Obamacare Health Insurance Premiums: Lower Than Expected?

Twenty-four days! That's the amount of time we have left, including today, before state-run health exchanges are scheduled to open for business and individuals will be allowed to openly and transparently compare insurance plans between differing companies to see what suits their needs best.

Following Thursday night's NFL opening game, I caught my first personal glimpse of the push to educate the public about the Patient Protection and Affordable Care Act. Living in Washington state, one of the 16 states that's decided to participate in the state-run exchanges, I watched a town hall meeting that gathered some of my state's top lawmakers to answer the public's questions regarding the new bill, also known as Obamacare.

While the seemingly insurmountable technological aspects of getting the health exchanges ready for implementation and the difficult task of getting the public educated about Obamacare is ongoing, one concern that hasn't left the forefront of a majority of folks' minds since the bill was passed in 2010 is what it might do to health insurance premiums.

There is no question that something needed to be done to curb the willy-nilly progression of health-care premiums over the past couple of decades. However, skeptics abound as to whether the current bill will successfully keep premiums under control while providing equal or better care for Americans. In June, a Gallup poll showed that just 44% of Americans approved of the new law, while 52% opposed it. Needless to say, Obamacare has been fighting an uphill battle from the start.

However, new data revealed this week in a study by the Kaiser Family Foundation may prove that trudging uphill, in three feet of snow, both ways, may just be possible.

Score one for the Obamacare supporters
The Kaiser Family Foundation's study (link opens PDF file) involved looking at all 17 states that had publicly released their insurance rate data, as well as the District of Columbia. With that information, the Kaiser Family Foundation utilized the number of insurers in each state, as well as a projection of the subsidized and unsubsidized premiums of various age groups within the largest city in each of these states, to compare health insurance premiums from one area to the next.

As you might suspect, there were some huge variances in premiums. In Baltimore, Md., and Albuquerque, N.M., the premiums for a 40-year-old on the bronze plan (one that covers 60% of medical costs) were the lowest, at $146 and $155 per month, respectively. In New York City and Burlington, Vt., they ran the highest at $308 and $336. The variance here has to do with existing laws long before the PPACA came along that didn't differentiate premiums by age and disallowed insurers the right to deny coverage to people with pre-existing conditions.

What you probably didn't expect is the finding by the Kaiser Family Foundation that premium costs in 15 of the 18 largest cities is lower than the Congressional Budget Office estimate of $320 per month as it relates to the average cost of the second-lowest cost silver level plan (the second-lowest cost silver plan is the benchmark for all subsidized comparisons). 

Obviously, this study could wind up being a boon for insurers who could scoop up additional consumers with word that premiums are coming in lower than expected. Aetna (NYSE: AET  ) , WellPoint (NYSE: WLP  ) , and CIGNA (NYSE: CI  ) have all made huge purchases to get their hands on the highly coveted Medicaid expansion member market, but would be wise not to ignore the individual markets in the states they operate, as they can use this lower-cost study to their advantage.

Another underlying beneficiary here would be drugstores such as Walgreen (NYSE: WAG  ) , which has been actively promoting Obamacare in the hope of boosting its pharmacy business. If premium costs are coming in below projections, that's all the more reason for Walgreen to trumpet this news to consumers. Simply put, insured individuals are much more likely to go and see a doctor and get a pharmacy prescription written than uninsured individuals.

Concerns on the horizon
Clearly this study is a big boost in favor of Obamacare. If these figures hold true, then dissenters to the plan will have little to complain about, with coverage for many people expanding and clearly more people than before the PPACA being insured. However, there are still variables that could derail this calculation and push premium costs higher.

For one, KFF's study compared costs in 17 states plus the District of Columbia (i.e., from the states that have reported their insurance rate info). These 18 states/regions include 11 states that have chosen to take charge of their own state-run exchanges. This means that a majority of the yet uncalculated states are part of the federally run health exchange program that chose not to participate. It's quite possible that costs could adjust upward in these non-committal states if fewer insurers choose to participate.

