The Department of Health and Human Services released an analysis of the first open enrollment period of the health insurance marketplace, and the subsidies for coverage. (Karen Bleier/AFP/Getty Images)
It's hard for an ordinary person to figure out whether health insurance will be more expensive under the Affordable Care Act. First of all, figures that look good "on average," often mask extremely wide differences across age groups. Secondly, it's hard to find pre-ACA policies that are comparable to the policies available post-ACA.
These differences are shown by two recent reports with sharply different implications. The government's report shows that federal tax credits make health insurance premiums more affordable for everyone. The academics' report, however, shows that women age 55 to 64 will face a huge spike in cost when they go out to buy individual insurance on the federal exchange. These women bear the brunt of the increased premiums and out of pocket expenses after the Affordable Care Act.
Let's start with the government report. In its first analysis of premium affordability since the Affordable Care Act went into effect, the Department of Health and Human Services reported that federal credits will cut the average health insurance premium for people eligible to receive tax credits by 76 percent.
Without the credits, individuals would pay $4,152 a year, on average, in health insurance premiums; with the credits, they'll pay just $984 a year. Some 87 percent of people who bought insurance on a federal exchange chose a plan with tax credits, according to HHS.
The government report, however, doesn't take into account out of pocket costs and doesn't say anything about how premiums might have changed because of the health care reform. Thus, it doesn't show whether the tax credits are mostly offsetting reform-induced premium increases meaning that individuals aren't really seeing a reduction in their health care costs or whether the credits are reducing the net price of health insurance coverage.
In the years before Obamacare, for example, insurance companies could do something known as medical underwriting that allowed them to figure out how much a person might "cost" them in terms of benefit payouts. Insurance companies could charge people with pre-existing conditions — pregnancy was one of those conditions — more than people who didn't have such conditions. They could exclude certain benefits, like maternity and newborn care, from their policies (ACA-compliant plans must offer ten essential benefits, including maternity and newborn care). They could charge older people a whole lot more than they charged younger people, they could sell policies that excluded coverage for certain health matters, and they could deny some people coverage altogether.
This variation in policies, however, also means that it's difficult to find pre-reform policies that are comparable to those available under the ACA, which have largely been standardized because insurance companies can no longer consider health status, except for smokers, who can be charged more for coverage, when setting their premiums. They also can't discriminate by gender.
Here, a trio of academics from the University of Pennsylvania comes to the rescue.
What Mark Pauly, Scott Harrington, and Adam Leive of the Wharton School have done is to figure out how much non-elderly individuals spent on insurance before the ACA and then compared these figures with what they'll spend after the ACA. They did this by using survey data for 2010 through 2012 from the Census Bureau's Current Population Survey that show how much people spent on health care, including premiums and out of pocket payments. By looking at the total spent rather than just on premiums, the data reflect the fact that someone who buys a policy with a low premium can expect to have higher out of pocket costs, and vice versa. They report their findings in a paper from the National Bureau of Economic Research.
For post-ACA prices, they looked at the premiums for the various levels of coverage (these levels are classified according to various metals: bronze, silver, gold and platinum) and estimated out of pocket payments according to data from the Medical Expenditure Panel Survey. The data were tabulated by age and gender for the bronze and the two lowest price silver plans.
After crunching the numbers, they found that people who buy the bronze or silver plans on the federal exchanges will spend a moderate amount more — from $694 to $1,165 a year, or 14 to 24 percent — on premiums and out of pocket expenses than they did before the health reform took effect.
However, that average figure masks a huge redistribution of the costs to older women from nearly everyone else.
Total expected premiums and out of pocket expenses rose by 50 percent for women age 55 to 64 — a much larger increase than for any other group — for policies on the federal exchanges relative to prices that individuals who bought individual insurance before health care reform went into effect.
Women age 55 to 64 will pay from $2,185 to $2,738 more in premiums and out of pocket expenses under the new health insurance environment than they did pre-ACA.
Premiums for the second-lowest silver policy are 67 percent higher for a 55 to 64-year-old woman than they were pre-ACA.
In fact, the redistribution to older women is so great that almost everyone else is "below average" in the change in their total health care expenses for these two plans. For example, men age 45 to 54 will see their premiums fall by about $1,000 a year relative to the average if they buy the bronze plan, while total costs for women in this age group are $300 below average. For older women, they're $1,500 above average.
I asked one of the author's of the study, Mark Pauly, why it seems that older women are bearing the brunt. "It's likely because they are being averaged in with younger women who have much higher expenses associated with childbearing and with older men who didn't take care of themselves. "Community rating redistributes against the relatively healthy," he explained.
He also indicated that he's not aware of others who have looked at this group of individuals. The HHS report provides some details for premiums by age group, showing that a typical 60-year-old individual will pay almost 60 percent more than a typical 27-year-old for the second-lowest cost silver plan. But, again, these figures don't include out of pocket expenses.
Of course, tax credits may offset much of the additional costs that older women face under the Affordable Care Act. Although, as Pauly explained, "most of those who previously bought individual insurance would not be poor enough to get substantial subsidies" so tax credits might not change the situation. Most of the people buying individual insurance on the health exchanges were previously uninsured.
Despite relatively small average increases in premiums and out of pocket expenses post-ACA, it appears that older women should be ready to face a "sticker shock" when they go out to buy their health insurance on a federal exchange.
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