"Health insurance premiums will drop by about 50% on average for consumers in New York who buy new plans through a state-run marketplace created by the Affordable Care Act."
The state approved plans to be sold by 17 insurers, including UnitedHealth Group and WellPoint, the industry's two biggest carriers, according to a statement today by New York Governor Andrew Cuomo. The lowered rates mean that starting Oct. 1, a New York City resident who now pays at least $1,000 a month for insurance will be able to buy coverage for as little as $308, according to rates posted by governor's office.
"The plans will be available to employees and residents who don't get health coverage through their employer. Federal subsidies offered by the health law may drop the costs even lower for some consumers", the state said.
What's Really Going On in New York?
New York's individual health insurance market has been in disarray for the last 10 years. Rather than establish a state risk pool for the uninsurable, the regulators in New York required insurers to accept all applicants, regardless of medical conditions. However, unlike the ACA, the state did not mandate that all residents including the young and healthy buy insurance.
That's produced a market tilted toward older, sicker, costlier members and drove New York premiums to among the highest in the country. Currently per capita health care costs are 18% higher in New York than the national average. So by adding healthy, young members to New York's exchange, it should incur greater rate reductions than other states.
Low income, young individuals in New York are currently priced out of the market. Starting in 2014, the rates will be supplemented by the federal law's subsidies for low and middle-income customers, and its requirement that all Americans get coverage or pay a penalty.
The costs would be lower yet for individuals who earn less than four times the federal poverty level, or $45,960 annually, the cutoff for premium subsidies under the health law.
Rates will be coming down primarily because a greater number of healthy, uninsured individuals are expected to obtain coverage and be added to the insurance pool.
Plans sold on the exchanges will be divided into four categories - bronze, silver, gold and platinum, with the latter offering the most coverage, yet also higher premiums. The biggest savings will be seen on the lower level Bronze plans which will include plans with limited access to a smaller network of providers.
Potential Trouble Ahead
The new insurance rates won't come without trade-offs. The younger and healthier crowd is generally the group facing the most significant rate increases, and they may be more inclined to pay the penalty and not buy health insurance next year. That could spell trouble if higher prices and low penalties push young, healthy customers out of the market.