Second, as the study notes, in many states, one or just a very small handful of insurers controls a vast majority of the insurance market. Transparency should help curb any blatant premium overpricing, but in states where just two or three insurers operate, there's nothing that stops these insurers from boosting premiums across the board. Take, for example, Rhode Island, Maine, Montana, Vermont, South Dakota, and Connecticut, which, according to KFF's study, only have two or three insurance companies operating within their state. Sure, there are multiple plan options within the silver and bronze category -- it's not as if it's a one-and-done take-it-or-leave-it type of health insurance plan -- but in a consumer-driven market, competition breeds better pricing. With so few insurers still controlling individual states, premium pressures may still prove ongoing.

The bottom line
With just a hair over three weeks to go before individuals are given the green light to purchase insurance on state-run exchanges, it's safe to say that the time for speculation is winding down. With disapproval of Obamacare touching its highest levels in two years this summer, KFF's new study couldn't have come at a better time. As an investor, I'd look for insurers and drugstores to use this news to their advantage in helping the public to become knowledgeable about the new law and to sign up for health insurance.

Still in the dark about how Obamacare might affect you and your portfolio? Don't worry -- you're not alone. To help prepare investors for the massive changes coming to the American health care system, The Motley Fool created a special free report that makes this complex topic easily understandable. Download "Everything You Need to Know About Obamacare" and discover how the law may affect your taxes, health insurance, and investments. Click here for your free copy today.


Read/Post Comments (17) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 08, 2013, at 2:28 PM, wscarp1 wrote:

    That Gallup poll and other polls have shown that about 44% approve and 52 % oppose it. However, what they never quote from these same polls is that about one-half of those who say they oppose it say that they want it to do more. When you add that to those that like it as it is, you get 70% for at least this much or more health care reform. Quite a difference!

  • Report this Comment On September 08, 2013, at 2:30 PM, sagehopper wrote:

    But are they lower than they were before Obamacare was crammed down our throats?

  • Report this Comment On September 08, 2013, at 2:33 PM, vet212 wrote:

    Higher much higher, just as Harry "nothing" Reid wanted and Barak "America hater" Obama orderedand as wanted the availability of healthcare services deminishing

  • Report this Comment On September 08, 2013, at 2:59 PM, Halo101st wrote:

    Saying obamacare is less expensive than originally thought is like saying the pain gouging out your eye is not going to be as bad as was thought. Why should it cost anything more?

    I thought Mr. Benevolence and his stupid plan was not going to cost us anything and we could keep our doctors! I have already lost my GP of 30 years!

    Mr Incompetent lies again.

  • Report this Comment On September 08, 2013, at 3:00 PM, NiceShootinTex wrote:

    An enormous number of the uninsured today simply cannot afford to pay the premium. Nor do they qualify for Medicaid.

    The number of reasons the Affordable act is functionally unsustainable are stunning. Premiums must be complimented by tax credits (folks say the "government" when they really mean you and I since the government only has OUR money to credit). Eventually these credits phase out.

    The low end option provides for 60% coinsurance which makes it unaffordable when used. You pay for what you get, and you get what you pay for.

    Skewing numbers or making up numbers to show that the majority of Americans are in favor of the AFHCA does not make it true, and only serves to sublimate the ego of the one skewing the numbers.

    One has to ask what special purpose they have that requires those numbers?

  • Report this Comment On September 08, 2013, at 3:06 PM, NiceShootinTex wrote:

    Oh yeah. One more thing. I am obviously not a fan of Obama or his ilk. They are all snollygosters anyway. Which doesn't necessarily make them any different from any other party of today or yesteryear.

    However, in his defense I have to say that HE no more knew what was in the bill than Nancy Pelosi did. The only difference between them is that Obama can string words together to make a complete sentence.

    AFHCA is a pig that's still being fed and will continue to grow. No comments on how it appears today can touch what it will become.

  • Report this Comment On September 08, 2013, at 3:09 PM, starfish36 wrote:

    Scope of coverage is expanded and more people are covered. "Previous existing conditions" are gone, as are last minute cancellations when an insured gets seriously sick. More preventive and diagnostic procedures are covered. Discrimination against women is essentially gone. And cost is less, in some cases quite a bit less, than was projected. We approach what has been available in Europe, the UK, Canada, Japan and other developed countries, not one of which has ever scrapped universal coverage and gone back solely to private insurance. And people here complain?

