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Obamacare could lower premiums in New York, new study finds

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There's pretty widespread acknowledgement that, under Obamacare, many in the individual market will see premiums go up. Health and Human Services Secretary Kathleen Sebelius has acknowledged this, as have other top Democrats.

This is what happens when insurance plans are required to cover Americans with potentially costly, pre-existing conditions: More sick people, who require additional care, gain coverage. While some will see their premiums decrease (older Americans, for example, due to limits on age rating), states are already seeing significant premium increases.

That's the case in most of the country — but not in New York State. There, the state is actually expecting some big changes likely to lower health premiums, according to a new analysis prepared for the New York Health Benefits Exchange.

All of this has to do with a law that New York State passed in 1993, which mirrored the Affordable Care Act in a lot of ways. It required insurance companies to accept all customers, much like Obamacare ends pre-existing conditions. It went beyond the health overhaul in requiring carriers to charge all customers the exact same premium.

The health care law allows insurers to charge older consumers three times as much as young subscribers, meant to cover the higher medical costs that these customers tend to have.

But without the requirement to purchase insurance — the health law's individual mandate— premiums in New York shot up. One 2007 study, by the actuarial firm Milliman, found that monthly payments could top $1,000 per month.

"Current non-group premiums are extremely high," Deloitte reiterates in its new report. "These high premiums are a result of the age of this block of business, guaranteed issue, pure community rated market, no income-related subsidies, and the small size of this market."

The health care law will shake up New York's individual market in an especially interesting way. It will require New Yorkers to purchase health coverage, a requirement that doesn't exist right now.

While insurers in states such as Maryland expect the general mix of people they cover to become significantly less healthy, as those with pre-existing conditions gain access to coverage, New York expects the exact opposite: Healthier people will be buying coverage.

Deloitte expects that this influx of healthier consumers into the market will mean that the average person buying her own policy will have health care costs that are 13.9 percent lower than those of the current population buying now.

A less sick population generally means a less expensive population, as insurers calibrate their premiums to the amount of claims they expect to pay in the next year.

"The expected increase in the size of the non-group market post-ACA could introduce a much more typical distribution of health care needs to this market," the Deloitte paper predicts, "Thus leading to significantly lower premiums."

Whether this will lower health premiums — or just hold them steady — remains to be seen. In Vermont, which has similar insurance regulations to New York, health plans have proposed monthly premiums similar to what they charged consumers last year.

Blue Cross Blue Shield of Vermont did not, according to its rate filings, expect the population of its consumers to become healthier, the assumption that Deloitte has made.

"The morbidities of the populations for which we have no experience data were assumed to be the same as the morbidities of the categories used as surrogates for
them," the health plan wrote in state filings last month.