Individual insurance customers will save with health reform

People with private individual health insurance will save between $280 to $589 annually, depending on their age, under the Patient Protection and Affordable Care Act, according to a new study authored by Steven Hill, a senior economist in the Center for Financing, Access, and Cost Trends at the Agency for Healthcare Research and Quality, (AHRQ) in Rockville, MD.

The study, released by Health Affairs, simulated the effects of health reform on the more than 11 million Americans under the age of 65 covered by private individual health insurance plans. To arrive at his findings, Hill drew a sample from the Medical Expenditure Panel Survey Household Component survey conducted by the AHRQ. A total of 2,672 adults with individual insurance between 2001 and 2008 were compared to groups of adults who had insurance through small employers (6,476) and large employers (54,360). All expenditures were inflated to 2008 dollars.

The savings for adults who have individual, nongroup, insurance comes from comparing the benefits of health insurance exchanges to the individual market in 2001 through 2008. The exchange’s benefits would have been more generous than typical benefits in the individual insurance market in those years.

“For families with incomes above 400% of the federal poverty guidelines, the more generous benefits may increase premiums, but this increase may be more than offset by other provisions in the Affordable Care Act,” says Hill. “Their out-of-pocket spending on covered services will be capped at about $6,000 for single coverage. The average savings in out-of-pocket costs would likely have been about $245 per year for this population, and this additional cost, with any loading factors, might be added to current premiums.”

He notes that premium increases could be offset by two factors that the Congressional Budget Office expects to decrease premiums in the exchanges by 14% to 20%: lower administrative costs and healthier people purchasing insurance.

In the exchanges, families with incomes below 400% of the poverty guidelines will be eligible for premium tax credits as well as reduced cost sharing, including lower caps on out-of-pocket spending, Hill says. Their reductions in cost sharing will be paid by the federal government to the qualified health plans.

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