREMIUM – INCOME.

The higher the Silver premium, the larger the subsidy. If the subsidy is higher than the Bronze premium (as with the 60-year olds above), then the Bronze plan is free.

Of the 18 states studied, Ohio is in the middle of the pack on each of these prices. What I’m relieved to find is a decent price difference between Silver and Bronze plans, though it would be good to make that larger.

South Dakota, for instance, has completely screwed up its exchange. Its Bronze premiums are only $19 less than its Silver premiums, so the Bronze plan gets almost no discount.

Vermont, on the other hand, has a $140 difference between Bronze and Silver plans. That means that basically everybody can get a Bronze plan for free, because the tax credit is greater than the cost of the Bronze plan.

That means that most Vermonters on the exchange will get an extra $1452 each year from the federal government simply because of their price structure.

Vermont accomplishes this through an Active Purchaser Exchange, meaning that they only include particular plans. This lets them manage after-tax premiums a lot more closely.

Now, premium costs are much higher for higher-income uninsured Vermonters ($336) than for higher-income uninsured South Dakotans ($239). But most people earning that much money get insurance through their work; my estimate (which is backed by both of these studies) is that 88% of uninsured Ohioans will qualify for subsidies or Medicaid.

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Depending on the results of the open enrollment period, both gubernatorial candidates could very easily promise to lower exchange prices for the majority of enrollees. Let’s say that the Kaiser plan isn’t very popular2 and that the next plan costs $226 instead of $196. By simply dropping the Kaiser plan, the majority of exchange users would save $30 a month. The only people hurt by that would be people enrolled in the Kaiser plan who don’t get subsidies.

In fact, I’d go so far as to say that the governor has a duty to keep after-tax insurance costs low, and in the managed competition of Obamacare has a fantastic lever to do so. It’s just that one of the candidates has said Obamacare is the worst thing in world history, and the other candidate can show how 60-year olds in Maryland are paying half as much as Ohioans, or how 40-year old women in Connecticut are paying 25% less. Running the exchange is part of a governor’s job description, and the governors of Oregon, Maryland, and Connecticut are doing it better than Kasich.

The final very, very good news is that the original CBO score for Obamacare anticipated Silver plans of $320. 15 of the 18 states cost less than that, including California (the most populous state). This means that Obamacare will probably cost way, way less than anticipated.

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A week prior, Rand Corporation estimated the impact of Obamacare on health expenditures and on the population getting insurance. It was a rather disappointing study, because it didn’t look at actual insurance premiums, it looked at estimated health costs. Very importantly, it found that prices for small businesses would be unchanged, but 23% of small business workers would be eligible for tax credits.

It also concluded that most uninsured Ohioans would have coverage by 2016, and that overall individual health expenditures would drop 21% after subsidies, earning a nice headline in the Plain Dealer. PD went on to compare that “average premium” to the current “average premium”, which is unfortunately a made-up statistic.

To analogize, ODI found “the average of premiums on the insurance market” the way one would find “the average rushing yardage of a Browns player”. They had 12 runners gain 1593 yards last year; so the “average runner” gained 133 yards all season. Therefore, we should expect Trent Richardson to rush for 8 yards each game3.

It’s a statistic that tells us about the number of plans on the market, but tells us nothing about the cost of each plan.

The Kaiser report is, to date, the best comparison of exchanges (while the Rand report shows that the prices are sustainable). These are the documents that, moving forward, will tell governors what they can do to best serve their population by getting the best deals for Ohioans who buy on the exchange.

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1 So, “people who need health services” get the resources, rather than “people who can afford health services”. Insurance redistributes resources from “people who have something but don’t need it right now” to “people who need something right now but can’t buy it”. When it’s something that we’ll all need someday (health care, recovery from accidents

2 The provider network will be the determinant here. I’d expect Kaiser to have a good network–indeed, I expect this plan to completely dominate the market–but I could be totally wrong. Also, I’d expect that at least one of the 16 regions will have a Silver plan with a lousy network.

3 I wish I’d thought of this a year ago, because it’s a great analogy.

We only care about 1 or 2 runners on the Browns, because they get 90% of the carries. Similarly, we only care about a handful insurance plans that meet our needs while charging the least.

ODI has fixated on these $50/month plans with no prescription coverage and $25,000 deductibles, even though very few people are enrolled in them (and those who are, are being ripped off). They’re judging the Browns rushing attack on Thad Lewis’ one carry for 3 yards. The Chudzinski era won’t last long if their backup quarterback can’t average at least 4.5 yards a carry!

 
  • stryx

    Another great post Luke.

    I heard the other day that uninsured people with incomes below the FPL that don’t qualify for Medicaid also won’t qualify for a federal subsidy- they’ll have to pull the whole weight of their premium. Any chance the state will fix this inequity?

  • Carol

    I’m 55 and buying insurance through my retired husband’s former employer at $574 per month. He’s on Medicare and we’re paying about 1/4 of our gross income for insurance for both of us. I haven’t been able to figure out how this is going to affect us at all and get the feeling that’s the way the state wants it.

  • Luke Brockmeier

    Thanks!

    You’re right, and it’s a major problem. The premium levels were written into the law for incomes between 100-400% of poverty. The idea was that everybody below poverty would enroll in Medicaid, while people between 100-138% of poverty would have the choice between Medicaid and a $24/month private plan with a $500 deductible.

    When SCOTUS dashed the Medicaid expansion, it meant that in states that DON’T expand Medicaid, a family of three earning $20K will get that $24/month plan while the same family earning $19K will pay $185/month.

    The only thing the state can do is expand Medicaid. The arguments against it are all wildly irresponsible–if Bill Seitz is concerned about federal spending, Bill Seitz needs to run for Congress.

    The same goes for a number of types of immigrant. If they’re barred from Medicaid enrollment and exchange subsidies, they’ll be forced to pay $185/month for insurance, which they won’t be able to afford. That’ll leave certain community providers to offer them care at no charge, but those providers will no longer get the grants they’ve traditionally gotten. This policy primarily hurts the provider. Immigration reform fixes this.

  • Red Rover

    Are the monthly premiums going to include the tax credit, or do you only get it when you file your return? In other words, will the family of four making $60,000/yr that chooses the Bronze Plan have to pay $530/month or $194/month? Being forced to pay the full amount every month and hold out until April would be outrageous.

  • Luke Brockmeier

    You get it when you buy your insurance. It’s then reassessed when you file in April–so you’ll get a larger return if you overestimated your income, and a smaller return if you underestimated it.

    The awesome thing about the exchange is that the Rube Goldberg-ness all happens on the back end. You just see plans and prices.

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