California health officials on Thursday unveiled the likely rates that insurers will charge under the health-care law backed by President Barack Obama — and they are lower than expected, rebutting warnings by critics that many people will experience “rate shock” once the law is fully implemented.
On average, a person who chooses a mid-level plan can expect to pay around $321 a month, about $100 less than the amount projected by the Congressional Budget Office when the law was being debated in Washington. For low-income people, much of that cost will be offset by rebates from the federal government.
But some middle-income people who don’t get insurance from their employers will end up with hefty monthly bills, California officials acknowledged.
“There have been many predictions of sticker shock, and well, there may be some sticker shock,” Peter Lee, director of Covered California, the state agency implementing the law, said at a news conference – explaining that customers would be surprised at how low the rates are.
The rates released by California offer the most complete picture so far of what Americans might expect under the Affordable Care Act this fall when they can start buying insurance on health exchanges, the online marketplaces where the uninsured will be able to find coverage and get government subsidies.
The exchanges are slated to be open in October, in time for the Jan. 1 requirement that most Americans carry health insurance or face a fine.
California is the eighth state to release information about what insurers would like to charge on the exchanges. It has the largest uninsured population in the country, with more than 7 million people who lack coverage, and was one the first states to embrace the health law.
Maryland is among the states that have released information about proposed insurance rates. Maryland’s largest insurer, CareFirst, has announced it will seek a 25 percent increase in the premiums it charges on the individual market. Other insurers requested more modest increases.
Rates proposed by the insurers have varied widely depending on age and geography. But analysts say the rates have not been as high as feared. Some worried the rates would be driven up by an expected influx of sick people into the system and because the law requires insurance companies to offer more services such as maternity care, which is not always included in the basic coverage available on the private market.
The law’s supporters argued that competition and other factors would keep the costs down. That appears to be the case in California, where 33 insurance companies applied to offer plans on the exchange, and state officials rejected all but 13.
“I actually think it’s pretty remarkable that you can have that level of reform and have the prices be as reasonable as they are,” said Gary Claxton, a vice president at the nonpartisan Kaiser Family Foundation.
Still, the costs could be substantial for some individuals and families who do not qualify for federal assistance. The ones likely to have the highest rates are entrepreneurs in their 20s and 30s, said Micah Weinberg, senior policy adviser for the Bay Area Council, a San Francisco-based business advocacy group that supports the health law.
“A young, self-employed entrepreneur making $50,000 a yea — not really rolling in it — they could see really dramatic insurance rates,” he said.
And there is no guarantee that the rates will remain as low in the following years, especially if sick people sign up en masse next year. That could dramatically increase costs for insurers, who would then have to recoup the money by increasing premiums.
“They’re low enough that you have to think, are there going to be health plans in this market that are underwater,” said Caroline Pearson, vice president of health reform at Avalere Health, a consulting firm. “It’s so hard to predict because you don’t know who’s going to show up on the market.”