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Obamacare's Silver Surprise

There was some surprisingly good news this month about the cost of insurance under Obamacare.  It will be cheaper than expected.  But it remains to be seen – will cheaper insurance satisfy Obamacare doubters on either the left or the right?

I doubt it, but first let’s take a look at the details.

A few months ago, the Wall Street Journal warned of health insurance sticker shock when the Obamacare insurance exchanges open for business in another ten weeks. 

There could be an up-to-50 percent increase in health insurance premiums, the Journal warned.

But a report this month from the Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation (ASPE) brought a surprise. 

Based on data from the first eleven states reporting actual premium numbers, ASPE now says that insurance costs for Obamacare “silver” plans for individuals will be 18 percent lower than originally projected by CBO.

Premiums for the least expensive plans were averaging around $321 per month – before income-based tax credits were subtracted from those costs.

And in five states plus the District of Columbia reporting small group plan numbers, insurance premiums for the all-important “second lowest cost” silver level plans will range from 6 percent to 36 percent less than they would have been if Obamacare were not the law of the land.

What makes a plan a “silver” plan?

Despite what you might assume from the headlines, plan categories are not based on insurance premiums.  They are based on the percentage of the total cost of health care that the plan will pay for everyone in the plan, versus what the plan’s policyholders will pay out-of-pocket.

There are four categories of plans – bronze, silver, gold, and platinum.  All plans will provide coverage for the same group of essential benefits.  But bronze plans will cover 60 percent of the cost of these benefits, silver plans will cover 70 percent, gold plans will cover 80 percent, and platinum plans will cover 90 percent.  Policyholders will pay the rest.

This does not mean that if you have a silver plan, at the end of the year you will have paid 30 percent of your total health care costs and your insurer will have paid 70 percent. 

Those are just the averages, and everyone’s individual experience will vary from the average at least somewhat.

There are two reasons that the cost of the silver plans will get so much attention.

The first is that, along with gold plans, they will be the most widely-available plans.  The second is that the tax subsidies built into Obamacare are based on the projected cost of the second-lowest-cost silver plan.

But not all silver plans will be alike.

One silver plan, for example, may charge a higher premium than another silver plan.  But that plan might cover 75 percent of hospital costs, while the other pays only 70 percent.

Other silver plans might be less expensive than some bronze plans – particularly if they provide less “first dollar” coverage for care – or more expensive than some bold plans.

But while the premium costs of the silver plans may dominate the news and public policy analysis in the coming months, I don’t think that how good you feel about Obamacare is ultimately going to be based on the cost of a silver plan. 

Here’s why.

Deductibles, co-pays, and uncovered health expenses also factor into how satisfied we are with our insurance.

If you believe that being expected to absorb, on average, 30 percent of your health care cost burden when you already have insurance is too big a price to pay, then you will not be happy with a silver plan.  You will either hope you or your employer can afford to pay extra for a gold or platinum plan if one is available, or you will complain as much as you do today about your lousy coverage.

And you will dream again of government-sponsored health care for all.

Conversely, if you think that Obamacare goes too far in requiring insurers to cover at least 60 percent of the health care costs of the people they insure, then you may decline to participate in the system at all and pay the small fine.

And you will join Eric Cantor in the march to health policy irrelevancy by asking the U.S House to repeal Obamacare for a 40th time.

Paul Gionfriddo via email: gionfriddopaul@gmail.com.  Twitter: @pgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.  LinkedIn:  www.linkedin.com/in/paulgionfriddo/
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