Obamacare Premiums Much Lower Than Expected.

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This article was first posted January 1, 2014.

Back in March 2013 Retire Early noted the large spike in monthly health insurance premiums under Obamacare for those with an income exceeding 400% of the Federal Poverty Level (FPL) (i.e., Single=$45,960, Couple=$62,040.) Because of the large tax subsidies available, there was a huge benefit to keeping your income below that 400% FPL threshold.

Table One illustrates the refundable tax credit (subsidy) available to an applicant with an income just below the 400% FPL limit for a benchmark Silver Plan (70% actuarial value). The "High-Cost" and "Low-Cost" bands are set at 20% over/under the median.

Table One. Obamacare 2014 Annual Premium Congressional Budget Office (CBO) 2009 Estimate Inflated to 2014 Cost
Age	400% FPL 2013-2014 Est.	Max Premium at 9.5% of Income	Annual Policy Premium 70% Actuarial Value 50-Year-Old	Annual Policy Premium 70% Actuarial Value 55-Year-Old	Annual Policy Premium 70% Actuarial Value 60-Year-Old
Single High-Cost Area	$45,960	$4,366	$8,400 (Subsidy = $4,034)	$10,300 (Subsidy = $5,934)	$12,200 (Subsidy = $7,834)
Single Median-Cost Area	$45,960	$4,366	$7,000 (Subsidy = $2,634)	$8,575 (Subsidy = $4,209)	$10,150 (Subsidy = $5,784)
Single Low-Cost Area	$45,960	$4,366	$5,600 (Subsidy = $1,264)	$6,850 (Subsidy = $2,484)	$8,100 (Subsidy = $3,734)

More recently, a study of monthly premiums in the 36 states where the Federal Government is running the insurance exchange revealed very good news on pricing. On average, the actual premiums being offered on the exchanges are 34% below the CBO estimates. (See Table Two below.) About 80% of the premiums surveyed fell within 20% of the median. The highest cost area in the 36 states covered by the Federal Exchange was the 12 rural counties in Southwest Georgia. The lowest premiums were found in Tucson, Arizona and the surrounding area. Indeed, in about 10% of the area served by the Federal exchange, a 55-year-old with an income at 400% FPL will find that the monthly premium on the benchmark Silver Plan is so low he won't qualify for a subsidy.

Table Two. Comparison of 2014 Estimated Premiums with actual annual premiums available in the 36 states covered by the Federal Exchange 55-year-old applicant without tax subsidy Benchmark Silver Plan
.	2014 Estimate	Actual 2014 Premium (per year)	Difference (percent)
Highest-Cost Area (12 Rural Counties in Southwest Georgia)	N/A	$10,080	.
90th Percentile	N/A	$6,738	.
Single High-Cost Area (+20% above Median)	$10,300	$6,755	-34%
Single Median-Cost Area	$8,575	$5,628	-34%
Single Low-Cost Area (-20% below Median)	$6,850	$4,500	-34%
10th Percentile	N/A	$4,572	.
Lowest-Cost Area (Pima & Santa Cruz Counties (Tucson) Arizona)	N/A	$3,528	.

The non-partisan Congressional Budget Office (CBO) issued an update to their estimate of the long-term cost of the Affordable Care Act (aka 'Obamacare') noting a "sufficiently broad and persistent" slowdown in health care cost growth.

Relative to our March 2010 baseline projections, our latest projection of spending in 2020 for Medicare is now $137 billion, or 15 percent, lower for technical reasons, and projected spending for Medicaid is now $85 billion, or 16 percent, lower for technical reasons. (Those figures leave aside revisions caused by enacted legislation and updates to our economic forecast, and focus on the remaining so-called “technical” revisions.) During that period, we also revised down our projection of private health insurance premiums per enrollee in 2020 by about 9 percent. (CBO Sept 19, 2013)

If you are a retiree currently buying your own health insurance on the individual market, you should check out the prices on Healthcare.gov. You'll likely be pleasantly surprised. The open enrollment period ends March 31, 2014.

Related Web Sites for additional information.

Time Magazine -- Bitter Pill: Why Medical Bills Are Killing Us
http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-killing-us/

CBO estimate of health insurance premiums under Obamacare, Nov. 30, 2009
http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/107xx/doc10781/11-30-premiums.pdf

Health Insurance Premium Credits in the Patient Protection and Affordable Care Act (ACA)
- Congressional Research Service, June 13, 2012
http://www.fas.org/sgp/crs/misc/R41137.pdf

Kaiser Family Foundation - Health Reform Subsidy Calculator
http://healthreform.kff.org/SubsidyCalculator.aspx#incomeAgeTables

Federal Register - Health Insurance Premium Tax Credit
https://www.federalregister.gov/articles/2012/05/23/2012-12421/health-insurance-premium-tax-credit

IRS - Affordable Care Act Tax Provisions
http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

State of Indiana -- Actuarial analysis of Obamacare.
http://www.in.gov/aca/files/Individual_Market_Premium_Rate_Change_Variability_under_the_ACA_Final.pdf

State of Oregon -- Actuarial analysis of Obamacare.
http://www.cbs.state.or.us/ins/consumer/federal-health-reform/wakely-aca-actuarialanalysis-20120731.pdf

Actuarial Value and Cost-Sharing Reductions Bulletin
http://cciio.cms.gov/resources/files/Files2/02242012/Av-csr-bulletin.pdf

Plan Levels and Standardization of Coverage
http://www.acscan.org/pdf/healthcare/implementation/background/PlanLevelsStandardizationofCoverage.pdf

Commonwealth Fund -- Choosing the Best Plan under Obamacare
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/Aug/1626_Lore_choosing_best_plan_HIE_actuarial_ib_v2.pdf