Covered California, the agency responsible for implementing President Obama's Affordable Care Act, announced on Thursday that premium rates submitted by insurers for the state's health care exchange are lower than estimated.
This comes as much-needed good news for the Obama administration, especially a week after House Republicans tried to repeal the Affordable Care Act for the 37th time. Thirteen insurers presented rates that will be available to as many as five million people in California.
The announced rates are far below estimates and the average numbers show that a middle-aged Californian could pay anywhere from $40-$300 per month. The wide range includes the variety of benefits offered combined with the use of federal subsidies to pay for healthcare.
ThinkProgress's Sy Mukherjee reports that millennial Californians looking to buy the cheapest "bronze"-level plan could pay as little as $170 a month before subsidies.
"These rates are way below the worst-case gloom-and-doom scenarios we have heard," said Peter Lee, executive director of Covered California. Republicans have been drumming up fear of skyrocketing premiums for consumers as recently as last week when House Republicans predicted premium rate hikes as high as 66% for California.
One of the valid justifications for higher premiums is the 80/20 cap Obamacare imposes on health insurance companies' profits. The cap forces health insurance providers to only spend 20% of the premium dollars on administrative costs and 80% of it on medical expenses, greatly squeezing profit margins.
Lee did caution that some consumers could face higher costs. A new analysis by the Center for American Progress found that only 3% of the millennial population would see higher costs. John Gridley of The Lund Report warns that premiums are also set to increase with age on a yearly basis instead of the five-year age periods. This could offset early savings and end up being more expensive in the long term. These rates also do not apply to employer-provided health insurance policies, whose rates could be raised further by some of the insurance providers to offset lower rates on the exchanges.
Many are still optimistic despite these concerns. Competition between insurance agencies is a "revolutionary improvement," according to Anthony Wright, executive director of the health advocacy group Health Access. He told Reuters that it represents a "move from a broken market where people are charged by how sick they are, to a competitive market where people pay what they can afford, based on a percentage of their income, on a sliding scale.”
California and Oregon are poised to be the first to implement Obamacare, and will be hawkishly watched by both sides of the political spectrum. The Republican Party might just lose its mind if President Obama's plan really does draw down premium prices without compromising health care benefits. However it is still too early to understand the outcome of the unwieldy regulations in Obamacare and how they will be implemented on a state-to-state basis.
For now, Oregon's insurance providers have lowered their initial bid for rates, so something's working.