Health Insurance Health Reform

Are Obamacare health plans a good deal?

Marketplace Money reports that a PwC study finds that Obamacare plans are actually lower cost than comparable plans outside the Health Insurance Exchanges.

“That’s one of the misperceptions out there. That somehow they are barebones or you are not really getting adequate medical insurance,” she says.

Connolly says even when you factor in all the out-of-pocket costs, the average top tier gold and platinum plans are similar to employer ones.

So did President Obama just drive a tough bargain? The answer is, not exactly. There are two reasons why the Exchange plans may be lower cost. First, exchange plans have notoriously narrow networks. Although exchange plans have similar monetary generosity as employer plans, they offer fewer provider choices.

Second, exchange plans may be using long-term pricing strategies. Basically, health insurers may be willing to take a loss this year. The reason is that switching plans is expensive for individuals. Even if there is no monetary cost, to switch plans requires doing research and understanding whether your favorite provider is on the plan, what the coverage is and other factors. Thus, once people enroll on the exchange plans, health insurers may increase premiums to take advantage of this lock-in effect.


  1. I think the article you linked from Marketplace Health Care is somewhat misleading. It cites a true statement from a PWC analysis – but leaves out a lot of relevant stuff. In so doing, writer Dan Gorenstein reminds us that when the subject is complex it’s usually not sufficient to tell the truth – one must also strive to tell the whole truth and nothing but the truth.

    Here is the PWC statement that Dan Gorenstein cites:

    “even when you factor in all the out-of-pocket costs, the average top tier gold and platinum plans are similar to employer ones.”

    Gorenstein does not link to his source. I found a source that comments on the same PWC analysis

    Among other things, this source I found says “insurance premiums on the new health exchanges are cheaper than those paid by the majority of Americans who have employer-based coverage . . . still, PwC’s study doesn’t account for other costs to consumers—like deductibles, which are likely to be more expensive under the new plans . . . the PwC study also doesn’t mention other changes that affect consumers like insurers narrowing provider access . . . and a number of top hospitals and doctors are not accepting insurance provided by the exchanges because of low rates and more bureaucratic red tape.”

    So it appears there’s a lot that Gorenstein fails to mention. There also appears to be a lot that PWC failed to factor into their analysis. Still, the average premium cost found by PWC for the exchange gold and platinum plans may indeed be “true.” So why wouldn’t that finding be useful?

    Because most people enrolled thru an exchange did not select a gold or platinum plan – perhaps as few as 10% did. So it is misleading for Gorenstein to push PWC’s comparison of gold and platinum plans with employer plans, when in fact most people have not enrolled in a gold or platinum plan. Of course, the silver and bronze plans where most people have enrolled, require much more cost-sharing than the gold and platinum plans.

    I think people are buying the lesser silver or bronze coverage in order to avoid the higher premium cost of gold and platinum. That might save them in premium cost, but places them at risk for substantial copayments they may not be able to afford should they become seriously ill or suffer an accident. In other words, these people may have unwittingly underinsured themselves. Seems to me that’s precisely the problem that Gorenstein is using the PWC analysis to suggest does not exist.

    Time will tell- but I continue to have a bad feeling about all of this.

  2. Why are rates higher than expected? Shouldn’t the new and younger enrollees allow for rates to come down? What will stop health insurance companies from capturing the extra money from new enrollees as profit and keeping rates high? It seems like well intended programs are always captured by corporate interests. When the student loan program expanded universities obliged by increasing tuition at unprecedented rates. They spent the extra money on luxurious buildings and larger administrative staff rather than keeping tuition low.

    Hopefully there are not many barriers for new competition to enter the insurance exchanges and undercut the prices. When the mandate begins there will be a lot of cash coming in to insurance companies. I hope Obama has some way to hold their feet to the fire when they enjoy the increased enrollment of the young and healthy. The cost of ACA insurance will determine how this program is ultimately received. In a year or two the price of health insurance will be much more important than a few computer glitches on start-up.

  3. tommy, you suggest that nothing “will stop health insurance companies from capturing the extra money from new enrollees as profit and keeping rates high?”

    And then you suggest that “new competition [in] the insurance exchanges” would somehow “undercut the prices.”

    I have a question: Why would a “new” competitor have a greater incentive or be any more likely than an old one, to undercut the prices?

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