The Numbers Are In

Yesterday, CCRC Actuaries, the firm hired by the West Virginia Offices of the Insurance Commissioner to analyze the effect of the Affordable Care Act (ACA), released its report on the expected impact of the health insurance exchange in West Virginia.  The good news is that lots of people will spend less on health insurance and many more people will be insured.  The bad news? Some people will pay more. 

In a nutshell, the majority of West Virginians who currently have insurance through their employer won’t be affected.  Meanwhile, the number of uninsured people in the state will drop from 246,000 to 76,000, a nearly 70 percent decrease, as more people enroll in Medicaid or are able to get individual coverage through the newly created health insurance exchange, dubbed the Marketplace. (Table 1)

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The number of people getting their insurance in the Marketplace will increase nearly fourfold, from 28,000 people to 107,000.  Importantly, around 86,000 of them will qualify for premium tax credits.  As a result, the net cost of health insurance premiums in the non-group individual market will actually decline by 42% on average after tax subsidies.  Without health reform, the average annual premium for health insurance in the non-group market is $4,953, however after reform and tax credits are considered, this annual premium drops to $2,870. (Table 2)

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Of course, not everyone will qualify for tax credits since they are based on a sliding income scale for people earning less than 400 percent of the federal poverty level (FPL).  For those who won’t qualify for the subsidies yet will still get their insurance from the Marketplace, there will likely be an increase in the average premium cost.  For example, a 40-year-old single male who earns more than 400 percent of FPL (over $50,220 annual income) would pay an average of $3,512 in annual premiums without health reform or $4,878 with health reform, an increase of almost 39 percent.  Those who warn about “rate shock” caused by the ACA are almost always referring to this group – the healthy, young, single men with above average incomes. 

Women, however, won’t see anywhere near the same increases.  Historically, health insurers have charged significantly higher premiums for women for the same coverage as men.   Beginning in 2014, however, the ACA will prohibit “gender rating” as it’s called and require that men and women to be charged equally.  So a 40-year-old single woman paying an average of $4,616 in annual premiums on the individual market without health reform will pay the same $4,878 annual premium as the 40-year-old male with health reform, an increase of 5.7 percent.

The older you get the more you benefit from tax credits as well, since health insurers generally charge more for the same coverage for a 60-year-old when compared to a 20-year-old.  Families with children also will receive, on average, larger tax credits when purchasing their insurance from the Marketplace.  (Table 3)

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Judging health insurance policies today to policies in 2016 is not an apples-to-apples comparison.  Many of the policies sold today as high-deductible or catastrophic plans will not meet the minimum standards of what health insurance plans are required to cover starting in 2014.  The new standards prevent insurers from denying coverage, excluding pre-existing conditions, setting lifetime or annual caps on claims, while requiring insurers to cover annual check-ups and other well visits at no or little cost to the patient.  Many young adults, especially healthy men, will see their health insurance premiums increase in the individual market, however, the majority of those 107,000 West Virginians who will be purchasing their health insurance from the Marketplace beginning in 2014 will see not only improved coverage, but cheaper rates.  

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