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Affording Obamacare: New York's New Health Plan Rates

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This week's announcement of the costs of the health insurance plans that will be offered through New York State's Health Benefit Exchange brought good news: with the implementation of Obamacare, New Yorkers purchasing individual insurance policies will pay less than half of current rates. (A few months ago in this space, I wrote about the likelihood that Obamacare would actually decrease health care premiums in New York State, but even I didn't think prices would go down so dramatically!)

New Yorkers will pay much less for coverage in large part because Obamacare's individual mandate requires that almost everyone purchase health insurance or pay a penalty, meaning that younger and healthier New Yorkers who might have opted out of an expensive insurance policy are now more likely to sign up for coverage. And with healthier people in the insurance pool, prices can come down. (In many other states, sicker patients who had previously been denied coverage for their pre-existing conditions will also be signing up for health insurance, potentially driving up costs, but in New York State, we have long had "guaranteed issue," meaning that people can't be denied coverage because of their health status.)

It's true, health care premiums in New York State will still not be super-cheap (I liked Elisabeth Benjamin's quote in the Times, that health care premiums are going "from Bergdorf's to Filene's"), but remember that many New Yorkers will qualify for subsidies that will further reduce their out-of-pocket costs.

The announced premium rates are good news for New York. And having some actual numbers makes it much easier for us to understand and explain what health reform will mean for New Yorkers who will be enrolling in health care coverage through the Exchange beginning October 1.

Let's take a few examples. If you live in New York City and you want to buy coverage on the Exchange, you have a range of plan options. Sixteen different insurers will each offer four tiers of coverage: bronze, silver, gold, and platinum (a bronze plan costs less than a platinum, but its benefits aren't as rich and coverage is less comprehensive). So, say you want to go with a middle-of-the-road silver option; the full cost of your premiums will vary depending on which insurance carrier you choose, but will average about $475 per month.

But keep in mind that many New Yorkers with lower incomes will be eligible for subsidies to offset the cost of coverage. On average, according to the Times, an individual with an annual income of $17,000 would pay $55 per month for a silver plan, while someone earning $25,000 per year would pay about $145 per month.

Although rates will be much lower than they are today, health insurance will still be expensive, and more needs to be done to reduce health care costs even further. But the health reform law is taking us in the right direction to make health care coverage more affordable in New York.

Of course, it is important to remember that cost should not be the sole factor that consumers consider in choosing a health insurance plan. Smart consumers will also need to look at the provider network offered, the co-pays and other out-of-pocket costs required, and the benefits covered by each plan. (New York State recently announced the organizations that will serve as Navigators to help consumers understand their options and make informed decisions about coverage.)

With open enrollment just two-and-a-half months away, plenty of work must still be done to educate New Yorkers about the Health Benefit Exchange and ensure that as many people as possible -- more than 1 million New Yorkers -- gain health care coverage. Having a clear understanding of the coverage actually being offered and what it will cost is an important and welcome step in that process.

There is one other reason to expect that Obamacare could change the price structure of health care in the individual market (keep in mind, only 3 percent of New Yorkers are expected to have coverage through the individual market; the vast majority will continue to receive coverage through their employers): These attractive rates are most likely based on conservative assumptions, made by insurance actuaries, about who will buy insurance and what their care will cost. I'm willing to make another forecast: I bet rates will come down even more over the next year or two as insurers learn exactly who buys coverage. Stay tuned! We'll all be keeping a close eye on this wager!