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Source: White House on Flickr.

There's no two ways about it; the Affordable Care Act, which you probably know better by its shorthand, Obamacare, is a highly controversial law.

Despite state and federal exchanges adding approximately 8.1 million enrollees this year, according to the July 2014 Kaiser Family Foundation Health Tracking Poll, 53% of respondents had an unfavorable view of the law, which was the highest reading since KFF began taking records back in April 2010.  

Of course, Obamacare's success or failure won't be determined by whether or not respondents like the bill or not based on a month-to-month report. Instead, its success will be judged by how well it controls medical-cost inflation over the long-term by spreading the cost of medical care across a greater swath of American citizens.

To that end Obamacare's future is very much up in the air. Although the uninsured rate has dropped to just 13.4% according to Gallup, we're still pretty much in the dark on what might happen with premium rates in 2015. If rates don't move much higher it will be viewed as a victory for the health reform law. If rates scream higher by high single-digits or double-digits you can rest assured opponents of the law will be calling for change.

A surprising Obamacare revelation
However, a new study released earlier this month by the Kaiser Family Foundation revealed something few would have suspected.

Based on the analysis of 15 states and the District of Columbia for which insurers have submitted premium pricing information for 2015 – note, more than 15 states have submitted premium pricing information to their states Insurance Commissioner, but only these 15 states plus DC offered complete data – KFF analyzed the second lowest-cost silver plans and deduced that the average silver plan premium percent change in 2015, before taking into account any income-related tax credits, is a drop of 0.8%!

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Graph by author. Projected silver plan premium price change from 2014 to 2015. Data source: Kaiser Family Foundation. 

That's quite the shock because no data thus far has suggested more than a state or two, let alone the entire nation as an average, would see insurance premiums decline.

Based on the after-tax credit, KFF's calculations point out that the average change for all 15 states plus DC for the second lowest-cost silver plan is only scheduled to increase by 0.1% for a 40-year old person making $30,000 per year. In fact, 14 of the 16 locales it studied showed a coincidental decline of 0.8%, with only Portland, Oregon, and Nashville, Tennessee expected to see premiums rise, primarily because premiums in those two cities were too low to qualify for subsidies last year anyway.

A victory for Obamacare? Not so fast...
On the surface this would look like an early victory for Obamacare in that it's doing its job of keeping costs down by encouraging more competitiveness in the marketplace among insurers. The idea here is that if consumers have the ability to make apples-to-apples insurance comparisons with clear cost differences then they'll make smart purchasing decisions.

But, things aren't as cut-and-dried as they might appear according to KFF.

Despite lower-than-expected premium costs, KFF advises readers to take into consideration that its findings only account for 15 of the 50 states, and additional insurance premium data from the remaining states could drastically alter the aforementioned outcome.

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Source: Covered California.

In addition, while marketplaces drive competitiveness, they also drive pricing volatility. As KFF points out, in 12 of the 16 major locales studied, the plan which boasted the lowest premium price point in 2014 is no longer the lowest-priced plan in 2015. In other words, if cost-conscious consumers are looking to keep their costs as low as possible while still satisfying the minimum benefit requirements as set forth in the Affordable Care Act, we could be in line to see a lot of insurance plan switching in the coming year.

Of course, we also have to consider two additional factors. One, the marketplace will automatically renew consumers' health plans unless than actively opt to switch plans. Also, as KFF notes, cost-conscious consumers may be reluctant to switch plans, even if the price moves up, simply because it might mean switching doctors. In sum, plan-switching could be a push-pull adventure in the upcoming year.  

The real impact
I suspect this all amounts to what could be a particularly volatile upcoming year for insurers that specifically target cost-conscious and lower-income individuals.

To begin with, competition in many states is set to increase. UnitedHealth Group (NYSE:UNH), the nation's largest insurer which pulled out of a number of exchanges prior to the 2014 launch last year, has announced that it's throwing its hat into the ring in a handful of new states, including Connecticut. After observing the marketplace from the sidelines, UnitedHealth believes it has a better idea of what states offer it the best enrollment benefits going forward.

However, UnitedHealth won't be able to simply walk in and take members in each new state if low-cost insurers have anything to say about it. Some insurers have specifically angled the cost of their plans to undercut larger-named rivals in order to draw in consumers. Whether or not that'll work remains to be seen, but low-cost insurers are certainly willing to win based on volume of new members enrolled rather than based on margins.

Another point we have to consider is that some of these lower cost insurers are dealing with the individual market for the first time ever. Put another way, these insurers didn't have any pricing data to rely on previously when they priced their plans for 2014. Now that they have a better idea of what to expect, some, like Molina Healthcare (NYSE:MOH) in my home state of Washington, have realized they could lower their premiums and be considerably more cost-competitive within the state.

With silver and bronze plans cumulatively accounting for more than four out of every five plans sold in 2014, it's only prudent to expect these lower-cost options to remain a key driver of health insurance enrollment in 2015. However, figuring out whether premiums do actually fall or rise, or what percentage of sick versus healthy individuals sign up, is still anyone's guess until we have data in from all 50 states.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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