Report: ACA's Effect on Insurance Premiums Varies by Income Level

The effect of the Affordable Care Act on Californian's individual health plan premiums will vary significantly according to members' income level, according to a new report, the New York Times reports (Pear, New York Times, 3/28).

The report was developed by consulting firm Milliman and commissioned by Covered California, the state health insurance exchange (Sanders, "Capitol Alert," Sacramento Bee, 3/28).

Report Findings

The report found that middle-income residents could see individual health plan premiums increase by an average of 30% and total health care costs increase by an average of 20% under the ACA.

However, families earning less than $60,000 annually could save up to 84% on premiums and 76% on total care costs with the help of federal subsidies, according to the report.

Researchers found that residents with annual incomes between 250% and 400% of the federal poverty level who currently are enrolled in individual plans will pay an average of 47% less when they have access to subsidies under the ACA (Terhune, Los Angeles Times, 3/28).

In addition, the report estimated that premium rates for individual health plans in California would increase by an average of 9% in 2014 without changes under the ACA (AP/Modern Healthcare, 3/29).

The report attributed overall cost increases to guaranteed coverage for sicker applicants under the ACA (Los Angeles Times, 3/28).


Robert Cosway -- an actuary at Milliman -- said that under the ACA, "[h]ealth insurance will become relatively less expensive for people with chronic conditions and relatively more expensive for healthier people." He added that some healthier individuals might drop their health insurance coverage because of increasing premiums (New York Times, 3/28).  

Patrick Johnston -- president of the California Association of Health Plans -- said, "These richer benefits, more predictable coverage and subsidies come at a cost," adding, "All these expansions add to the already increasing cost of care" (Los Angeles Times, 3/28).

However, Peter Lee -- executive director of Covered California -- said, "There are 5.3 million Californians who will qualify to purchase insurance through the exchange," adding, "Insights gained from this research confirm that most people will experience a positive impact" (New York Times, 3/28).
Frank Apgar
Hatti, under ACA provisions, if an individual doesn't have health care coverage and then is diagnosed with a major health problem such as breast cancer, all they need to do is to then apply for an individual policy, then get the, radiation therapy and chemotherapy. Recall the ACA provisions have a guaranteed issue requirement, w/o any underwriting or premium adjustment based on health history. By foregoing coverage before they are diagnosed, what will have been their premium subsidy of others, will not taken place, they will have saved their own money. The resultant premiums for those with coverage though will need to be adjusted upwards from what they otherwise would have been given the lack of the healthy individuals subsidizing the others who are consuming resources. The only answer is to have penalties strong enough that would require all to have coverage at all times, something that is not part of the ACA.
Hatti Hamlin
David and Karen, you are so right about how it works. But it will be tragic if some workers who now purchase individual insurance opt out due to the expense. A major health problem can hurt even affluent families. For example, without insurance, breast cancer treatment will top $20,000 and could be as high as $100,000 depending on how advanced it is (but also on how long the patient survives after treatment and must be continually monitored.) If you're close to retirement (the median age of first diagnosis is 61)that cost will hit you even harder because you don't have time to make up for the lost savings. Bottomline, anybody who's smart is going to bite down hard and keep his coverage, knowing all the while that the higher costs he's paying is mostly subsidizing others
Karen Darnall
ACA subsidies will cause some workers to cut their hours to keep family income below $60,000. Earning > than 400% of FPL will result in total loss of cost-sharing. Other “cliff effects” will be more apparent as more people learn how to game the system.
David Dickinson
Let's call a spade a spade. When you read above ".....families earning less than $60,000 annually could save up to 84% on premiums and 76% on total care costs with the help of federal subsidies....", what this really means is that those families will have 84% of their premiums paid for by some other taxpayer. There is no "saving", just the usual government redistribution.

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