A few weeks ago, we pointed out that there are a few different ways to calculate how much Obamacare premiums are changing next year. For example, you could simply look at the price of the average plan in an area from last year to this year. Or you could take it a step further and do a weighted average; that’s where plans with more enrollees count more heavily, so you get a better sense of how much premiums will change for the average policyholder.
That information is useful, but remember that the idea behind Obamacare is not that your premiums will never change; it’s that you’ll be able to shop around for the best deal without worrying about your health status. Last year most people picked one of the cheapest silver options in their area, so it would be really helpful to compare those prices to the cheapest options now.
That info wasn’t available when we wrote the post, but we have it now, thanks to a new study from the Kaiser Family Foundation– and the results are good news for anyone shopping for Obamacare coverage next year.
KFF looked at premiums for the benchmark silver plan in 16 major cities across the country. These are the second highest priced silver plans– they’re called “benchmark” plans because subsidies on the exchanges are tied to the price of them. What KFF found was that on average the price of the benchmark silver plan actually decreased:
The average decrease was small– just 0.8%– but in healthcare any decrease in the cost of premiums is practically unheard of. As Larry Levitt, co-author of the report, put it:
Competition driving ACA benchmark premiums down in many places. In health care, it’s like defying the law of physics. http://t.co/OJPrYIGOzG
— Larry Levitt (@larry_levitt) September 5, 2014
Of course, we don’t want to make too much of this study. It only looked at 16 cities where final rate information was available, so it’s not a huge sample size; also in many of the cities premiums did go up. There are a few things we can for sure though.
1. Rate shock is not happening
Let’s say we focus on the biggest increase in the study: Nashville, Tennessee where the price of the benchmark silver plan is going up 8.7%. That’s still a smaller increase than most individual market plans saw in the years before Obamacare, when, on average, individual premium increases were in the double digits, and in some states it was more than twice that:
And of course, it’s also a much, much smaller increase than opponents of Obamacare expected. They were predicting disaster— a doubling or even tripling of rates after the first year, leading to an insurance death spiral where the whole system collapses. Instead, we’re seeing the opposite– what Paul Krugman has called the “Obamacare life spiral.” The risk pool is better than insurers expected, more insurers are entering the marketplaces, and the increased competition is keeping prices down.
2. The KFF study matches what other data has showed
Like we said earlier, there are a few ways you can look at what’s happening to premiums. Charles Gaba, of the website ACAsignups.net, has been keeping track of the changes weighted average plan prices that have been reported so far:
- Maryland: ranges from -14% to +16%
- Mississippi: 2% weighted avg. decrease
- Oregon: 6.8% semi-weighted avg. increase
- District of Columbia: ranges from 8% decrease to small increase
- New York: 5.7% weighted avg. increase
- Arkansas: 2% weighted avg. decrease
- Connecticut: 0.8% weighted avg. increase
- New Mexico: 1.5% semi-weighted avg. decrease
- Washington State: 1.9% weighted avg. increase
- California: 4.2% weighted avg. increase
- Rhode Island: 4.3% weighted avg. increase
- Florida: 13.2% questionably weighted avg. increase
Unlike the KFF study which showed a decrease in the price of benchmark silver plans, when you look at the weighted average price of plans (which remember, reflects mostly changes in the price of popular plans) you find a small increase in most states. This makes sense though; most Obamacare enrollees won’t shop around unless the price of their current plan skyrockets, so popular plans can get away with small increases without losing too many customers. Meanwhile, insurers that didn’t sign up many people have to overcome that inertia on the part of shoppers, so they have to offer cheaper plans to lure new customers– the KFF study reflects these plans.
3. If you already have Obamacare coverage, you’ll still want to compare prices
The amount you end up paying for your plan on an Obamacare exchange depends on three things:
- The actual sticker price of your plan;
- Your income; and
- The cost of the benchmark silver plan.
Even if the price of your plan stays the same (and chances are it won’t), the other two factors work together determine the size of the subsidy you might be eligible for. You can see in the KFF study that the price of the benchmark plan changed at least a little everywhere (and in some cities quite a lot); so wherever you live the size of your subsidy will almost certainly change, even if your income didn’t. Even though shopping for insurance can be a hassle, you at least want to log onto your state’s exchange during the open enrollment period, to make sure you’re not getting hosed. You might find out that you can save a ton of money by switching plans.