With ten states and D.C. having reported preliminary information on the prices of plans in their new health insurance exchanges, partisans on both sides of the Affordable Care Act have pounced on the news to reinforce their preconceived notions.
Supporters of the law report that “rate shock is a crock” and that prices are “surprisingly low,” while opponents look at the same data and conclude that “Obamacare will increase individual health insurance premiums.” Gary Cohen of CCIIO’s recent announcement that rates on the federal exchange will be made public in September will surely raise the fevered pitch of commentary.
But what do these numbers actually represent? Carriers submitting bids start with the prices of their current products and then adjust them for the myriad changes in the insurance market that go into effect on January 1, 2014.
Those changes include: elimination of health status underwriting, compression of rates by age, partial standardization (and in most instances significant expansion) of the benefit package, expansion of the market to a largely unknown population due to premium subsidies, effects of the “three Rs” (risk adjustment, reinsurance, and risk corridors), a completely new product distribution system, and a host of other changes in the health care and health insurance environment.
Needless to say, these many changes introduce a tremendous amount of uncertainty.