  • Report this Comment On September 08, 2013, at 3:20 PM, Ricktloml wrote:

    What they fail to mention is the high deductibles, and over $6000.00 outlay of your money Before the plan pays anything, low cost? hardly

  • Report this Comment On September 08, 2013, at 3:51 PM, Jabbrat wrote:

    I'm not sure why everyone keeps saying it's cheaper. It's much more expensive for the same amount of coverage that I have now - At least 2 or 3 times the cost.

    It's amazing what waving your hands and claiming that this lesser coverage (silver plan) that gets touted as the second best is what everyone "should" purchase. Why would anyone want to downgrade their coverage and pay more for it? Why would they want to pay twice what they do now to maintain current coverage?

    If this is the best that can be done, why aren't our political leadership required to choose from this list of options and then pay for it out of their own pockets? They should be ashamed for thrusting this abomination upon us. They're snake oil salesman of the worst kind, as they've given few or no options to something they didn't even read or understand before they infected us with it!

  • Report this Comment On September 08, 2013, at 3:58 PM, blazenat wrote:

    You are a fool if you think healthcare is going to be cheaper, and that your are gonna get it for nothing.. you are gonna pay.. esp. the people who cant afford to.. To Obama , $95.00 is nothing. $75.00 is nothing, 150.00 is nothing.. This man is rich and knows nothing about needing money. Pakistan paid for his education. He knows nothing.. This article is written by one of Obamas liberal idiots.. He cant tell the truth or Obama will have his job and his tax returns.. LIES.. that's all the Media knows how to do.. I work in healthcare and trust me YOU are gonna pay.

  • Report this Comment On September 08, 2013, at 5:04 PM, 1Mic1 wrote:

    If the Bronze plan is as stated: In Baltimore, Md., and Albuquerque, N.M., the premiums for a 40-year-old on the bronze plan (one that covers 60% of medical costs) were the lowest, at $146 and $155 per month, respectively. In New York City and Burlington, Vt., is the highest at $308 and $336 as again stated in the above article.....what will stop people from moving to states that offer the same plan with lower premiums?

  • Report this Comment On September 08, 2013, at 7:24 PM, LibsAreLikeLice wrote:

    If ObamaKare is so good, then why do libs force Americans into the program at the point of an IRS agent's gun?

    http://youtu.be/aMyiS9o4VBI

  • Report this Comment On September 08, 2013, at 7:42 PM, TexasGal0850 wrote:

    Of course this is the liberal media reporting this....just saying....never believe what you read.

  • Report this Comment On September 08, 2013, at 9:01 PM, Pakirk53 wrote:

    I wish I had a strawberry farm becuase the amount of horse crap being generated by writers like Sean Williams would guarantee a bumper crop every year. Not a single person has purchased healthcare via an exchange. the employer mandate has been kicked down the road for a year and thousands of waivers have been granted the idea we have a handle on what this train wreck cost is only in the minds of low beamers.

  • Report this Comment On September 08, 2013, at 9:11 PM, Automan63 wrote:

    At what point was kaiser going to tell you they are a flaming liberal....KAISER IS LIBERAL group for govt health care. HOW ABOUT THE TRUTH

  • Report this Comment On September 08, 2013, at 10:37 PM, clloyd53 wrote:

    And the Kaiser family and their foundation donated how much money to DNC campaigns? The Kaiser family owns how many insurance companies and health care services? I do not think you could get an unbiased opinion from them.

  • Report this Comment On September 09, 2013, at 10:21 AM, sage1193 wrote:

    I self-insure and it is quite expensive. Lower my premiums and I am a happy camper. Try to hold the economy and budget hostage in an effort to repeal the law will only serve to seal my decision to not vote for anyone from that political party in the future.

    Since I am moving out of the country and will get my medical insurance at much lower rates with better coverage. I personally don't care about the actual mechanics of how the law will or will not work. All I care about is how to exploit the law by investing in companies that will profit from it.

    To that end I've done very well. WLP and ESRX have done very well. CERN is lagging a bit but on the way up.

    My advice is to quit whining about the country actually trying to do something good for the people and uninsured by going out and buying companies that will profit from the law.

    Obamacare is not going away no matter how loudly one party gnashes their teeth.

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