Are These Marketplaces Affordable?

In the Affordable Care Act marketplaces, which now serve 7.3 million Americans, some premiums are going up while others are going down. Based on data available so far, we reported last week that the average premiums for last year’s most popular plans would rise 8.4 percent, but that people willing to switch plans could get much better deals — an average 1 percent increase, and even decreases in some markets.

But is 8.4 percent an alarming increase or a good deal for a plan you like? Is a 1 percent increase a disappointment or a terrific bargain? To put both increases in context, we’ve assembled some historical data on insurance markets that existed before the Affordable Care Act.

None are a perfect comparison group — there are many reasons the new marketplaces and the people shopping there are different from customers in the older markets. But, taken together, they can give us some sense of whether the health law is giving customers a good deal on insurance.

The overall assessment: By nearly any comparison, the average 1 percent premium increases available to consumers willing to switch plans is remarkably low. We are in a period of record-low health-care spending growth. But even in this period, premium increases lower than inflation are unusually good news.

Even the average 8.4 percent increase for people who renew in the most popular plans falls within the range of historical increases in the individual market. It’s not on the low end, but it’s not in the category of runaway premium growth that many critics of the Affordable Care Act warned might be coming.

Recall that back before January, when the marketplace plans launched, the individual insurance market was a very different place. Insurance companies were free to exclude customers with previous illnesses. People tended to cycle in and out of coverage very frequently as their income and employment status changed.

And regulations in some markets limited the amount that insurers could vary premiums by age, making products unaffordable for many young, healthy customers.

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Jeffrey R. Ungvary President

Jeffrey R. Ungvary