Let’s Stop Using Bogus Comparisons of Health Insurance Premiums to Throw Darts at Health Reform

Avik Roy, repeating his claim that health reform will make insurance less affordable, criticizes the Obama administration for announcing various premiums that people will pay next year for coverage in the new insurance exchanges without comparing them to what people now pay.  He quotes the charge by Douglas Holtz-Eakin, head of American Action Forum, that, “Instead they try to distract with a comparison to a hypothetical number that has nothing to do with the actual experience of real people.”

Then Roy proceeds to do just that.

Roy compares premiums for the cheapest individual market plans available in 2013 with the cheapest “Bronze” plans for people ages 27 and 40 available next year in the exchanges.  This comparison isn’t apples-to-apples; it’s more like apples-to-avocados.  It:

• Downplays the premium tax credits that many people in the individual market, particularly young adults, will receive under health reform. Once you factor in those tax credits, many people who buy their own insurance today will pay less next year.

• Ignores the fact that many people can’t get coverage in today’s individual market but will be able to under health reform. Many people are denied coverage or quoted unaffordable premium rates because they have a pre-existing health condition.  That means premiums in the individual market are lower than they would be if insurers were barred from excluding people in poorer health, as they will be starting next year.

  Under health reform, people who haven’t had access to the individual market will finally be able to obtain coverage, without being penalized or excluded because of their health problems.

• Ignores the fact that today’s lowest cost plans often don’t cover essential benefits, but plans offered in the exchanges will. In comparing current premiums for cheap health plans in various states with next year’s premiums under health reform, Roy says little about what people’s actual experience would be if they have one of these cheap plans and get sick or injured.

  Take Nebraska, where Roy says 27-year-olds will face the biggest premium increase under health reform.  We examined the five cheapest plans in October 2013 in one zip code in Nebraska and found that none covered mental health services or substance abuse treatment, and two didn’t even cover prescription drugs, visits to primary-care doctors, or visits to specialists such as oncologists.  Only one provided maternity coverage.  And, two of these plans had a $10,000 deductible, meaning that enrollees must pay that much of their own money on covered benefits before the plan starts contributing.

  In comparison, plans offered in the new exchanges will have to provide a comprehensive array of benefits (including all of those just mentioned) and limit what consumers pay out of pocket.

• Pretends the plans with cheapest sticker prices in the market today represent what people buying their own insurance are actually purchasing. In fact, we do not know how popular these particular (and often extremely limited) plans are (for example, whether they enroll large numbers of young adults) or how much people actually pay for them once the insurer takes applicants’ health status and other factors into account.

One other point is worth noting:  27-year-olds are not 27 forever.  A healthy 27-year-old with bare-bones coverage may pay more next year for a better plan, but as she gets older or experiences health problems, health reform’s changes to the individual insurance market will mean she won’t have to worry about whether she has access to decent coverage.