California Obamacare premiums: No ‘rate shock’ here

May 23, 2013

Health insurers will charge 25-year-olds between $142 and $190 per month for a bare-bones health plan in Los Angeles.

A 40-year-old in San Francisco who wants a top-of-the-line plan would receive a bill between $451 and $525. Downgrade to a less robust option, and premiums fall as low as $221.

These premium rates, released Thursday, help answer one of the biggest questions about Obamacare: How much health insurance will cost. They do so in California, the state with 7.1 million uninsured residents, more than any other place in the country.

Multiple projections expected premiums to be relatively high.

The Congressional Budget Office predicted back in November 2009 that a medium-cost plan on the health exchange – known as a "silver plan" – would have an annual premium of  $5,200. A separate report from actuarial firm Milliman projected that, in California, the average silver plan would have a $450 monthly premium.

Now we have California's rates, and they appear to be significantly less expensive than what forecasters expected.

On average, the most affordable "silver plan" - which covers 70 percent of the average subscriber's medical costs - comes with a $276 monthly premium. For the 2.6 million Californians who will receive federal subsidies, the price is a good deal less expensive, the amount noted in green below.

Health premiums will be lower for the youngest Americans. Here's how the costs work out for a 25-year-old purchasing the same health plan. 

These premiums really underscore the big role that the tax subsidies play. Available to Americans who earn less than 400 percent of the poverty line ($45,960 for an individual), these federal payments limit an individual's premiums to a specific percent of their income. An individual earning 150 percent of the poverty line, for example, won't be expected to spend more than 4 percent of his or her income on a health plan.

That means that the individual earning $17,235 (150 percent of the poverty line) only ends up paying a fraction of the $230 premium.The federal government picks up the rest of the tab.

For a less robust "bronze" plan, which covers 60 percent of the average beneficiary's costs, the tax credit could actually cover the entire premium for low-income twenty-somethings. That's what you see in the upper-left corner of the chart below, which shows how much it would cost a 21-year-old earning $17,000 to buy the most affordable bronze plan: Nothing.

About 2.6 million Californians are expected to qualify for some level of subsidy support. The amount they receive depends completely on their income level. Still, these credits could end up being a big boon to the Obama administration as it looks to convince low-income Americans to enroll.

 

 

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