New Reports: ACA either cut premiums 76%...or raised them 49%.

Hat Tip To: 
Andrew Z., Steve C.

The Washington Post reports today about a new report issued by the HHS Dept. which states that the average premium rate for those who enrolled via the Federal ACA exchange were cut by 76% thanks to the subsidies in the law:

The Americans who qualify for tax credits through the new federal insurance exchange are paying an average of $82 a month in premiums for their coverage — about one-fourth the bill they would have faced without such financial help, according to a new government analysis.

...The health officials said they have not yet analyzed the incomes of people who qualified for the subsidies. But overall, the report shows, the average monthly tax credit this year is $264. Without the federal help, the average premium chosen by people eligible for a tax credit would have been $346 per month, and the subsidy lowered the consumers’ premiums, on average, by 76 percent. The result is that four out of five people with subsidies are paying premiums of no more than $100 a month — although that does not include money they might need to spend for insurance deductibles and other out-of-pocket costs.

Meanwhile, my old Twitter-debate nemisis Avik Roy has posted an article over at Forbes claiming that the Affordable Care Act has INCREASED premiums nationally by an average of a whopping 49%. This is based on an extensive survey of rates in most of the counties nationwide:

Our new county-by-county analysis was led by Yegeniy Feyman, who compiled the county-based data for 27-year-olds, 40-year-olds, and 64-year-olds, segregated by gender. We were able to obtain data for 3,137 of the United States’ 3,144 counties.

Among men, the county with the greatest increase in insurance prices from 2013 to 2014 was Buchanan County, Missouri, about 45 miles north of Kansas City: 271 percent. Among women, the “winner” was Goodhue County, Minnesota, about an hour southwest of Minneapolis: 200 percent. Overall, the counties of Nevada, North Carolina, Minnesota, and Arkansas haven experienced the largest rate hikes under the law.

The best-faring county for both men and women was St. Lawrence County in northern New York, with premium decreases of 70 percent in 2014 relative to 2013. The New York City metropolitan area—the five boroughs, Long Island, and Westchester County—are the clear winners under Obamacare, with decreases in the 63 to 64 percent range.

Now, I don't know enough about the methodology used in this study, nor do I have the time to delve into it today. On the surface it seems pretty sound:

To calculate these figures, we used the same methodology we’ve used in the past. We compiled an average of the five least-expensive plans in a particular county pre-Obamacare, adjusted to take into account those with pre-existing conditions and other health problems. We then did the same calculation with the five least-expensive plans in each county under the Obamacare exchanges. We then used these county-based numbers to come up with population-weighted averages pre- and post-Obamacare.

...however, there's one very important caveat in the next paragraph, and to Roy's credit, he doesn't try to bury it:

Remember that these figures represent the underlying, unsubsidized health insurance prices. If you’re eligible for a subsidy—if your income is below 400 percent of the Federal Poverty Level—taxpayers will help defray a portion of these costs. Those subsidies will disproportionately help those in their late fifties and early sixties, because of the way the Obamacare exchanges interact with the subsidy formula.

Yeah, that certainly goes a long way towards explaining the polar opposite headlines between the two studies. Basically, it sounds like Roy is saying that the insurance company rates went up 49% overall...of which 76% of the total was covered by subsidies for those who enrolled via the exchanges. For example:

  • Old Rate: $500/mo
  • New Rate: $745/mo
  • Subsidy: -$566/mo
  • Final Cost to Enrollee: $179/mo

So, from the perspective of the enrollee, their cost dropped by 64%, while from the perspective of the insurance company, their gross revenue increased by 49%.

HOWEVER, neither of these reports necessarily proves that overall enrollee costs have gone up or down...or, necessarily whether insurance company profits are going up or down, because there's another important caveat: In both reports, it's important to note that they only include the actual premium cost, not out-of-pocket expenses like co-pays, deductables and so on. Those are much trickier numbers to work out.

Another possible factor: Note the wording in the methodology; they took "the five least-expensive plans in a particular county pre-Obamacare, adjusted to take into account those with pre-existing conditions and other health problems" and compared them with "the five least-expensive plans in each county under the Obamacare exchanges."

Well, here's the thing...did those "5 least-expensive plans" pre-ACA include the so-called "junk" insurance policies which cover essentially nothing?

Known as "mini-meds'' or "junk insurance,'' these products often are little more than discount cards that can leave unknowing consumers with huge medical debt. Even a policy expert from the conservative Heritage Foundation, no fan of the Affordable Care Act, says they aren't worth keeping.

One example: the "Go Blue Health Services Card'' for which cancer survivor Donnamarie Palin of New Port Richey has paid $79 a month. For that, she gets $50 toward each primary care doctor visit, $15 toward each drug — but zero coverage for big-ticket items like hospital stays.

I'm not sure what Roy means by "adjusted to take into account those with pre-existing conditions and other health problems"...if he means that they only used "real" policies instead of these "discount card" subscription plans, then fair enough. However, if these are included in the comparison (junk policies aren't allowed on the ACA exchange and aren't considered "insurance" for purposes of the penalty), then you might as well throw out the whole thing, no matter how many comprehensive it is.

In addition, health insurance premiums were already rising at an average of around 10% per year before the ACA was enacted, so even if the "49% increase!" claim is accurate, that's still somewhat misleading.