(Bloomberg) — Health insurance under the Affordable Care Act will cost individuals at least $2,988 a year on average, a price that Republican opponents may target as out-of-reach for many Americans who don’t qualify for U.S. subsidies.
While the $249 monthly payment is intended to be discounted through tax credits, less than half of people now buying insurance on their own may get that help. The release of the data by the Obama administration comes just six days before the ACA’s insurance exchanges open for enrollment, and a day after Ted Cruz, a Texas Republican, took the floor of the U.S. Senate to oppose the law.
The affordability of the overhaul has polarized debate since the act passed in 2010. While the law’s cheapest plans offer more care than minimal policies available today, including guaranteed coverage for people with pre-existing conditions, their cost may persist as an issue even though it affects only a relatively small percentage of people.
The law’s long-term success “will depend on the changes that are made over the next couple of years to address the affordability issue,” says Brian Wright, an insurance analyst at Monness Crespi Hardt & Co. in New York. “If you have modifications that can help address those issues, then it will ultimately be successful. If not, then it’s an open question.”
Premiums nationally are about 16% less than the Congressional Budget Office projected in 2012, the government said in its report, a factor that may reduce the total cost for the law, now estimated at $1.4 trillion over a decade.
Individual mandate
The act was created to benefit low-income people, including 48 million now uninsured — about 15% of the population, according to the Census Bureau. To help offset the cost of older, sicker individuals in this group, the law mandates that every American buy insurance, including young, healthy adults who pay for health plans but rarely use them.
People who have insurance through their jobs, about 55% of Americans, aren’t directly affected by the law and are automatically considered in compliance with the mandate.
About 60% of the uninsured will find coverage for no more than $100 a month when taking into account subsidies and the effect of Medicaid programs for the poor, according to the U.S. Department of Health and Human Services.
“The prices are affordable,” Gary Cohen, director of the agency’s Center for Consumer Information and Insurance Oversight, said on a conference call with reporters.
The report outlined rates for exchanges in 47 states and illustrates the effect of subsidies available for people earning less than four times the poverty level — about $94,000 for a family of four. None of the companies selling plans in the states were identified.
The rates vary widely by state. The highest prices noted in the data are in Wyoming, where the cheapest bronze plan averages $425 a month for an individual and the cheapest silver plan $489. In Minnesota, prices average $192 a month for the cheapest silver plan and $144 for the lowest bronze plan.
Republicans, who have said the individual mandate curtails personal liberty, have argued that many Americans will pay more for insurance as a result of the law and that added benefits it brings may not be worth the cost.
GAO report
The release of exchange premiums comes after the U.S. Government Accountability Office reported in July on the cost of insurance individuals buy today. Those data show that Americans who are young and healthy are able to buy inexpensive policies. A 30-year-old nonsmoker can pay as little as $373 a year in Georgia or $1,027 in Alaska, the GAO reported.
The release of prices by HHS was the last major public step for the government as it anticipates that at least 7 million people will buy plans in the health law’s insurance exchanges during the open enrollment period that starts Oct. 1 and runs through March 2014.
Republicans have been persistent in their attack of the health law, which passed Congress with no support from their political party. Senator Cruz, the Texas Republican, has been leading an effort to force a spending bill through Congress that eliminates funding for the health law. President Obama has said he would veto any such legislation.
“I intend to speak in support of defunding ‘Obamacare’ until I am no longer able to stand, to do everything that I can to help Americans stand together and recognize this grand experiment three and a half years ago is quite simply not working,” Cruz said late Tuesday on the Senate floor.
While some individual consumers may pay more for coverage, average prices in the new exchanges are still lower than what the government expected. That may signal a turn in the debate as the Obama administration asserts itself against Republicans, says Dan Mendelson, the chief executive officer of Washington-based consulting company Avalere Health LLC.
“There are going to be a lot of people who are getting big subsidies, and for the first time in their lives have insurance,” Mendelson says. “At that point it becomes harder to politicize this.”
Administration officials working on the health care law privately expressed confidence that the lower cost of insurance after subsidies and easier access to care for people with pre-existing conditions will bolster support. They anticipate gaining an entrenched constituency that protects Obamacare from political attack along the lines of Medicare or Social Security.
“Just look for yourself,” Obama said in a speech Tuesday at the Clinton Global Initiative in New York, summarizing the pitch. “You will discover that this is a good deal for you.”
Obama also has claimed credit for helping to contain medical spending, saying in his February state of the union speech that “already, the Affordable Care Act is helping to slow the growth of health-care costs.”
