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analysis

Health insurance spike is misleading

The average health insurance plan in Indiana will increase by 72 percent next year and hit $570 a month under the 2010 health care law, the state announced Friday. What does that tell us?

It certainly doesn’t tell us insurance coverage in Indiana will be cheap; that much is obvious. But it doesn’t really tell us that Indiana’s premiums are outrageous –- in fact, when you dig into the documents insurers’ filed, it turns out Indiana’s rates look a lot like those in the rest of the country.

The $570 figure that Indiana put out Friday doesn’t, it turns out, tell us much at all. It’s pretty much just a great number to make the cost of health insurance sound expensive in Indiana and a horrible one to use in thinking about how much Hoosiers will pay for coverage come January.

The health care law envisioned Americans having a choice of different levels of insurance coverage. Sick people, for example, might want to pay a higher premium for a health plan that would cover a greater chunk of their bills. Healthy people, conversely, could gravitate to a more bare-bones plan – one that left them more financially vulnerable but also with a smaller premium.

These plans are categorized into metal levels. A bronze plan, for example, covers 60 percent of the average beneficiary’s bills and would likely have the lowest premium. A silver plan covers 70 percent, and a gold plan foots, on average, 80 percent of the bill. At the top of the heap are platinum plans, which foot a hefty 90 percent of the average subscriber’s costs.

There’s some evidence to believe that the most important rates are the prices we should watch most closely. Those are likely the plans that buyers on the exchange will gravitate toward. We saw this in Massachusetts, where 84 percent of enrollees chose bronze or silver plans, while just 8 percent bought a gold plan.

At least one carrier in Indiana seems to agree with this distribution. In state rate filings, Physicians Health Plan of Indiana estimates that 45 percent of its enrollees will pick bronze and 38 percent take up silver.

“It is expected that the average mix of Individual Market will be more toward less rich benefit plans and credit should be given for the associated reduction in induced utilization,” the company wrote in its filing.

In other words, the average plan cost isn’t a great estimation of what people will play. And we’ve seen in other states’ data that bronze plans and silver plans can have hugely different premiums. In the District of Columbia, for example, CareFirst plans to charge a 27-year-old $172 for bronze coverage and $341 for a platinum plan.

Countrywide stats

Indiana’s $570 figure comes from squishing together all the filings – every plan that is bronze, platinum or anywhere between – and coming up with one composite.

We don’t know whether a bronze plan in Indiana will be incredibly expensive, which is certainly a possibility, or if some high-priced platinum offerings are pushing up the average.

Indiana has not released data on metal-level premiums, although some information can be gleaned from looking through the rate filings submitted by insurers (endless thanks to Sarah Lueck at the Center for Budget Priorities and Policy for showing me how to access said filings).

Anthem’s rate filing includes projections for health insurance costs in its bronze plans.

A 47-year-old male who does not smoke would be charged, on average, $307 per month. Sample plans from another plan, MDWise, predict a 47-year-old man will be charged $294 and $391 for a bronze and silver plan, respectively.

When you start digging into these rate filings, you see that the rates Indiana carriers expect are pretty similar to what other areas are seeing, according to data gathered from 11 states by the federal Department of Health and Human Services. For the states’ second-cheapest silver plans, the average monthly cost ranges from $280 in Oregon to $440 in Vermont.

The $391 premium that MDWise plans to charge is a bit on the high end of that range. We don’t know, though, what its competitors are charging, whether its on the high end of Indiana or more in the middle of the pack.

Indiana just hasn’t released those data yet.

Premiums tricky

Health insurance premiums are incredibly complex. They represent, for the most part, a best guess by health insurers about how much health care their members will use in the coming year.

Some of it is science, using data on how much health care has cost in the past. This year, much more of it is art, an estimation of what a wave of new customers will look like.

Because premiums are complex, they’re pretty easy to spin, to frame the numbers to seem high or low. We saw this in California, where officials compared individual rates in 2014 to small-group prices in 2013, concluding that the new prices ranged between “2 percent above and 29 percent below.” That’s not really fair: The small group and individual insurance markets are separate entities.

For all the spin though, we’re seeing rates come in relatively similar across the country, mostly between $300 and $400 per month for the second-lowest silver plan. That’s not an especially exciting news story but it’s the health-care law’s reality.

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