Health Reform at Work: Lower Rates in New York State

New Yorkers currently or considering purchasing coverage in the individual market woke up to exciting news today: premiums in 2014 are expected to be cut by more than half.  And that’s for the most generous coverage on the market. New Yorkers will also be able to purchase some plans for even lower premiums.

For instance, a New York City resident purchasing an Empire BlueCross BlueShield HMO plan today could expect to pay a little more than $1500 per month. Beginning January 1, 2014, that same individual could pay between approximately $400 and $650 per month, depending on how much cost-sharing protection they wanted. (And if they are under age 30 or qualify for a financial hardship exemption, they could purchase a catastrophic level Empire BlueCross BlueShield HMO plan for just $201.29 per month.) While this still is a hefty sum of money, many New Yorkers (more than 1.5 million, according to a report by Families USA) purchasing coverage through the exchange will qualify for premium tax credits that can significantly reduce their costs.

While small groups will not see a big change in their rates, they can also take comfort from today’s announcement. Despite New York’s relatively high per capita health care costs, the average rate for a silver plan in the small group market is reportedly nearly 32 percent lower than the Congressional Budget Office’s projected nationwide average. Plus, certain small businesses may qualify for tax credits to lower their bills.

One factor that is likely contributing to the good numbers coming out of New York is the competitiveness of their health insurance exchange – which we discuss along with five other states in a recent report. New York will have 17 health insurers competing for business in its individual market – including eight new entrants to the market – and 10 insurers participating in its small business exchange. As we report in our paper, these new entrants include a new consumer operated and oriented plan (COOP) – the Freelancers Health Services Corporation – and a number of Medicaid plans, such as Fidelis Care. These new insurers offer some of the lowest cost plans on the market. For example, the Freelancer’s average statewide cost for a bronze plan is just $252.

New York’s reduction in individual market rates also demonstrates why it is important to get everyone covered. As Sarah Kliff at the Washington Post reports, twenty years ago, New York introduced a number of reforms to its insurance market – including guaranteed issue and pure community rating – but did not couple these reforms with any requirement that all individuals purchase health insurance. This has meant that while anyone could get health insurance if and when they needed it, there was little incentive to purchase it when healthy – resulting in a small and very costly insurance market.

With the Affordable Care Act’s individual mandate going into effect, however, a large pool of healthier people are expected to begin purchasing health insurance. The high costs of a few people will now be spread out over a larger pool, lowering the cost of premiums across the board.

With the administration’s delay of the shared responsibility requirements for employers, some members of Congress have begun pushing for a similar delay for individuals. New York’s experience should throw cold water on that idea. Through the creation of health insurance exchanges and improvements to the rate review process, we’ve seen the Affordable Care Act put downward pressure on premium increases in a number of states.  Delaying – or repealing – the individual mandate would lead to skyrocketing premiums and undermine the progress the law has made and will continue to make in the future.

2 thoughts on “Health Reform at Work: Lower Rates in New York State

  1. The New York market has the country’s highest rate due to previous state-level “healthcare reform”. Since 1993 the state requires that insurers accept all applicants regardless of health, prohibits any type of rate discrimination, and contains no mandate to purchase. The inevitable death spiral brought on by adverse selection then ensued.

    These are important facts to consider about prospective rate changes.

    • Hi Kevin, Thanks so much for your comment. You make an important point. New York has had very high individual health insurance rates because of their earlier reforms. Those reform will stay in place in 2014 when the rate reductions will go into effect, however, demonstrating that you can have strong consumer protections and reasonable premiums under the right conditions.

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