ObamaCare’s Subsidy and Premium Snapshot for 2014

Nine in 10 enrollees on Healthcare.gov during the Affordable Care Act’s first open enrollment season received government assistance to help cover their premium, according to the latest report from the Department of Health and Human Services (HHS).

HHS reports that on average, premiums fell 76% after a federal subsidy kicked in. The report also revealed that silver plans, the mid-tier coverage option on the federal exchange, were the most selected. With tax credits, people with silver plans paid an average premium of $69 a month.

Subsidies were available in 2014 for those making up to 400% of the federal poverty level, which is around $45,000 for individuals and $94,000 for a family of four.

While many of the 5.4 million people who enrolled on the federal exchanges received a subsidy, analysts say the report offers a mixed bag of signals for 2015.

Larry Kocot, visiting scholar at the Brookings Institution, points out that these numbers are only estimates and the data does not reflect how many enrollees have actually paid their premiums. “These figures are based on plan selections, not premiums paid,” he says. “This raises the question: how will this story change once we have actual premium and payment data?"

Also in question is the lack of a back-end mechanism on Healthcare.gov for insurers to bill the government for enrollees’ subsidies and cost-sharing plans. Such a mechanism wasn’t in place this year, and may not be fully implemented by November 2015—meaning the insurance industry is manually billing the government for these enrollees.

With the back-end mechanism not being implemented, Kocot says human error is a major concern with regard to manual reporting and payments.

“As the number of people getting subsidies increases, the number of people who will get an incorrect subsidy will likely increase," he says. "It is great that more people than anticipated are getting subsidized premiums; it would be even better if we knew how many people will have to return a subsidy overpayment.  We know there will be overpayments in subsidies that will have to be collected next year; however, we won't known the magnitude of the overpayments for several months.  At this point, it would be more useful to know how many enrollees have actually paid and continue to pay premiums month to month."

Those who do not pay their monthly premiums are typically not considered “enrolled” by the insurance industry. A person would have to miss premium payments for three consecutive months before an insurance company can terminate their coverage under the ACA.

Consumers shopping in the individual marketplace had an average of five insurers and 47 marketplace plans to select from, HHS reports. Open enrollment for 2015 kicks off in mid-November. HHS reports that “early reports from states” suggest more insurers will be entering the marketplace in 2015.

Devon Herrick, senior policy analyst at the National Center for Policy Analysis, says states with more insurers participating on the exchange had more incentive to offer more competitive pricing. Texas, for example, had the same insurer offering both individual and multi-state plans from Blue Cross Blue Shield of Texas, because offerings are done by region.

Herrick was surprised that the silver plans were so popular with such high subsidy numbers.  “You would expect that people who were getting a big discount would buy better coverage. Two-thirds of the people getting a tax credit either chose the cheapest or second-cheapest silver plan. For taxpayers that’s good, they aren’t gorging on benefits.”

But he also offers another scenario: enrollees didn’t really want coverage, and may not continue to pay their premiums. “They got the cheapest thing they could with the least cost to them; it has implications in how many of these people will stick around.”

As far as 2015 is concerned, Herrick says the report proves people are extremely price sensitive.

“If prices, or premiums rise next year, because of adverse selection [risk pools skewing towards older and sicker enrollees], then some of this may shake out,” he says.