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Five Things To Know About Obamacare Premiums: A Guide For The Perplexed

Consumers are confused about premiums under Affordable Care Act

Julie Appleby | 8/5/2013, 6 a.m.
Premiums will cost what?

Premiums will skyrocket next year! Premiums will be lower than expected! Premiums will be about the same!

Consumers are understandably confused after weeks of conflicting pronouncements about the expected cost of plans, for individuals and small groups, to be sold in new online insurance marketplaces under the federal health law beginning October 1.

New York regulators said average premiums on those plans will be half of what they cost now, while Indiana warned of an average 72 percent increase. Florida’s insurance officials projected 30 to 40 rate increases, while the White House trumpeted a report saying that rates in 10 states and the District of Columbia will average 18 percent less than forecast.

How is a consumer to make sense of this? For starters, state rates vary considerably because state regulations differ, although that is expected to lessen under the health law. But a bigger factor is that state officials who have opposed the health law are inclined to compare measures that show a big increase, while those in favor are inclined to do the opposite.

"Premiums across states vary a whole lot less than the spin does," said Larry Levitt, a senior vice president at the Kaiser Family Foundation, a nonpartisan health policy research organization. (KHN is an editorially independent program of KFF.)

Most policy analysts concur that average premiums will go up for younger, healthier people—and that they will get better benefits than they do now—but that rates may fall for older or sicker Americans, as new rules go into effect January 1. Increases may be offset for many of those buying coverage through tax credits available to people with low and moderate incomes.

In general, the rates for individual policies look an awful lot like what employers pay now for workers’ coverage, said William Custer, who studies health insurance at Georgia State University.

"The goal was to let people buy comparable coverage to what employers get with comparable prices. It seems like that’s the premiums we are seeing," he said.

To help you parse reports in your state, here are five things to keep in mind when evaluating claims about the cost of coverage that starts in 2014:

1. Comparing apples to apples is virtually impossible. The first thing to understand is that policies that will be sold to individuals and small businesses in online marketplaces are brand new and must cover a range of essential benefits that were not always covered in the past. That includes prescription drugs, hospitalization and maternity coverage. Consumers cannot be turned away or charged more because of health problems, as they can now in most states. Women cannot be charged more than men. In addition, the amount you'll have to pay out of pocket will be capped at $6,350 for singles or $12,700 for families. Currently, almost a third of individual policies have caps that exceed those amounts, according to a report by Kaiser Health News and U.S. News & World Report. "You have to compare apples to apples, to the extent you can. But those apples don’t exist," said Joseph Antos, an economist at the conservative American Enterprise Institute. "There isn’t a good way to do a comparisons."