Premium Increases Under Obamacare Not as High as Expected: Study

September 9, 2013

The federal Affordable Care Act will not lead to widespread premium increases in the individual health insurance market. That’s according to a new analysis of 10 states and the United States overall by RAND Corp., which predicts no prevalent trend in sharply higher prices under Obamacare.

While there have been other reports that indicate the cost of individual policies may jump sharply under healthcare reform, the RAND analysis shows the cost of policies in the individual market will vary mostly by states and individual factors such as an individual’s age and whether they smoke.

“Our analysis shows that rates for policies in the individual market are likely to vary from state to state, with some experiencing increases and some experiencing decreases in cost,” said Christine Eibner, the study’s lead author and a senior economist at RAND, a nonprofit research organization. “But our analysis found no widespread trend toward sharply higher prices in the individual market.”

RAND researchers modeled how the Affordable Care Act is likely to change cost and coverage patterns in both the individual market and small group market in 10 states — Florida, Kansas, Louisiana, Minnesota, New Mexico, North Dakota, Ohio, Pennsylvania, South Carolina and Texas. The report also considers the potential consequences for health insurance enrollment if Medicaid is not expanded in Texas, Louisiana and Florida.

Our analysis found no widespread trend toward sharply higher prices in the individual market.

Under the federal Affordable Care Act, insurers who sell policies to individuals and small groups (pools of fewer than 50 people) must offer coverage regardless of health status or pre-existing conditions. Prices can vary by only a few factors, including age, tobacco use, geographic location, family size and the amount of coverage purchases. The oldest person can be charged three times as much as the youngest adult, with smokers paying up to 1.5 times more than nonsmokers.

Researchers used an updated microsimulation model, which predicts the effects of health policy changes at state and national levels, to estimate the likely impacts of the Affordable Care Act on the individual and small group markets once the law is fully in force.

States Vary

There is a considerable range among states in the number of people who will remain uninsured under the Affordable Care Act. For 2016, the study’s estimates range from a low of 5 percent in Minnesota to a high of 12 percent in Texas. States with larger immigrant populations, such as Texas and Florida, will tend to have more uninsured people.

The number of people who buy individual policies under the Affordable Care Act will more than double from 4.3 percent of the nonelderly to 9.5 percent of the nonelderly.

Prices in the individual market will vary among states, too. The analysis showed that in 2016 there will be no premium changes in the United States overall and in five states (Florida, Kansas, Pennsylvania, South Carolina and Texas). Three states (Minnesota, North Dakota and Ohio) could face premium increases of up to 43 percent, although those costs may be covered by federal tax credits.

Louisiana and New Mexico may face premium declines. The differences are explained largely by the proportion of a state’s residents who have insurance. Minnesota, North Dakota and Ohio all have low numbers of uninsured residents, meaning fewer young, healthy people will be brought into the individual insurance market as a result of the law.

Small Groups

The Affordable Care Act will increase the number of people insured in the small group market. There will be increases in small group coverage of up to 5 percentage points in the United States overall and in seven states (Florida, Louisiana, Minnesota, New Mexico, Ohio, South Carolina and Texas). Three states (Kansas, North Dakota and Pennsylvania) will experience declines in small group of up to 2.2 percent.

Small group premiums largely will be unchanged under the Affordable Care Act. For the U.S. overall and in nine states (Florida, Kansas, Louisiana, Minnesota, North Dakota, Ohio, Pennsylvania, South Caroling and Texas) small group premiums will see only minimal differences from existing levels.

The research was sponsored by the Center for Consumer Information and Insurance Oversight and the office of the Assistant Secretary for Planning and Evaluation. The report is available at

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