When health insurance premiums under the Affordable Care Act (“Obamacare”) were released on Wednesday, they were subject to mixed reviews. Some said the premiums were too high to be considered “affordable.” Others said the rates were actually lower than expected. But the varying opinions could have a lot to do with how much the premiums vary based on any number of factors. Depending on your age, income, and geographic location, you may be either excited about Obamacare or completely outraged.
“For millions of Americans, these new options will finally make health insurance work within their budgets,” said Kathleen Sebelius, Secretary of the Dept. of Health and Human Services (HHS).
Health Insurance Marketplace Premiums For 2014
The HHS released a report that breaks down the health insurance marketplace premiums that will be available for enrollment on Oct. 1 and will be implemented on Jan. 1. HHS will support and fully run health insurance marketplaces in 36 states beginning in 2014. Eleven states and the District of Columbia are implementing their own, state-run marketplaces.
The report focused on the plans with the lowest premiums in each state because those are the ones that HHS expects consumers to prefer. It also focused pretty heavily on 27-year-old consumers because they are the beginning of the target age range for healthcare exchange consumers. People under the age of 27 can still be covered under their parents’ health insurance plans.
"Because of the [Affordable Care Act], three million young adults under age 26 have gained coverage by staying on their parents’ plan," said Obama at an event in Maryland on Thursday.
According to the Washington Post, the average monthly premium for an individual policy will be $328 in 2014. That’s before calculating the tax credits available to low-income Americans. And, many officials believe that these prices — once the credits are calculated — will be reasonable compared to what they had previously been without the healthcare exchanges. The majority of Americans who are currently uninsured will be able to find a policy for $100 or less monthly.
“Think about that: Good health insurance for the cost of your cell phone bill, or less,” said Obama.
How Obamacare Exchanges Will Calculate Your Rate
Here’s how it works. If your income is low enough, then you’re eligible for federal subsidies. Subsidies are financial support granted by the federal government to those in need. So, while a price on an insurance plan may seem high at first, it may actually be a lot less once you calculate government assistance. A low income coupled with an expensive health insurance plan in your state would increase the amount of your subsidy.
For example, if you make about $17,000 a year, the government won’t let you pay more than $60 a month for the lowest-priced plan. That’s about four percent of your income. The government will then cover, or “subsidize,” the rest.
"All told, nearly 6 in 10 Americans without health insurance today will be able to get covered for $100 or less," Obama told supporters.
Why The Rate Variations From State To State Don’t Necessarily Matter
Based on the subsidies, the government will help lower-income individuals and families — even in states where the premiums seem extremely high. Overall, most rates — 95 percent, in fact — fall below the government’s initial projections. Even before tax credits, the rates will be 16 percent lower than expected. In addition, the choice of plans is so vast that there’s something for almost everyone at every income level.
“The more choices you have, the lower the premiums,” a senior Obama administration official said. “States with few insurance companies who didn’t get a lot of new competitors this coming year, still have higher premiums.” The report found that states with “the lowest premiums have more than twice the number of insurance companies offering plans than states with the highest premiums.”
For more information on how much you will have to pay for health insurance under the Affordable Care Act, visit The Henry J. Kaiser Family Foundation’s website and use the foundation's subsidy calculator.